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.
Asahi Plans Takeovers in Southeast Asia
“We are looking at Indonesia, Vietnam, Thailand, the Philippines and Malaysia,” Asahi President Naoki Izumiya, 63, said in a Dec. 12 interview in Tokyo. Kirin will “consider corporate tie-ups and small-scale mergers and acquisitions in Southeast Asia,” Chief Executive Officer Senji Miyake said in an interview yesterday.
The brewers’ push into the region will give them access to markets where some rivals’ operating margins are more than double that of both Asahi and Kirin’s, as Japan’s aging population crimps demand in their home market. Asahi has spent more on acquisitions this year than any other after domestic demand for beer slumped in 2010 for a 14th straight year and the yen’s gain boosted Japanese companies’ buying power abroad.
“The Southeast Asian market is not yet dominated by one company so there are opportunities,” said Mikihiko Yamato, an analyst at JI Asia, who recommends buying Kirin shares.
Asahi has gained 7.6 percent in Tokyo trading this year, compared with an 18 percent slide for the broader Topix index. Kirin has declined 17 percent.
The yen has risen more than 7 percent against the dollar in the past year, the biggest gainer among 10 major currencies tracked by Bloomberg.
Asahi, Japan’s biggest beermaker by volume, made 6.6 percent of sales abroad last year, compared with 23.4 percent for Kirin, the biggest by market value, according to company statements. Asahi’s sales from overseas will probably increase to 10 percent this year, said Takayuki Tanaka, a spokesman for the Tokyo-based brewer.
“We want to expand our Super Dry brand and sell beer globally,” Asahi’s Izumiya said. “We can’t just cut costs. We have to increase our top line as well.”
Carlsberg A/S will produce and sell Asahi’s “Super Dry” beer in Malaysia, the Japanese brewer said in a statement yesterday.
Asahi earlier said it aimed to boost sales to 2 trillion yen to 2.5 trillion by 2015, with 20 percent to 30 percent revenue from overseas. Revenue last year was about 1.5 trillion yen.
“The Southeast Asian market is twice the size of Oceania, including Australia, and they want to move quickly,” said Hiroshi Saji, a Tokyo-based analyst for Mizuho Securities Co. who recommends buying Asahi shares.
The total population of Indonesia, the Philippines, Vietnam, Thailand and Malaysia will grow to 553 million in 2016 from 519 million this year, according to International Monetary Fund estimates compiled by Bloomberg. The population of Southeast Asia, including Myanmar and Singapore, will probably increase 7 percent to about 650 million.
Japan’s will probably contract 1.1 percent to 127 million in the same period, according to the data.
Beer sales by volume of domestic brewers in the world’s third-largest economy contracted 3.5 percent to 2.9 million kiloliters last year and dropped 47 percent in the past decade, according to the data from the Brewers Association of Japan.
Asahi’s operating margin of 9.73 percent compares with 26.74 percent for the Philippines’ San Miguel Brewery Inc. (SMB) and 22.47 percent for PT Multi Bintang Indonesia, according to latest filings compiled by Bloomberg. Kirin has a profit margin of 6.96 percent, data compiled by Bloomberg shows. Malaysia’s Guinness Anchor Bhd. has an operating margin of 16.27 percent while Thai Beverage Pcl. (THBEV)’s is at 12.14 percent, the data show.
San Miguel Brewery, a unit of the Philippines’ biggest company by sales that dominates the country’s beer market, is 48 percent owned by Kirin, which has been investing in the southeast Asian country for at least a decade.
Kirin is also the biggest investor in Singapore beverage maker Fraser & Neave Ltd. with a stake of about 15 percent, according to data compiled by Bloomberg. Kirin in 2009 took Lion Nathan Ltd. private, gaining full control of Australia’s second- biggest brewer.
Asahi’s biggest acquisition has been its purchase of Independent Liquor Ltd. of New Zealand for NZ$1.5 billion, or about $1.3 billion when it was announced in August. The company bought Australian beverages firm P&N Beverages Pty Ltd., New Zealand’s Charlie’s Group Ltd. and Independent Liquor and Malaysia’s Permanis Sdn. All deals were completed in the second half of 2011.
Asahi has announced more than $3.3 billion worth of purchases abroad in the past five years, compared with about $14 billion for Kirin, according to data compiled by Bloomberg.
Kirin last month agreed to buy out shareholders in Brazilian beermaker Schincariol Participacoes e Representacoes, completing its biggest acquisition. The deal valued the Brazilian company at about $3.6 billion excluding debt, when combined with the October purchase of a 50.45 percent stake.
While Kirin may continue to make acquisitions, they will probably be “small-scale” purchases, Miyake said. “The time for big M&A is over for now and our number one priority is to pay off our debts.”
The brewer of Kirin Lager plans to expand in Vietnam Thailand and Indonesia, he said.
Kirin last month also agreed to assume 1.1 billion reais ($597 million) of Schincariol’s debt and estimated 2.1 billion reais of potential labor, legal and tax liabilities as part of the deal. It has about $1.9 billion of bonds and loans due in the next decade, according to data compiled by Bloomberg.
The company’s debt-to-equity ratio jumped to 1.1 times from 0.5 times after the purchase of Schincariol, Miyake said.
15 Dec. 2011