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 keen to foster relationships with retailers
Chief executive Graham Mackay will seek to hit the ''reset'' button on the key relationship between Foster's and the retailers after years of squabbles around heavy discounting, promotions and supply chain management.
''We think that the relationships with them [Australian supermarkets] and management of those retail relations have been neglected and that's a fairly common cause in Australia. So, we think there is work to be done there,'' Mr Mackay told analysts last week.
Advertisement: Story continues below ''We just think getting in there and doing a better job with them and working together with them will yield results.''
In particular, the Anglo-South African brewer is expected to implement its Building Execution Excellence at Retail (BEER) initiative in Australia if its $12.3 billion takeover bid for Foster's is completed, after a highly successful launch of the strategy in North America lifted growth.
The BEER strategy, which enables SABMiller to measure and improve the quality of service it offers to retailers, has been implemented in part in other regions and in parts of Europe where it shares IT platforms with key supermarket customers.
''We believe that our customers [retailers] and ourselves should take a shared view of growing the value pool, thinking and acting deliberately together in this endeavour,'' Mr Mackay said as he sold his $5.5325-per-share offer for Foster's.
''Drawing from our experience, particularly in the US, we will adopt this shared partnership approach [in Australia] to value creation with joint business planning and enhancement of the shopper experience in off-premise channels.''
The BEER initiative was an immediate hit for SABMiller in the US, with its MillerCoors unit category leader in 30 per cent of key account chains after the introduction of BEER - up from 24 per cent in 2008. Retailers also won, with stores linked to the brewer's strategy outperforming unaligned outlets volumes and sales.
''MillerCoors's revenue through these outlets is up almost 5 per cent, a win not only for the business but also for the retailer,'' a SABMiller document says.
Foster's has had an uneasy relationship with Coles and Woolworths of late as stagnant volume growth has seen the retailers slash prices even as they have also been introducing their own home-brand beers that directly compete with Foster's beers.
Their squabbles flared up earlier this year when Foster's stopped the delivery of tens of thousands of cartons of VB, Carlton Draught and Pure Blonde to Coles' First Choice liquor stores and Woolworths' Dan Murphy's chain after a price war drove the price of slabs so low that Foster's believed its brand equity was being damaged.
The huge discounting has been partly driven by shrinking growth for beer as a beverage category. Beer volumes are down 6 per cent in 2010-11 - dropping 7.3 per cent in the first half and 4.6 per cent in the second half.
''We believe there are opportunities to rejuvenate the beer category and enhance Foster's position in it,'' Mr Mackay said.
Dan Murphy's national merchandising manager Stephen Donohue welcomed the new approach from SABMiller and Mr Mackay.
''We are always open to furthering more collaborative relationships with our suppliers as they tend to result in a better outcome for both parties and deliver a better deal for customers,'' Mr Donohue told BusinessDay.
A spokesman for Coles said: ''Foster's is a key partner in our liquor business, and we look forward to continued collaboration with the company under its new ownership structure.''
Mr Mackay said despite the consolidation of the supermarket sector in Australia and the dominance of the two leading players, SABMiller could work with both retailers to grow the size of the beer market.
''There is no reason why we shouldn't improve relationships and deal well with a concentrated trade. That does happen in other parts of the world and obviously we are use to dealing with major key account customers.
''We will reach out to key retailers with a view to building an improved customer relationship model, centred on mutually beneficial solutions for brand-led growth.
''We will improve revenue and channel management of the business through developing the relationships between Foster's and its retailer customers and thereby raising beer's appeal to shoppers at the point of purchase.''
26 Sep. 2011