Global hop marketA local alternative to mass beer suggested by independent brewers has been successful and is now altering the global market. Beer is becoming more diversified, so transnational companies have to accept the new game rules and to switch focus to young and fast growing markets. All these processes increased the demand for aroma and bitter hop as well as their acreage expansion on two continents. However now there appeared a downward trend of alcohol consumption in the world, so even special sorts can soon turn to be sufficient. In this connection the dynamic American hop market is already facing some problems. EU hop producers have become more cautious, they are not racing to exceed the demand and look forward with more confidence, judging by the contract terms.
Hop Market in RussiaGermany still dominates the Russian market, yet over the recent two years one has been able observe a continuous success of Czech hop suppliers. Their expansion and growing popularity of hops from the United States became the drivers of supplies growth in 2016 despite the preceding modest harvest crop in the EU, as well as the factor of relative stability in 2017. In this connection, in 2017, the ratio of the varieties continued to shift towards the aroma ones, and the supplies of Magnum hop and other alpha varieties were reduced. However, the import of bitter hop pellets is partially replaced by extracts, especially from the major beer manufacturers. Total volumes of alpha acid supplies, according to our estimation, decreased by approximately 5% and returned to the level of 2015. Barth Haas Group continues dominating the hop products market; HVG also increased its weight. At the same time, Morris Hanbury significantly reduced the supplies in 2017.
10+1 trends of Russian beer market 2015-2017Despite of the moderately negative prognoses for 2017, the beer market can be stabilized soon. Yet the years of the negative dynamics have resulted in marketing being limited just to “optimization” and the art of balancing between price and volumes. Bigger supermarkets share means stronger trade marketing. These processes are connected to the majority of the described trends. At the same time, the federal brands inflation leads to searching for new tastes, sales channels and contact formats that expand the product range and diversify the beer market, but do not imply a substantial volume increase. Let us enumerate and further discuss the ten trends of the beer market we can see in 2015-2017 as well as the major event of 2017.
Beer market of Ukraine 2017In the first half of 2017, the Ukrainian beer market goes on decreasing slowly. Yet, the companies manage to compensate their lost volumes by raising prices and improving the sales structures. This results in the mid price market segment reduction while the sales of premium brands are rising. These processes are connected to position strengthening of companies Carlsberg Group and Oasis and the market share reduction of Obolon. Most of the novelties by the market leaders belong to craft or hard lemon categories.
Beer market of Russia 2016: PET goes to draftThe beer market of Russia was warmed up by the hot summer, but the preparation for large volume PET prohibition has already impacted it negatively. The year was successful for Efes, MBC and regional producers; Carlsberg’s positions were virtually stable but AB InBev and Heineken lost a part of market share having focused on the sales profitability. The dynamics of big brands was determined by how much the companies were willing to keep the prices down or by their promotional activity. In this context the economy segment of the beer market and sales of inexpensive draft beer were increasing. The premium segment started shrinking due to license brands migrating to the mainstream segment.
SABMiller suffers setback in China
The move sets the stage for a bigger tussle for Kingway Brewery Holdings, one of the few sizeable assets up for grabs in China’s fast-growing beer market. Alternatively, it could see provincial government controlling shareholders have a bigger say in determining how assets are parcelled out, analysts said.
SABMiller’s Chinese joint venture, CRE Snow, offered to pay Rmb1.1bn ($168m) for a 21.37 per cent stake in Kingway. The stake was put on the block by a Heineken joint venture in a move interpreted by analysts as the Dutch brewer giving up after failing to win control of the brewer.
But on Monday Kingway said that controlling shareholder GDH, a Guangdong provincial government holding company, had exercised its right to buy the 21.37 per cent stake, blocking CRE.
“CRE does not have a lot down in Guangdong province, so it would have been an entry point into a new area,” said Ian Shackleton, drinks analyst at Nomura. He added, however, that it was not “a huge miss”. SABMiller declined to comment.
Mr Shackleton reckoned GDH, which will now have a 74 per cent stake in Kingway, may sit on the stake. Others pointed to the “not low-ball price it is paying” – an implied $41 per hectolitre, compared with an estimated $25 per hectolitre for new build – and said this suggested it would aim to sell on the entire stake at a still higher price.
Chinese brewers, although typically bought simply for their capacity rather than brands, have attracted some strong multiples over the years. Last year Carlsberg paid an estimated $117 per hectolitre for a 5 per cent stake in Xinjiang Wusu.
News of the stymied deal in China came as activity is gearing up in Brazil, where family owners of Schincariol, the country’s privately run number two brewer, are mulling a sale.
Any sale would pit SABMiller against Heineken, which has operations in Brazil through Mexico’s Femsa.
The Brazilian market is dominated by Anheuser-Busch InBev, which has a market share in excess of 70 per cent. Jason DeRise, analyst at UBS, said an acquisition would be attractive for Heineken.
“It would help improve the Femsa deal dynamics because the Brazilian part of that deal is in a poor position and profitability is just above break-even,” he said. Bolting together Heineken’s sub-10 per cent market share with Schincariol’s 11-12 per cent “would fix the profitability.”
SABMiller, which would have less direct synergies, would find it harder to justify a big price tag, analysts said. However, Mr DeRise said any deal could prompt Petropolis, the number three brewer, to sell out too, giving a foreign brewer the opportunity to roll up a roughly 20 per cent stake in the fast-growing market.
.Copyright The Financial Times Limited 2011. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.
6 Apr. 2011