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.
US. Big Beer dresses up in craft brewers’ clothing
Perhaps you've ordered a beer at a restaurant recently. Maybe you even perused the craft beer list, looking for something different. If you're like me, your decision was based on something other than price -- otherwise you could've ordered a Coors Light or Budweiser for two or three bucks less.
So what was it? Was it the possibility of finding a unique, even superior flavor? Or was your decision based on the idea that a craft beer is one that's made by a small, independently owned brewery and not by the same makers of Coors or Bud?
If it was the latter, you may want to find out who's really making your beer before your next round.
Big, global breweries have taken notice of the craft beer movement -- mostly because that's where actual growth exists in the otherwise stagnant beer industry. In 2011, craft brewing saw growth of 13% by volume while overall U.S. beer sales were down an estimated 1.3% by volume. And even though craft beer still accounts for less than 6% of all beer sales, anyone remotely connected to the business knows it will play a big part in the industry's future. Craft beer delivers higher profit margins, it attracts consumer spending, sought-after clientele for bars and restaurants, and many people are passionate about craft beer, similar to the same way people are passionate about wine.
Everybody wants in. And so the macro-breweries have launched beers that approximate the craft taste profile (the popular Coors brand, Blue Moon), purchased stakes in some craft breweries (southwestern Terrapin Beer Company by MillerCoors), and snatched up others entirely (such as the recent acquisition of Goose Island Brewing by Anheuser-Busch).
What's noteworthy about these forays into the craft segment is the way these brands are purposely distanced from their Big Beer parents. You won't find the Coors name on a bottle of Blue Moon. Rather, you see the name Blue Moon Brewing Company. The same goes for a bottle of Anheuser-Busch's Shock Top. To distance their craft products from their billion-dollar household brands, the big brewers have gone so far as to create separate divisions to house their specialty brands: MillerCoors has created Tenth & Blake Beer Company while Anheuser Busch (BUD) has the Green Valley Brewery.
In many industries, this wouldn't raise an eyebrow. But craft beer is defined as much by its underdog culture and at-times contentious relationship to the greater beer market as its actual products. Some craft brewers and drinkers see these beers as imitators, donning a craft beer costume -- bold label designs and quirky names -- in an attempt to deceive customers.
"The large brewers have been using a variety of tactics to basically try to capitalize on some of the mystique and success in the marketplace that craft brewers are having," argues Paul Gatza, director of the Brewer's Association, a national trade group for independent brewers. "That these labels don't proudly say Anheuser-Busch or MillerCoors on them is to some degree a chancy proposition. To some beer drinkers out there, they won't care. To others, they will care and probably won't feel so good if they feel like they were duped by the large brewers."
On craft beer forums and blogs, the debate rages on. Consumers in general have grown increasingly concerned with who makes the products they buy and how products are made. More and more, our purchases have come to feel like endorsements of a company's practices.
"There are two types of consumers," says Anat Baron, the director of the documentary Beer Wars, which explores the battle between micro- and macro-breweries. "Consumers who shop by price and just don't care who makes the stuff that they buy, and other consumers, which are a minority, but I think a growing minority, that actually care about who makes what they buy."
Obfuscating the parent company behind a beer denies a drinker the right to exercise that choice. However, Tom Cardella, the CEO of Tenth and Blake, doesn't see the issue this way. In addition to the Blue Moon brand, Tenth and Blake houses Jacob Leinenkugel Brewing Company, Crispin Cider, as well as imports such as Peroni and Pilsner Urquell. "There's a lot of chatter about it within the industry but, at the end of the day, I really don't think it's a big issue. These businesses are marketed differently, they're targeted differently against consumer segments within the marketplace."
To Greg Koch, CEO and co-founder of Stone Brewing Company in Escondido, Calif., it's a cut and dry matter of how much American consumers value truth over deception. "It's my personal philosophy that the truth should be easy to understand and require no special knowledge," says Koch. That similar practices occur with other products, like "artisanal" cheese or "natural bread," doesn't justify it, says Koch. "They're basically co-opting imagery that's not consistent with reality. That's where, as a consumer, I get ticked off."
As a craft brewer, Koch is especially miffed: "Craft brewers are creative. We don't follow trends -- we create them. We specifically went against the mass-homogenized, corporatized business model…. When that very empire, the multinational conglomerate, starts giving the impression to unsuspecting consumers that they're a part of our world, of course that's offensive.
In response to those that say that it doesn't matter who makes a beer, Koch says: "Did the Milli Vanilli scandal matter? Why were people outraged? The music that people had enjoyed didn't change when it was discovered that an unknown singer was doing the singing. But people made clear that the truth is important and they don't like being duped."
Will the real craft beer please stand up?
Craft beer has several definitions. The Brewers Association stipulates that craft breweries be small(annual production of fewer than 6 million barrels), independent(less than 25% owned by an alcoholic beverage industry member who is not themselves a craft brewer) and traditional(devotes a decent portion of its product selection to all-malt beverages).
Though you can't taste a beer company's size or ownership structure, some see these qualities as essential distinctions. "I think there is a big difference between the beer that comes from a craft brewery and the beer that comes from a large brewery but is marketed to appear to be craft," says Sam Calagione, founder and president of Dogfish Head Craft Brewery, in Milton, Del. "The challenges that true independent, small, emerging craft breweries face to make their beer and get it to the consumer are so different from the challenges that international conglomerate brewers face, particularly when it comes to access to market and access to ingredients."
The largest craft brewery (using the Brewer Association criteria) is The Boston Beer Company, maker of Samuel Adams, which shipped 2.5 million barrels in 2011. That accounts for slightly less than 1% of the U.S. beer market. By comparison, the big breweries are, in fact, very big: In 2011, Anheuser-Busch shipped 98.8 million barrels, a market share of 47.7%. Meanwhile, MillerCoors (a joint venture between Molson Coors (TAP) and SABMiller PLC) had a share of 28.4%. Meanwhile, in 2011 the average craft brewery shipped 5,911 barrels while the median barrel count was just 550 barrels.
Dogfish Head brewery in Milton, Delaware
Cardella of Tenth and Blake says he does not fixate on industry definitions. "We kind of look at allowing the consumer to define what he considers craft beer. As we look at our businesses, craft generally refers to beers that basically provide a little bit more flavor intensity and a little bit more distinctiveness in regards to experimentation and styles."
Online, you'll find many people vowing to never drink a given beer again after discovering it's a MillerCoors or an Anheuser-Busch product. But others mock those folks for what they perceive as knee-jerk vilification of the "big bad corporation." In particular, the acquisition of Goose Island in 2011 by Anheuser-Busch seemed to ruffle a lot of feathers, especially since Chicago's noted hometown brew will increasingly be brewed outside the Windy City.
Yet Anheuser-Busch sees it as a win-win for the brewery and the drinker. "We were very impressed over the years with the amazing reputation of the Goose Island brand," says Paul Chibe, Anheuser-Busch's vice president of marketing. "And that brand was built upon extraordinary beer with amazing innovation. And what we've been is an enabler. So as Goose Island has needed capacity, we've given them the capacity. The thing that people can be confident in is that the Goose Island brewers are still the ones leading the brewery."
Chibe argues that critics of Anheuser-Busch fail to see the big picture. "You go look at the craft brewers -- how many of them are former Anheuser-Busch people? I think there's a bit of pride on our part in that we are able to be the school for many craft brewers that started their careers here … and they're bringing that great tradition to the craft industry."
Chibe credits a small but "extremely vocal" group of people for the negative buzz regarding Anheuser-Busch's legitimacy as a brewer of craft beer. "People that know brewing know that making a light lager style beer is not easy business. And that's why there's respect paid, just like we pay the respect to these guys who are doing amazing brewing in the craft beer community."
When post-prohibition protections wind up hurting the little guy
Craft and Big Beer don't exactly have a cozy history with each other. Big breweries, especially Anheuser-Busch, exert a huge amount of control over the distribution system, well beyond quaint concepts of good-spirited competition.
That distribution system is a complex one, with a tangle of varying state regulations, some of which date back to the repeal of prohibition. Most states operate on a three-tier system of brewer, distributor, and retailer. This system was created after prohibition to prevent an imbalance of power, specifically from allowing the bigger breweries of the time from manhandling small mom-and-pop bars.
Based on that goal, the system works. But the middle tier -- the wholesalers -- are not nearly as independent as intended and are often in the pocket of the big brewers. Getting access to the market is tightly controlled by the powerful players. As many people I spoke to put it, the big brewers will "ask" their wholesalers to focus more on their portfolio of products. This pressure takes many forms, but as an in-depth investigation by Crain's Chicago Business found in 2010, it is sometimes in the form of illegal pay-to-play practices. And even though some wholesalers may see opportunity to grow their business by pushing more craft brands, they also know better than to bite the hand that feeds them.
"Anheuser Busch can snap their fingers and the distribution network will get it on shelves and get it on tap handles and knock off other brewers who have been on those tap handles," says the Brewer's Association's Gatza. "In an ideal world, those decisions would be made by the beer drinker…."
Through a combination of acquisitions of craft breweries, craft distribution partnerships, and specialty brands, the big brewers hope
Anheuser-Busch brewery in Fairfield, Calif.
to get just enough craft brands in their portfolio to fill taps and shelf-space at the expense of newcomers.In response to criticism that Anheuser-Busch does this specifically to stifle the growth of craft brewers, Chibe says, "The tap handle battle we have embarked on was not directed at crafts but other large brewers and part of a competitive marketplace that is good for consumers."
In other cases, distribution laws serve the interest of preserving the current power structure and limiting newcomers. Take for example, the beer franchise laws. Again, it varies from state to state, but in many cases, once a small brewer signs a distribution agreement in its initial stages of growth, it's shackled to that wholesaler. "The ways the laws are written, once you have a franchise agreement, you can't really get out of it," says Tom Kehoe, co-founder of Yards Brewing Company in Philadelphia. "When a small brewer wants to move to a bigger wholesaler, it's up to the wholesaler, who can sell those distribution rights for that brand or even trade brands with another wholesaler."
It's not that franchise laws are totally senseless. The original intention was to keep wholesalers from being pushed around by the big breweries, because if they pulled their product from a wholesaler, it could put them out of business. But on the other hand, if a wholesaler isn't doing a good job with a craft brewer's product -- especially if they've been encouraged not to push craft beers by a major brewer -- the craft brewer has little recourse to take their product elsewhere. And the powerful lobbying of the National Beer Wholesalers Association (NBWA) works hard to keep things as they are. According to the Center for Responsive Politics, the NBWA Political Action Committee contributed $2,721,000 to political candidates for the 2012 elections, the second most by any PAC.
A long road from the barren 1970s
Craft brewers and craft beer enthusiasts have good reason to be skeptical of viewing big brewers as worthy stewards of the craft industry. From the end of prohibition through the 1980s, the beer industry has seen constant consolidation. Regional brewers either went out of business or were bought up. As a result, the beer drinker of the late seventies had pitifully few choices.
On tap at the local pub were the usual suspects: Bud, Miller, Coors, and maybe an import like Heineken. In 1979, there were 44 brewing companies in the U.S. Today, there are 2,126. For the most part, there was one kind of beer available: what is derided in craft circles as "fizzy yellow beer" -- also known as "adjunct" or "corn" lagers. Adjunct refers to the addition of cheap ingredients (corn, rice) to lighten a beer's taste or lower production costs. Adjunct lagers are the boxed-wine of the craft beer world.
Federal restrictions on home brewing were lifted in 1978, leading to increased amateur experimentation. Meanwhile, a handful of pioneering breweries demonstrated the viability of craft beer as a regional business. In 1984, Jim Koch founded The Boston Beer Company and started brewing Samuel Adams Boston Lager, the beer that arguably kicked off the craft beer renaissance of the 1990s. "You gotta remember, this was a totally different world," says Koch. "In 1984, if you were an American beer drinker, you could not get a great glass of beer. You could get mass-produced beers, which are fine for what they are, but they're not trying to be great."
A Harvard grad, Koch (no relation to Greg Koch, mentioned above) left a job at Boston Consulting Group to pursue his family trade. Koch's grandfather was a brewmaster at Anheuser-Busch. "My personal experience with them began in January of 1996. In 1996, they began a yearlong, full-scale attack campaign focused on doing as much damage as they could do to my business. And it began with kicking us out of virtually all of the Anheuser-Busch wholesalers. And then they started a PR campaign, which attacked Sam Adams."
Jim Koch went to the Better Business Bureau to have the ads reviewed, claiming they were false and misleading, and the bureau ruled in Koch's favor. Anheuser-Busch agreed to stop the ads. Jim Koch saw this as an attempt not just to thwart his efforts but to slow the growth of the craft industry overall. "But I don't have any bitterness about it -- they were just competing. False and misleading advertising was pretty hardball, but they played hardball. It's business. They're not required to be nice."
The story illustrates what Jim Koch sees as a cultural difference between the craft industry and the big brewers. "Their view of business is not cooperative or collaborative. Craft brewers are very different." Citing an example, Jim Koch says that in light of a current shortage of certain types of hops needed for specific beer styles, his company decided to share some of its excess inventory. "We gave up some of these scarce hops so that 200 other craft brewers could make more of their beer, in a sense compete with us, and that mentality is completely foreign to big companies."
What does craft really mean?
Many Americans have resigned themselves to the notion that nothing is made here anymore. Even sports teams have a rotating roster of players that compete on fields named after banks.
But craft brewers' are gaining increased recognition and more states have adopted craft-friendly legislation over the years. "Fortunately, people are passionate about craft beer," says Greg Koch. "So local and national politicians are going 'Wait a minute -- these are small guys, they're connected to their community, they're producing real jobs and hiring real people.'"
Very much the optimist, Dogfish's Sam Calagione has faith in his customers. "I think the consumer understands what it takes for a little 7,000-square-foot brewery that is owned by people who live in their hometown to brew on a small scale. Consciously or subconsciously, when they think of craft-brewed beer, they think a small company made that beer and that's why that beer costs a little bit more, that's why that beer is more flavorful."
Less diplomatic, but more succinct, Stone Brewing Company's Greg Koch puts it this way: "If you want to listen to Milli Vanilli., I suppose that's a choice you get to make. Just know that you're making that choice."
16 Nov. 2012