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.
Asia Pacific Breweries: PBIT for FY2011 Crosses S$600 million
•PBIT rose 23% to S$613.9 million
•Group Revenue advanced 18% to almost S$3 billion
Today, Asia Pacific Breweries Ltd (APB) announced its financial results for the full year ended 30 September 2011. Group profit before interest, taxation, and exceptional items (PBIT) rose S$113.8 million or 23% to S$613.9 million. Attributable net profit before exceptional items (APBE) increased S$42.6 million or 16% to S$303.6 million. Excluding translation differences, gestation loss1 and the impact of acquisitions2 and disposals3, organic PBIT and APBE grew 25% and 16% respectively.
An exceptional gain of S$36.8 million was recorded from the divestment of interests in Kingway Brewery Holdings Ltd3 (KBH). This resulted in attributable net profit after exceptional items (ANP) rising by S$78.6 million or 30% to S$341.7 million.
Group revenue for the year gained 18% to almost S$3 billion. Earnings per share before exceptional items rose 16.5 cents to S$1.176. Compared to the previous financial year, net asset value per share gained 58 cents to S$4.96 while net tangible assets (NTA) per share gained S$0.57 to S$2.39.
The Directors have proposed a final dividend of 63 cents per share and a special dividend of 15.5 cents per share. Together with the interim dividend of 22 cents per share, total net dividend for the year is S$1.005 per share. The final and special dividends, if approved by shareholders, will be paid on 13 February 2012.
Mr Roland Pirmez, Chief Executive Officer of APB, said," Our double-digit revenue growth was mainly due to robust sales in markets such as Vietnam, Papua New Guinea and Sri Lanka. Sales volumes from Indonesia, New Caledonia and the newly acquired brewery in Solomon Islands also contributed to the improved revenue.”
“ANP grew 30%. The bottom line has been further lifted by an exceptional gain from the divestment of interest in KBH by our joint venture company,” he continued.
Indochina (Cambodia, Laos and Vietnam) and Thailand recorded PBIT and volume gains of 17%. Vietnam led the region with a double-digit volume growth although sales also improved in all the other countries. The Indochina region is the Group’s largest PBIT contributor at 47%.
South and South East Asia (Singapore, Indonesia, Malaysia, Sri Lanka and export markets) recorded PBIT and volume improvements of 30% and 20% respectively. Indonesia has emerged to become a new key contributor to the profitability of this region while PBIT in Malaysia rose 18% as compared to the previous year. While Singapore reported stable earnings, Sri Lanka turned in a modest maiden profit during the year. Excluding the results from Indonesia from October 2010 to January 2011 for a more comparable basis (as Indonesia was only acquired on 10 February 2010), PBIT for the region grew 6%. This region contributes 31% of Group PBIT and is the second largest PBIT contributor for the Group.
Oceania (New Zealand, Papua New Guinea, New Caledonia and Solomon Islands) reported a PBIT increase of 40% that grew on the back of an 11% volume increase. The robust performance was driven mainly by strong consumer demand in Papua New Guinea, improved margins from New Zealand as well as contributions from New Caledonia and Solomon Islands. Excluding the results from New Caledonia (from October 2010 to January 2011) and Solomon Islands (from June 11 to September 11) for a more comparable basis as New Caledonia was only acquired on 10 February 2010 and Solomon Islands on 6 June 2011, PBIT grew 33%. This region accounted for 27% of Group PBIT.
North Asia (China and Mongolia) reported a PBIT of S$2.1 million. Mongolia continued to report volume growth while the business model in China has been restructured to focus on the international premium segment.
Greater Demand Leading to Capacity Expansion
During the year, the Group expanded the capacity of several of its breweries.
In October 2011, the breweries in Danang and Ho Chi Minh City, Vietnam expanded their capacities to 1 million and 4.2 million hectolitres respectively to meet surging demand for our brands. The latter, the largest brewery in Vietnam, also added a second canning line that produces up to 90,000 cans of beer per hour, further sharpening its competitive edge and efficiency.
In August 2011, the brewery in Tangerang, Indonesia installed a new bottling line that is able to fill up to 36,000 bottles per hour. This has improved bottling productivity by 30%.
During the course of the year, new fermentation storage tanks were installed in breweries situated in Mongolia, New Caledonia and Sri Lanka. The additional capacities have improved the efficiency of the supply chain thereby ensuring that demand for our beers will be matched with a corresponding supply.
To cater to demand for Heineken and Tiger beers in China, the production capacity of the newly-commissioned Guangzhou brewery will be expanded to 1.5 million hectolitres. The expansion is expected to complete by the first quarter of 2012.
The Group also added to its capacity by acquiring a 97.69% stake in Solomon Breweries Limited in June 2011, thereby strengthening its presence in the South Pacific Islands. Solomon Breweries, which produces SB and Solbrew Lager, is immediately accretive to APB's earnings.
South & South East Asia (Singapore, Export Markets, Malaysia, Indonesia and Sri Lanka)
Volume and PBIT for the region rose 20% and 30% respectively, boosted mainly by the acquisition of breweries in Indonesia in February 2010. On a comparable basis, excluding the results from Indonesia from October 2010 to January 2011, PBIT grew 6% driven by higher volumes in Singapore, Malaysia, Indonesia and Sri Lanka as well as improved margins from price increases in Indonesia.
Indochina (Vietnam, Cambodia and Laos) & Thailand
The region, led by Vietnam, continues to deliver double digit volume and PBIT growth. Volume for the region grew 17%, with improved sales in all operating markets.
PBIT grew 17%, underpinned by higher volume and better margins in Vietnam. Excluding translation losses, arising mainly from the 18% devaluation in the Vietnamese dong, PBIT grew organically by 38%.
North Asia (China and Mongolia)
PBIT for the region fell 61% to S$2.1 million due to higher gestation losses from our new start-up brewery in Guangzhou and divestment of interests in KBH by HAPBC, partially offset by improved margins from price increases. Share of gain from divestment in KBH has been reflected under Exceptional Items.
Oceania (New Zealand, Papua New Guinea, New Caledonia and Solomon Islands)
Volume and PBIT for the region grew 11% and 40% respectively. The robust performance was driven mainly by strong consumer demand in Papua New Guinea and improved margins from New Zealand as well as contributions from newly acquired breweries in New Caledonia (February 2010) and Solomon Islands (June 2011).
On a comparable basis, excluding the results from New Caledonia from October 2010 to January 2011 and Solomon Islands from June 2011 to September 2011, PBIT grew 33% due to higher volumes and improved margins from all operating markets.
Corporate office expenses were higher than last year mainly due to increased employee share-based expenses as a result of the higher share price for the year offset by higher royalty income and lower business development expenses.
Rising inflation in our main markets compounded by the recent economic uncertainties may dampen consumer demand.
Strengthening of the Singapore Dollar against regional currencies, particularly the Vietnamese Dong, will continue to adversely affect the reported financial results of the Group.
14 Nov. 2011