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.
Kirin Pays $2.5 Billion to Acquire 50% Stake in Brazil Brewer Schincariol
Kirin bought Aleadri-Schinni Participacoes e Representacoes SA, acquiring 50.45 percent of Schincariol Participacoes e Representacoes SA, Brazil’s second-largest beermaker, the Tokyo- based company said in a stock-exchange filing. The purchase, completed today, was funded with cash and loans.
The purchase of the closely held maker of Devassa Bem Loura and Glacial is the biggest since 2009 for Kirin, which has spent more than $12 billion on overseas acquisitions in the past five years as Japan’s declining and aging population crimps domestic demand for beer and soft drinks. Kirin bought all of Australia’s second-largest beermaker in 2009 and owns almost half of the Philippines’ San Miguel Brewery Inc.
“Beer demand is poised to grow in Brazil, and so buying a well-known brand is important instead of entering by itself,” said Koichi Ogawa, a chief portfolio manager at Daiwa SB Investments Ltd. in Tokyo. “Investing abroad is the most rational way for Japanese food companies to use their cash.”
Kirin slid 0.3 percent to 1,148 yen at the 3 p.m. close in Tokyo, paring the stock’s advance this year to 0.8 percent. The benchmark Nikkei 225 Stock Average slipped 1.2 percent today.
Schincariol had 509 million reais in earnings before interest, taxes, depreciation and amortization last year and the deal gives it an enterprise value of 8.654 billion reais, according to Kirin’s presentation documents.
That would imply Kirin is paying an enterprise value-to- Ebitda multiple of 17 times, compared with an average of 12.5 for beverage makers with a market value of at least $1 billion, according to data compiled by Bloomberg.
“We have been looking for promising targets to gear toward further growth, and we found a prominent one in Brazil where we see potential,” Kirin President Senji Miyake said at a briefing in Tokyo. “The Brazilian market for beer and soft drinks outstrips that of Japan.”
Brazil is the world’s third-largest brewery market by volume, with China the biggest and the U.S. ranking second, according to market researcher Mintel International Group Inc.
Primo Schincariol Industria de Cervejas e Refrigerantes SA controls about 11 percent of the beer market in Brazil, while Anheuser-Busch InBev NV (ABI), the world’s biggest brewer, holds a share of about 70 percent, according to Nielsen data. Primo Schincariol is a unit of Schincariol Participacoes e Representacoes, said Kan Yamamoto, a Kirin spokesman.
Kirin said it will use its technology and marketing to help boost Schincariol’s annual sales by 10 percent on average.
Schincariol, which also makes soft drinks, juice and bottled water under the Schin and Skinka brands, had gross revenue of 5.7 billion reais last year, according to the statement. The Brazilian company employs about 10,000 people and derives about 82 percent of sales from beer and 18 percent from soft drinks, Kirin said.
It’s Kirin’s first acquisition in Latin America, according to data compiled by Bloomberg. The company has an affiliate to sell Japanese sake in Brazil, Yamamoto said.
The ratio of 17 times enterprise value-to-Ebitda at which it made the purchase is almost double the 9.01 median of 10 similar deals from 2002 to 2009, according to data compiled by Bloomberg. Kirin paid a multiple of 13.13 when it took Australia’s No. 2 brewer Lion Nathan Ltd. private in 2009 for A$3.5 billion ($3.8 billion).
The Japanese brewer made about 23 percent of last year’s 2.2 trillion yen ($28.4 billion) sales abroad, compared with about 14 percent in revenue from overseas in 2005, according to data compiled by Bloomberg.
Kirin’s A2 credit rating was put on review for a possible downgrade by Moody’s Investors Service. While the deal may benefit Kirin, the Japanese brewer is entering “a new market in which it has limited expertise,” Moody’s said.
Heineken NV (HEIA), the world’s third-largest brewer, had considered making an offer for Schincariol, people familiar with the matter said in May, and London’s Sunday Times reported that SABMiller Plc (SAB), the maker of Grolsch and Peroni, may have been interested in bidding for the Brazilian beermaker, without saying where it got the information.
Japanese companies have announced $46 billion of cross- border acquisitions in 2011, making it the busiest year for such deals since 2008, according to data compiled by Bloomberg.
A stronger yen also makes it cheaper for Japanese companies to make acquisitions abroad. The yen was at 77.42 per dollar as of 3:01 p.m. in Tokyo from 77.21 in New York yesterday. The Japanese currency reached 76.30 versus the dollar yesterday, the strongest since it touched a record 76.25 on March 17.
Citigroup Inc. advised Kirin, Japan’s second-largest brewer by volume, trailing Asahi Breweries Ltd. Kirin borrowed some of the funds for the acquisition in a bridge loan from Bank of Tokyo-Mitsubishi UFJ Ltd. and Citigroup, Ryoichi Yonemura, general manager at the company’s strategic planning department said. The amount and terms of the loan weren’t disclosed.
25 Aug. 2011