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.
MillerCoors CEO Tom Long seeks growth with craft beers
But persistently high unemployment, an uncertain economy and young consumers' shrinking thirst for mainstream beer are standing in his way.
A month since taking the reins of MillerCoors, Long is shifting the Chicago company from cost-cutting to growth mode.
SABMiller of London and Molson Coors Brewing Co. of Denver merged their U.S. operations in 2008 to better compete with Anheuser-Busch of St. Louis, the world's largest brewer, which is owned by Belgium-based Anheuser-Busch InBev. Three years and $684 million in cost savings later, Long said, MillerCoors, the maker of Coors Light, Blue Moon and Leinenkugel, is poised to boost profits.
"It is clear we have done quite well in capturing synergies, which was the promise of the joint venture initially, and that was stage one," Long, 52, said in his first interview since taking over as CEO at MillerCoors' Milwaukee offices. "Organic growth in craft and imports and light beer is our ambition because our future earnings power will come from that growth more than from cost savings, and so that is the challenge of the business."
Long, a North Carolina native with a master's degree in business administration from Harvard, has the manner of a Southern gentleman with the cadence of a marketing veteran. He spent 17 years at Coca-Cola Co., eventually serving as president of the Atlanta company's Northwest European division,
Long joined Miller Brewing Co. as chief marketing officer in 2005 and was promoted to CEO the next year. He took the position of chief commercial officer when the MillerCoors joint venture was formed in 2008, ceding the top job to veteran Leo Kiely. Last fall Kiely announced that Long would begin sharing CEO responsibilities with him, although no titles were changed at the time.
Long took over as CEO in June, and analysts expect the transition to be smooth.
"The fact that they've brought someone up from the inside suggests that presumably he buys into the brand, which suggests there will be some continuity in the brand focus," Morningstar equities analyst Phil Gorham said.
Experts say Long will be judged by his ability to turn the company's sales around.
"The savings angle has kind of run its course and the next chapter has to be about growth," said Benj Steinman, president of Beer Marketer's Insights. "They've got to deliver the goods in a tough market for mainstream domestic beers."
Beer shipments declined 2% in 2009 and 1% in 2010, the first consecutive-year slide since the mid-1990s. U.S. shipments are expected to be flat or slightly down in 2011. Another down year would mark the first three-year slide since the 1940s.
MillerCoors and Anheuser-Busch have pointed to high unemployment among 21- to 34-year-old men, their best customers, as the primary reason for slipping sales.
Both companies lost U.S. market share last year, according to Beer Marketer's Insights. Anheuser-Busch slipped a full percentage point, to 47.9% of the beer market, while MillerCoors lost more than half a point, falling to 28.9%.
The economy is not the only enemy of big beer. Small-batch regional brewers, as well as wine and liquor, also are posing threats.
According to the Distilled Spirits Council of the United States, beer accounted for 49.8% of dollar sales of alcohol in 2010. That's down from 56% in 1999. Over the same period, spirits grew from 28.2% of sales to 33.3%, and wine increased from 15.8% to 17%.
There's also some question as to whether mainstream beer brands are as relevant with young drinkers as they once were.
Big beer brands have been losing the affinity of core drinkers over the last two years, according to YouGov's BrandIndex, a research firm that tracks brand buzz, loyalty and quality perceptions based on consumer surveys. MillerCoors' Miller Lite and Coors Light and Anheuser-Busch's Bud Light have had negative ratings for most of that period.
Craft beer has posted double-digit sales gains for three of the last five years and is likely to do so again in 2011. Craft brews account for about 5% of consumption, a figure that could rise to 10% in five or six years if industry sales were to remain flat, according to Beer Marketer's Insights.
Big brewers have responded to the rise of craft beers by buying or investing in craft brands and building "craft-style" brands, which mimic the taste of craft beer but have wide distribution.
MillerCoors built the Blue Moon brand from the ground up, and it owns Leinenkugel, a 144-year-old brand. Anheuser-Busch created Shock Top as an answer to Blue Moon and agreed to buy Chicago-based Goose Island Brewing Co. in March.
Last fall, MillerCoors created Tenth and Blake, a dedicated division for its craft and import brands, including Blue Moon and Leinenkugel, as well as Peroni, Grolsch and Pilsner Urquell.
"[There] will not always be thousands and thousands of tiny brands," Long said, referring to the 1,700 brewers in the U.S. today. "Big brands will emerge, and they already have: Sam Adams and Fat Tire and others. Certainly Blue Moon fits into that category."
MillerCoors' goal "is to make sure that some of those emerging winners are ours," Long said. To do that, he said, the company will have to be successful in gateway beers that introduce consumers to the craft segment, as well as to other brews for "eclectic palates."
But light beer is still the company's primary focus. And the company not only may need to sell more light beer but also get cash-strapped consumers to pay more for it.
MillerCoors has increased prices in the U.S., along with other consumer package goods firms. But persistently high gasoline and commodity prices make additional increases possible.
To make the increases palatable, Long said, consumers "have to love what's in the liquid itself."
2 Aug. 2011