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.
A flat tax on alcohol could be a heady prospect for the new owners of Foster’s
A flat tax would simplify the tax system and change the economics of the entire industry. Put simply, a flat tax across the industry would slightly increase the price of beer sold in pubs and clubs, slightly reduce the price of bottled beer and dramatically reduce the price of spirits and alcopops. For wine companies it would have a profound impact. It would substantially lift the price of cheap wine and reduce the price of premium wine.
Right now there are more than 13 different alcohol taxes at play, many of which are antiquated, and some that are at odds with the government's health and social policies.
Advertisement: Story continues below A flat tax would be watched with interest by SABMiller, particularly the spirits business. Even before it has taken control of Foster's it has taken the first steps to lifting morale in the company and it is looking at the best way to improve the economics of the company's beer production.
The day after the Foster's board agreed to the renewed $12.3 billion takeover offer for the country's biggest beer company, SABMiller is understood to have given staff the afternoon off as a symbol of goodwill and a portent of positive things to come. SABMiller is also believed to be looking at how deeply it can take the knife to head office at Southbank, which is carrying a lot of fat and has been the subject of criticism over the years from its team in Sydney. And in terms of improving efficiencies the talk is that it will scale up the Bluetongue Brewery in NSW, which was previously a joint venture between SABMiller and Coca-Cola Amatil, close the brewery in Abbotsford, Victoria, which is old, inefficient and land locked, open up a small brewing establishment in country Victoria, where it would get tax concessions, and sell the Foster's Fijian distillery to Coca-Cola Amatil. All of this would reduce the company's cost per hectolitre of beer.
Bank of America/Merrill Lynch analyst David Errington co-authored a report on June 27 which looked at the cost of beer globally. The report found Foster's had the highest cost of production in the world. It estimated Foster's total cost of beer per hectolitre was $163, compared with $148 for Lion Nathan, $75 for SABMiller Europe and $73 for SABMiller in South Africa.
The Abbotsford brewery is one of the reasons why Foster's cost of production is so high. According to Errington, if the Abbotsford brewery was closed and a new one built, Foster's earnings before interest and tax could rise by at least $100 million to $150 million a year.
If politics didn't come into play and the tax was extended to wine, it would make the country's listed wine company Treasury Wine Estate look cheap. The Treasurer, Wayne Swan, has come out saying the government would not change alcohol tax on wine ''in the middle of a wine glut'' but it is only a matter of time before governments realise the tax system exacerbates the glut by encouraging production on the basis of volume as opposed to value.
Beer, spirits and ready-to-drink products, also known as alcopops, are taxed on the basis of their alcohol content, with spirits and alcopops taxed at a higher rate because of the perceived greater risk of abuse. Wine is the big anomaly. It is taxed on price rather than volume. This means low-value cask wine attracts little taxation while more expensive bottled wine attracts higher tax under the wine equalisation tax system. Various studies have been conducted over the years to estimate the impact of a flat tax.
One report, prepared for the Henry tax review, estimated that a flat tax would result in the price of a $35 bottle of spirits falling to $22.45, a bottle of alcopops would fall from $3.30 to $2.42, a $14 wine cask would jump to $31.07, an $8 bottle of wine would increase to $10, a $13 bottle of wine would rise to $13.87, an $18 bottle of wine would fall slightly and a $30 bottle of wine would dip to $27.53.
In terms of draught beer, the study found that a pot of light beer would go up 36?, a pot of mid-strength beer would rise 29?, full-strength beer would go up 23?, and packaged beer would be virtually unchanged. Such a move would have profound implications for the wine industry, which remains under serious pressure with systemic global oversupply, a high currency, drought and bad weather, and the effect of the slowdown on global demand.
It would decimate the cask wine market, which represents about half of all wine sold. And it would decimate winegrowers in the Riverina, Griffith and the Riverland. Treasury Wine Estate specialises in premium wine and so it would do wonders for its bottom line.
Regardless, any changes to alcohol tax are politically and practically challenging. The debate is complex and many in the industry believe it would be too politically damaging to introduce a simple taxation system taxing all alcohol in the same way.
3 Oct. 2011