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.
SABMiller tries fresh approach in Sudan
An initial task was working out how to acquire a plot of land in an area with an undeveloped land ownership system, a problem that was overcome after the slaughter of a cow on the chosen property and the acquisition of a tractor for the local community, as well as royalty payments.
The brewery opened just more than 20 months ago, but it remains a challenging and expensive place to operate. Materials have to be transported to the landlocked country – the world’s newest – through the Kenyan port of Mombasa. Clearing the port can take weeks, before trucks embark on a week-long journey through Kenya and Uganda to reach Juba, South Sudan’s capital, at a cost of $15,000 to $20,000 (U.S.).
The experience may be extreme, but it highlights some of the issues facing companies looking to tap into the fast growing economies of Africa.
“It’s [South Sudan] been fascinating,” says Mark Bowman, SABMiller’s managing director Africa. “You have 8 million people and no one making beer. There are not many greenfield opportunities left in Africa, so when you see that, there’s a significant amount of risk but also a tremendous amount of opportunity.”
The poor state of infrastructure across the continent is one of the major impediments to increased investment in Africa.
Yet the potential is also clear, with sub-Saharan Africa forecast to grow at about 5.5 per cent this year, and a low average beer per capita consumption of seven to eight litres per capita annually. This compares to 60 litres for South Africa, the continent’s largest and most developed economy.
South Africa generates the equivalent of 95 per cent of the continent’s electricity and hosts about two-thirds of its rail network, but still suffers its own power and infrastructure problems, illustrating the infrastructure deficit elsewhere.
SABMiller, which has direct operations in 17 African countries, is bullish on the continent’s prospects and expects volume growth rates of eight to 10 per cent per annum. Last year, it doubled capacity at its South Sudan brewery to 350,000 hectolitres and it is sourcing sorghum from local farmers, which will help reduce costs. The brewer had planned to branch out beyond Juba, but has had to put those plans on hold because of the absence of paved roads.
Indeed, throughout the continent, the company knows it cannot rely on states to provide services such as water or electricity and instead looks to be self-reliant, supplying its own power, water and water treatment. As a result, putting in new capacity costs 30 per cent more than in developed markets, Mr. Bowman says.
The dual problems of poor roads and negligible rail networks also means the model of having one large brewery and distributing across the country is not feasible in many places.
In Tanzania, for example, SABMiller has four breweries producing 3 million hectolitres, equivalent to a small brewery in South Africa. Its newest brewery in the east African state was opened in Mbeya, a town in Tanzania’s southwestern corner, partly to save $1.5-million annually transporting beer from Dar es Salaam, the commercial capital.
The brewery cost about $70-million, but it has helped boost sales in a remote area of the nation, Mr. Bowman says. “The challenge with Africa is that it’s a billion people but it’s very fragmented, each country has its own bureaucracy [and] many of these countries are sub-scale by many standards. The most efficient thing would be to have 25 breweries across Africa and ship it around but Africa obviously doesn’t work that way,” he says.
But he believes countries are beginning to address the infrastructure constraints. “There’s absolutely no doubt that if you take it Africawide, it’s getting much better very quickly. We are seeing improvements in all aspects – governance, road infrastructure,” he says. “Areas that are perhaps underperforming still would be utilities such as power and water.”
16 Aug. 2011