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.
US. Trouble brewing for beer as hops, barley prices increase
An unstable agricultural market mixed with increases in transportation and energy costs have left brewers with a choice: increase prices or absorb the cost and wait out the storm.
“Cost of production is up, and the cost of raw materials is up,” said Fred Matt, president and chief operating officer for F.X. Matt Brewing Co., in Utica.
The cost of hops and barley, the two main ingredients in the golden beverage, has increased.
“The price of hops seems to be fairly volatile depending on what’s planted on the West Coast and in Europe and how their harvests are going,” said hops specialist Steve Miller from Cornell Cooperative Extension of Madison County.
Many brewers are dependent upon hops and barley producers from outside of the U.S., including Canada, Australia and Europe.
Flooding this spring lowered the quality of barley crops in Canada and Australia, according to an article by Reuters.
Brewers reliant on those markets are forced to look elsewhere, and with a decrease in supply, prices increase. This happened on a large scale in 2008 when barley and hops prices in the United States increased about 34 percent, according to the U.S. Department of Agriculture.
For example, the Matt brewery gets the majority of its barley from Canada and the Dakotas, Matt said. It uses two-row malt, made from barley, for which Matt said he hasn’t yet seen an increase but is expecting one in October.
“We’re probably going to see a 25 to 30 percent increase,” he said.
Matt further projected a 10 to 25 percent increase in hops prices.
“This is where you see that we’re in a worldwide economy,” Matt said.
Large brewers unaffected
The rise in production costs will not likely have an effect on larger brewers until 2012 because they have longer contracts with hops and barley producers.
Brewers such as Anheuser-Busch buy as much produce in advance as possible or have hedged pricing, making them less susceptible to market changes, said Eric Shepard, executive editor of Beer Marketer’s Insights, Inc.
The majority of the pressure is on the smaller brewers, he said.
Craft brewers, such as F.X. Matt, likely will take more of a hit because they buy hops and barley in smaller quantities and generally have shorter contracts with producers, Matt said.
Craft brewers also are affected more because they generally purchase more specialty malts than larger companies.
Another issue facing brewers is high energy costs.
Anything shipped to and out of the breweries has an energy surcharge on it to compensate for increased fuel prices, Matt said.
Local hops not an option
One possible solution is for breweries to purchase local hops and barley; however, that is not an option.
Though New York was historically one of the foremost hops producers in the country, the industry fell in the 1800s after blight damaged crops, and Prohibition, Miller said.
A recent hops resurgence in the state might eventually allow brewers to rely solely on local produce. Current farms, however, are not yet large enough to guarantee larger breweries the quantity they need, Miller said.
The majority of the barley produced in the state is used by dairy and field crop producers, said Jeff Miller, an educator at Cornell Cooperative Extension Oneida County.
Barley used for livestock feed is different from that used for malt because malt barley is used for flavor where as feed barley is used for protein, Jeff Miller said.
Though the state is a large barley producer, it is of no help to the beer industry.
Consumers might pay more
With costs to brewers expected to increase this fall and into 2012, many are debating whether to increase prices.
Empire Brewery Co. in Syracuse plans to absorb as much of the costs as possible, said Tim Butler, director of brewing operations.
Similarly, Brewery Ommegang in Cooperstown also is planning to absorb costs. The brewery contracts its grains for a year so is not subject to daily fluctuations, Brewmaster Phil Leinhart said.
“Barley malt is the basis of just about all beer,” he said. “It is a concern, but the best thing to do there is to contract as far out as you can.”
F.X. Matt is looking to see what other brewers plan to do before making a decision. If others increase their prices, then brewers such as Matt will follow.
“We will take one in October if the market moves,” he said, though he hopes it can wait until January or February to avoid further increases throughout the year.
If the company decides to increase its pricing, consumers likely will see F.X. Matt products on average to increase 50 cents per six-pack and a $1 per 12 pack, Matt said.
In spite of looming production cost increases, beer sales for Matt have been growing, something he hopes will not be stunted if the company has to raise prices.
“Beer is relatively cheap compared to other commodities out there,” Matt said.
For example, he said, a bottle of water is $1.50 compared to a $7.99 six pack of Saranac.
“And water is a lot cheaper to make than beer.”
28 Jul. 2011