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.
Heineken’s Shelf-Improvement Strategy
"Sales of beer in bars and restaurants have declined in the past years and will continue to decline, due to stricter regulations on advertising, the smoking ban in bars and restaurants in many European countries," says Mr. Debrosse. "This has shied people more away from beer than the economic crisis."
"In addition, tastes have changed; people would now rather drink a prosecco or ros? wine, whereas they would previously order a beer," he says.
For a company that has traditionally focused on selling beer for consumption outside the home, this change necessitates a serious rethinking of marketing strategy.
On top of the slow decline of bar and restaurant sales come Europe's demographics; the population is aging and as it does so, it is drinking less. In 2010, Heineken's Western European sales declined 4.6% to €7.89 billion ($11.3 billion).
"Older people go out less. The average 55-year-old European drinks 35 liters of beer a year, whereas the average 25-year-old consumes 150 liters," Mr. Debrosse says.
And this matters more to Heineken, the world's third-largest brewer by sales after Anheuser-Busch InBev NV and SABMiller PLC, because it is more exposed to the low-growth European market than any of its peers. In 2010, Heineken generated nearly half of its sales and around 40% of its operational profit in Western Europe. Nomura estimates it will generate 51% of its operational profit from Western Europe between 2010 and 2015, compared with only 7% for AB InBev, in the 2010-to-2015 period.
The acquisition in 2009 of the brewing operations of Mexico's Fomento Economico Mexicano, or Femsa, the second-largest brewer in Latin America, will reduce Heineken's reliance on the mature Western European market, but this market will, nevertheless, remain an important contributor to the group's profitability, Mr. Debrosse says.
If Heineken want to raise its game it needs to find new ways to sell beer to aging, bar-shy Europeans. One key move has been toward transforming itself into an enterprise that operates along the lines of fast-moving consumer-goods companies such as Procter & Gamble, Unilever and Nestl? SA—companies that really understand high-volume supermarket retailing.
In 2009, it appointed former Procter & Gamble manager Alexis Nasard as global commerce director. Other brewers have also appointed senior executives from FMCG companies, such as AB InBev's chief marketing officer, who joined from Coca-Cola, and Carlsberg's chief executive, who previously worked at Gillette.
Heineken will also step up its advertising and promotion spending, some 12% of revenue in 2010, to move closer to the 15%-20% that companies such as Nestl?, Unilever or Groupe Danone SA customarily spend.
"At present, the beer shelves in many major retailers look terrible, making the consumer want to leave them as soon as possible," Mr. Debrosse says.
Mr. Debrosse sees making these shelves more attractive as key to Heineken's strategy, and this involves entering into cooperation agreements with retailers on presentation and promotion. Its first agreement was signed with Carrefour, the world's second-largest retailer, at the end of 2009.
The cooperation with Carrefour will initially focus on France, Spain, Italy and Belgium, but Mr. Debrosse doesn't rule out an expansion to other countries or even continents. "Together with Carrefour, we are trying to grow the beer category, which is beneficial to both the retailer and the supplier," Mr. Debrosse says.
"Since we started cooperating with Carrefour last year, sales at Carrefour have been up 3% more than at other retailers in 2010," Mr. Debrosse says. But it will take at least two or three years to fully implement the initiatives in all Carrefour outlets, he adds.
As well as making shelving displays more attractive, Heineken will introduce its own branded refrigerators, and create special shelves to give prominence to its five-liter kegs.
It also plans to make the most of its sponsorship of the UEFA Champions League, a European football competition, by holding tournament-themed events at Carrefour and bringing entertainment into the shops with screens showing highlights of the matches.
Mr. Debrosse stresses that "the cooperation is not so much focused on [price] promotions" but on creating a different kind of shopping experience. Price-cutting can be quickly matched by competitors. "It is difficult to compete on price as retailers follow each other's promotions quickly. We therefore need to attract the shopper with something else," he says.
Walking down the beer aisle in a Carrefour hypermarket in a suburb in Paris, shoppers can't escape the Heineken brand. They are confronted with a choice of 12 different packages of the Dutch brewer's flagship brand in neatly stacked cans and bottles of various sizes, next to a similar amount of choice in Heineken's Desperados, a beer flavored with tequila. The two brands take up about 75% of the store's beer shelves.
Mr. Debrosse says he expects to be able to boost Carrefour's beer sales by a high-single-digit percentage in the next three years, with Heineken, as the initiator, taking the largest percentage of the growth.
And while other brewers are also in talks with retailers to make their displays more tempting, they are doing it on a country-by-country basis, Mr. Debrosse says, whereas Heineken can use its European scale and market position to agree on European-wide agreements with the retailers, as it has done with Carrefour.
Heineken says it has the No. 1 position in the U.K., Spain, Ireland, Portugal and its home market, the Netherlands, in terms of sales volume.
Meanwhile, it has recently started talks with U.K. supermarket giant Tesco PLC as well as Germany's Metro AG and Lidl on cooperation agreements similar to the one it has with Carrefour.
The brewer is also planning to roll out its Desperados brand across Europe this year, following the solid growth of the tequila-flavored beer in France.
14 Jun. 2011