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.
Beermaker Asahi to Sell Bonds to Finance Overseas Purchases: Japan Credit
The average coupon on bonds sold by Asahi has fallen to 1.04 percent from 1.31 percent in the quarter ended March 2010, according to data compiled by Bloomberg. The average coupon on bonds sold by Cia. de Bebidas das Americas, Latin America’s largest brewer, is 9.91 percent and 5.81 percent for debt issued by SABMiller Plc (SAB), the London-based brewer in the midst of a $10 billion hostile bid for Foster’s Group Ltd. (FGL)
“This is a great market environment for securing long-term financing,” Asahi Executive Officer Yoshihide Okuda said. “Judging by the current economic environment, long-term interest rates are unlikely to rise over the next half a year.”
Asahi plans to raise more than 15 billion yen ($195 million) in its first bond sale since April 2010, said Okuda, who is in charge of finances at the Tokyo-based company. A sale of long-term bonds could be scheduled within six months and proceeds would be used for acquisitions and other purposes, he said. Okuda declined to give further details.
Asahi agreed to buy New Zealand’s Independent Liquor Ltd. for $1.3 billion last month following more than $2 billion in foreign acquisitions in the past five years. Japanese liquor makers, including Kirin Holdings Co., the country’s largest brewer by market value, are pursuing overseas takeovers as the nation’s shrinking population hurts demand for beverages.
Loans and Cash
Asahi, which plans to use loans and cash to pay for its purchase of Independent Liquor, is looking to the bond market to shore up finances and tap the lowest spreads relative to government debt in three months. The company plans 400 billion yen worth of acquisitions to reach its goal of raising the share of overseas revenue to 30 percent by 2015, Okuda said.
The extra yield investors demand to own Japanese corporate bonds instead of similar-maturity government debt dropped to 66 basis points from this year’s peak of 78 basis points on June 10, according to Nomura Securities Co.’s Bond Performance Index. The spread was at its lowest since May 30. The similar spread in the U.S. is 221 basis points, Bank of America Merrill Lynch indexes show.
Benchmark 10-year Japanese government bond yields added 1.5 basis points to 1.045 percent today in Tokyo, after reaching 0.98 percent on Aug. 19, the lowest level since Nov. 12.
The extra yield investors demand to own Asahi’s 0.633 percent bonds maturing in April 2015 over similar-maturity government debt shrunk to 18 basis points from the peak of 23 on May 9, according to Japan Securities Dealers Association prices on Bloomberg. The spread for 5-year bonds rated A by risk assessors Rating and Investment Information Inc., the same grade as Asahi, widened 42 basis points to 126 in the period.
The company had 12.4 billion yen in cash and equivalents as of June 30, compared with a 63 billion yen at rival Kirin. Asahi has 25 billion yen in bonds due in 12 months to July 2012.
“Looking at the company’s cash generation going forward, they are likely to come short about 100 billion yen,” said Akiko Kamigori, a Tokyo-based analyst at Daiwa Securities Group Inc. “Even with loans and commercial paper for the short term, they must be considering bonds long term.”
The Independent Liquor deal gives Asahi control of the world’s fourth-largest producer of bottled cocktails to help increase its portion of overseas sales from 7 percent, compared with Kirin’s 23 percent.
Asahi agreed in July to pay $200 million for the water and juice business of Australia’s P&N Beverages and $309 million for New Zealand drink maker Charlie’s Group Ltd. (CHA) The company had also agreed to spend $274 million for Malaysia-based PepsiCo Inc. bottler Permanis Sdn.
Kirin has invested more than $12 billion in acquisitions abroad in the past five years, outspending Asahi six to one, according to data compiled by Bloomberg. On Aug. 2, Kirin paid 3.95 billion reais ($2.5 billion) to gain a stake in Schincariol Participacoes e Representacoes SA, Brazil’s No. 2 beermaker.
The yen traded at 76.84 per dollar today in Tokyo from 76.66 yesterday in New York. The yen reached a post-World War II high of 75.95 versus the dollar in New York trading on Aug. 19, spurring speculation the Bank of Japan will move to weaken the currency.
The Markit iTraxx Japan index of credit-default swaps slid 4 basis points to 141 yesterday, according to CMA, which is owned by CME Group Inc. The risk gauge advanced from 98 a day before the earthquake, the data show.
Contracts to insure Japanese government debt against default for five years fell 4 basis points to 103.7 yesterday, according to the latest CMA prices. The cost to protect Asahi’s debt dropped to 49.8 basis points on Aug. 12, the lowest since March 21, and advanced to 57 basis points yesterday.
Credit-default swap contracts pay the buyer face value in exchange for the underlying securities if a borrower fails to meet its debt agreements.
1 Sep. 2011