The beer market dynamics in Russia is approaching zero, yet major brewers are divided into those who developed considerably in 2017 and those who considerably reduced their volumes. For instance, company Efes has managed to substantially extend their sales due to restrained pricing policy and activity in the modern trade. Heineken has also demonstrated an excellent performance promoted by significant increase of advertisement budgets launching a non-alcohol sort of the title brand and unusual activity in the economy market segment. Carlsberg and AB InBev have been focusing on margins and lost a market share of their inexpensive brands. Serious dependence on PET package and mass enthusiasm about Zhigulevskoe have negatively impacted the most of big regional brewers, that have been for the first time pressed by the leaders in the key sales channels, especially in Volga and Central regions. In the small business there has been a noticeable slowdown in appearing of new restaurant breweries, yet the number of craft breweries has been growing rapidly. In 2018, the beer market is likely to grow a little, while the share of AB InBev Efes may decrease due to the integration. ...
“Catalogue of Russian Beer Producers 2018” includes 1070 businesses ranging from large subsidiaries of international companies to rather small restaurant and craft microbreweries.The catalogue includes 32 large breweries, 75 regional breweries, 693 industrial mini- and microbreweries as well as 270 restaurant breweries. ...
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.
The Wehring Interview – Heineken – Part II
Just prior to upping its presence in Brazil and Mexico, when it bought FEMSA Cerveza in January last year, Heineken finally settled its protracted discussions with The UB Group in another emerging market for the world's brewers, India. Almost two years after teaming up with Carlsberg to buy Scottish & Newcastle, which held a 37.5% stake in UB's United Breweries unit, Heineken finally came away from the discussions with a deal with the Indian drinks giant.
Two years! What on earth could the two sides have not talked about in two years? “It was a very simple – and understandable – issue,” explains van Boxmeer. “(UB Group owner) Vijay Mallya made a deal with Scottish & Newcastle. Suddenly, we pop up, and he's expected to sit with someone else at the table. That needs some talks, and I think that's normal.
“You have the legal side of things and what the contracts are, but then you have to cut through these things. You have a guy who has a partnership with someone and then that someone becomes someone else. It's normal you sit and discuss the matter. For us, the partnership we were working out with Dr Mallya was a very important one, one which will be meaningful for the next 25 years. So, it was worth taking our time.”
Since settling the matter in late-2009, van Boxmeer appears more than happy with the cut of Heineken's cloth in the country.
“India has subsequently been stellar for us – there is no other word,” he says. “In terms of margin and market improvements and how the market is performing generally, everything is heading in the right direction. United Breweries is above 50% market share now, and we were below that when we started. So, no, it's really stellar.”
Looking back to early-2008, when Carlsberg and Heineken ganged up on S&N, I recall how it looked at the time like the two brewers were sharing the spoils nicely. Since then, however, some observers – ourselves included – formed the opinion that maybe Carlsberg had fared better from the carve-up than Heineken. Maybe, van Boxmeer's in that camp as well?
No, I didn't think so either.
“No, certainly not,” he retorts, when I ask if Carlsberg got the better half. “It's a matter of timing. The lion's share of the value of S&N when we did the acquisition was the UK. But, the UK has suffered a perfect storm. So, we came in at the wrong time. But, today, Heineken UK is the leading beer and cider company in the country. In the last three years, we've had to restructure a lot more than we thought we'd have to. But, we're now back on track. The UK is a difficult market, but it's not the only difficult market in Europe.
Heineken's CEO, Jean-Fran?ois van Boxmeer
“If you take the long view on Europe, it's still a good environment to do business in, even if it's much tougher than some emerging markets.
“Take a look at the India part of the S&N deal,” he continues. “If you look at the demographics, they only drink 1.3 litres of beer per capita – that's where China was 35 years ago. Even if the country gets to half of what China has raised to in the next 20 or 25 years, it's a huge opportunity - this is the strategic price of S&N. We didn't only want to make sure we would stay leaders on our home turf in Europe.”
A sound investment, then. Meanwhile, back in the present, one of the main regions for investment for Heineken is in Africa. Not only has the company teamed with Diageo to build a brewery in South Africa, but only this month the company won the bidding race for two facilities in Ethiopia. Although both examples I cite are recent, van Boxmeer is keen to highlight that the company has form in the region.
“Africa was one of Heineken's first anchorage points,” he says. “We were quick to get a presence in the French, Belgian and British colonies. The Dutch sailed everywhere and took a presence in such markets. We have been present in Africa since between the two world wars.
“Political stability in the African markets is improving, and the middle classes are emerging – that is what our business is thriving on. Africa won't be left at the side of the road; the rest of the world needs Africa. I see big improvements there, it's the cornerstone of our business. We have been multiplying the profits from our operations in Africa by five in around eight years – it's one of the biggest growth engines we have. What Brazil is for A-B InBev, Africa is for Heineken. Sure, it's smaller than Brazil, but we are also earlier in the growth curve.”
As we've already discussed in our hour together, Heineken has stepped deeper into A-B InBev and SABMiller's back yards – Brazil and South Africa - in the last 18 months. How's that for a statement of intent?
“I'm not looking to attack whoever aggressively,” van Boxmeer clarifies. “We target consumers, we don't target competitors. We're there to take opportunities in those two markets, not to commit suicide!”
The analysts that van Boxmeer is scheduled to meet after talking to me are starting to mill, and one or two of them look handy. Time for one more (question, not beer).
Last year, Heineken enjoyed what must have been a perfect day, marketing-wise: As well as the final of rugby's Heineken Cup in Paris, Saturday 22 May also saw Bayern Munich and Inter Milan duke it out in football's Champions' League final – a tournament Heineken is also a major sponsor of – in Madrid.
“I went to the Champions League final,” said van Boxmeer. “It's not that I don't like rugby, I just don't understand it!”
Jean-Fran?ois van Boxmeer is a native of that rugby powerhouse, Belgium.
27 May. 2011