The beer market dynamics in Russia is approaching zero, yet major brewers are divided into those who developed considerably in 2017 and those who considerably reduced their volumes. For instance, company Efes has managed to substantially extend their sales due to restrained pricing policy and activity in the modern trade. Heineken has also demonstrated an excellent performance promoted by significant increase of advertisement budgets launching a non-alcohol sort of the title brand and unusual activity in the economy market segment. Carlsberg and AB InBev have been focusing on margins and lost a market share of their inexpensive brands. Serious dependence on PET package and mass enthusiasm about Zhigulevskoe have negatively impacted the most of big regional brewers, that have been for the first time pressed by the leaders in the key sales channels, especially in Volga and Central regions. In the small business there has been a noticeable slowdown in appearing of new restaurant breweries, yet the number of craft breweries has been growing rapidly. In 2018, the beer market is likely to grow a little, while the share of AB InBev Efes may decrease due to the integration. ...
“Catalogue of Russian Beer Producers 2018” includes 1070 businesses ranging from large subsidiaries of international companies to rather small restaurant and craft microbreweries.The catalogue includes 32 large breweries, 75 regional breweries, 693 industrial mini- and microbreweries as well as 270 restaurant breweries. ...
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.
US. The Coming Threat to Your Craft Brew
Heffernan takes an odd angle to set up his story. Hyperconsolidation of the kind seen in the beer industry drives down consumer prices, he writes, and low prices for alcohol lead to excessive drunkenness. More on that below—I think Heffernan might be off here. But what caught my eye was his discussion of the way the beer giants are squeezing suppliers and wholesalers to take control of the retail shelf—and potentially squeezing out independent craft brewers, whose wares (which I adore) have taken off in the past 20 years even as the giants consolidated.
Heffernan's piece mentions a March 2012 interview in the trade publication Beer Business Daily, in which Anheuser-Busch InBev Vice President Dave Almeida "described in perfect detail how retailers can maximize their profits by replacing craft brews with 'premium' beer—its term for its mass-produced light lager." I looked up the interview , and it is amazing. Here's the relevant passage:
"Craft is a real threat, but it's also an opportunity," [Anheuser-Busch InBev Vice President Dave Almeida said]…Dave showed research that indicated that retailers that have too many SKUs actually end up selling less overall beer. He used the example of the health and beauty aids aisle in a supermarket, where consumers spend an average of 90 seconds and only buy something 25% of the time, whereas people spend 31 seconds in the beer aisle and buy something 75% of the time. "Retailers that are winning are not invested in craft to the detriment to the category," said Dave. Later Dave and his national accounts team walked me through a deck showing that chains that over-SKU with crafts end up selling less beer and making less profit than chains that protect their domestic premium space.
"Craft is a real threat, but it's also an opportunity," said Anheuser-Busch InBev's vice president.
Okay, let's unpack this. Craft beer has grown dramatically in popularity, and now makes up 6 percent of the total market. And while no individual craft brewer, not even the largest ones like Sierra Nevada, is big enough to pose a threat to Miller and Bud, the industry as a whole, from national brands like Sierra Nevada to your favorite local brew, are taking shelf space from the Big Two. Newsflash: The Big Two want that shelf space back. The retail jargon "SKUs" stands for "stock-keeping unit," a coding system used by retailers to track inventory. "Too many SKUs" translates to "too many unique products." What the beer exec is saying is that supermarkets and corner stores might think they make more money by finding space on the shelves for independent craft beers, but they actually sell more beer and book more profits by dropping craft beers and sticking with the giants.
And the giants are now peddling faux craft beers like InBev's Shock Top or SABMiller's Pale Moon. So if you're running the beer cooler of the retail outlet, you'd do better to offer a couple of corporate-made craft knockoffs than a dozen genuine craft brews. "Craft is a real threat," because it represents a growing thirst for real beer; "but it's also an opportunity," because that thirst can be co-opted by knockoffs.
If the InBev exec's economic analysis is correct and retailers heed his advice, then we could be on the verge of a hard squeeze on what I consider to be one of the most promising aspects of the US culinary scene : the rise of an incredibly robust, varied, and regionally distributed craft-brew industry. They already struggle to get retail space as the once-independent beer wholesale/distribution falls increasingly under the heel of the giants. But if retailers decide they don't want craft beer, because they make more profit from corporate swill, then it's hard times for craft brewers.
Heffernan's discussion of Big Beer's push to roll up distribution and wholesaling is excellent. I'm less convinced by his frame: that it's bad because it means cheaper beer and more alcohol abuse. To make his case, Heffernan points across the Atlantic to the UK:
England has a drinking problem. Since 1990, teenage alcohol consumption has doubled. Since World War II, alcohol intake for the population as a whole has doubled, with a third of that increase occurring since just 1995. The United Kingdom has very high rates of binge and heavy drinking, with the average Brit consuming the equivalent of nearly ten liters of pure ethanol per year.
Here in the United States, by contrast:
The United States, although no stranger to alcohol abuse problems, is in comparatively better shape. A third of the country does not drink, and teenage drinking is at a historic low. The rate of alcohol use among seniors in high school has fallen 25 percentage points since 1980. Glassing ["busting a bottle across someone’s face in a bar"] is something that happens in movies, not at the corner bar.
What's the difference? In the United Kingdom, the alcohol market is horizontally as well as vertically integrated—that is, a few companies not only make most of the beer (horizontal consolidation) but they also control distribution and wholesaling (vertical). "These vertically integrated monopolies are very 'efficient' in the economist's sense," Heffernan writes, "in that they do a very good job of minimizing the price and thereby maximizing the consumption of alcohol." Here in the United States, remnants of Depression-era laws maintain a quasi-independent set of wholesalers and distributors as part of a "three-tier" system. Heffernan explains:
The idea is that brewers and distillers, the first tier, have to distribute their product through independent wholesalers, the second tier. And wholesalers, in turn, have to sell only to retailers, the third tier, and not directly to the public. By deliberately hindering economies of scale and protecting middlemen in the booze business, America's system of regulation was designed to be willfully inefficient, thereby making the cost of producing, distributing, and retailing alcohol higher than it would otherwise be and checking the political power of the industry.
But are US beer prices really higher than those in the UK? I don't think so, but I'm not sure. It's hard to find good data on that topic. The best fast-and-dirty source I've found is the website PintPrice.com, which invites users across the globe to send in beer prices and then averages them nationally, converting prices into US dollars. According to this admittedly unscientific source, average US price for a pint of lager in a bar is $3.76 , vs, $4.76  for the UK. The "popular brands" of lager listed for each nation is different—Coors Light, Budweiser, Bud Light for the US; Carling, Fosters, Stella for the UK—but all of those brands are made by the Big Two: SAB Miller and InBev. Moreover, average disposable incomes are higher in the US than in the UK, meaning we have more available cash to spend on our (evidently cheaper) beer.
So what explains the divergent consumption trends in the US and the UK? I have no idea—resurgent American puritanism?—but Heffernan's claim seems off. However, the looming corporate threat to craft beer he teases out seems all too real.
19 Nov. 2012