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.
Ambev vs. Anheuser-Busch: A Primer on Retained Earnings
If I make a dollar on every widget I sell, ideally I take that dollar and reinvest it in new capacity, enter new markets or stoke demand for my products in existing markets. What I don’t want is to spend that dollar on replacing plants and equipment, paying off piles of debt or defending myself against lawsuits because my widget causes measles. There’s a case often made that debt repayment can drive profitability when your cost of capital is greater than your return on equity, but this isn’t the kind of dynamic I’m interested in as a long-term investor in a business. It’s instructive here to crunch some numbers to determine which of our companies is the better capital allocator.
Between 2002 and 2010, Ambev earned a grand total of 9.96 Brazilian Reals per share (approx. $6.40USD at current rates). During that same time the company paid out 7.10 Reals ($4.56USD) in dividends. This leaves 2.86 in retained earnings, which were plowed back into the business. Earnings per share were .66 in 2002 and 2.44 in 2010 with the incremental profit equaling 1.78 (2.44 - .66). Utilizing only 2.86 in retained earnings, the company realized a 62% return (1.78 / 2.86). This is a company firing on all cylinders and driving shareholder value at every turn. Now for Papa BUD.
Over the same period, Anheuser-Busch InBev earned $21.99 per share. The company paid out one .39 dividend in 2010 leaving 21.60 in cumulative retained earnings to reinvest. Earnings per share were $1.12 in 2002 and $2.50 in 2010 with the incremental profit equaling 1.38 (2.50 – 1.12). Utilizing 21.60 in retained earnings, the company was only able to realize a 6.4% return (1.38 / 21.60).
Whatever the company is doing with its earnings (a discussion for another time), they are not delivering the incremental profit and this is what the smart investor demands.
28 Jul. 2011