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.
Analysis: Brewing jobs in front line of euro debt crisis
The downturn in 2008 heralded a three-year cost-cutting exercise at Amsterdam-based Heineken and a number of brewery closures at Carlsberg.
Analysts say another round of bloodletting is on the cards.
Both brewers are threatened by the euro zone crisis -- Heineken earns 35 percent of its profit from western Europe and Carlsberg as much as half, with the Dutch brewer more exposed to euro zone economies on the critical list.
Brewers' profits have already been battered by the crisis in Greece and Iberia and analysts worry Italy and France might be next, while, outside the euro zone, Britain's beer market may suffer from national austerity measures aimed at cutting debt.
Germany is western Europe's biggest beer market in a $29 billion industry with around one third of the volume, followed by Britain, Spain, France, Italy and then the smaller markets of the Netherlands, Belgium and Denmark.
Heineken is coming to the end of its cost-cutting program, and analysts have said the next round, to be outlined in February, may have to go deeper, while Copenhagen-based Carlsberg has said it will look at overall costs.
Chief executive Jorgen Buhl Rasmussen told Reuters this week Carlsberg was preparing for the worst conceivable situation and looking back to its experience in 2008. It was important to act fast and ahead of the field, he said.
"For that reason, we are right now looking at our entire cost base to see if all activities are necessary and if any could perhaps be postponed for a period of time," he said.
Analysts said brewery closure will be more difficult after a number of recent shutdowns -- Carlsberg is operating in a number of countries with just one brewery. But, if trading is hit by the euro zone crisis, brewers may have no option.
"If the top line looks a bit gloomy and pricing in Europe is not fantastic, you need to adjust the cost base," Bernstein Research analyst Jean-Marc Chow said.
In 2008, Carlsberg decided to focus its Danish and Italian businesses on just one brewery each, with the closure of Valby and Ceccano. It also decided to close its Loule brewery in Portugal and Tetley brewery in Leeds, northern England.
Heineken's three-year 2009-11 Total Cost Management cut 435 million euros ($588 million) off costs in the first two years, with just over half the cuts in western Europe, and was still cutting costs this year.
Last year, Heineken closed two breweries in England, at Dunston in the northeast and Reading in the south, following its 2008 takeover of Britain's biggest brewer Scottish & Newcastle in a year when the beer market fell 4 percent.
A Heineken spokesman said his group is very focused on productivity and cost savings and has cut costs by over one billion euros since 2006, and it will continue these cost cuts with the launch of its new TCM2 program in 2012.
Heineken and Carlsberg, ranked No. 3 and No. 4 in the world, are more exposed to western Europe than the world's two biggest brewers -- Anheuser Busch InBev and SABMiller, which earn just 8 percent and 2 percent, respectively, there.
Carlsberg, which also brews Baltika, Kronenbourg and Tuborg, is the No. 1 brewer in France and No. 4 in Italy but makes most of its regional profit further north in Scandinavia, Germany and Britain.
Heineken, which also brews Amstel, Birra Moretti and Cruzcampo, is the most exposed of the big brewers to the euro zone crisis being No. 1 in Greece, Italy and Portugal and No. 2 in France, Ireland and Spain.
Societe Generale analyst Andrew Holland said brewers were finding it very difficult to increase beer volumes and push prices higher in Greece and Ireland, and the tough trading conditions could easily spread.
"The Italian market could be the next to suffer a consumer downturn. Austerity has yet to bite. From the experience of Greece, people stop spending a bit after the announcement of measures and then you get a second downturn when they actually find they have less money."
18 Nov. 2011