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.
Who Fancies a BUD?
Rupert is a member of The Motley Fool Blog Network -- entries represent the personal opinions of our bloggers and are not formally edited.
Beer. Although some would not like to admit it, it is a staple of modern day life. This kind of product has a certain defensive quality about it; unless there is a huge overnight change in perceptions, beer sales and their growth will rise in line with global population growth. The case for investment in the industry is simple--it is a fairly stable industry, and last year beer sales rose last year for the 27th year in a row.
So then should we consider investing in one of the world's largest brewers - Anheuser-Busch InBev (NYSE: BUD)?
World Beer Rankings
|Rank||Brand||Main market||2010-2011 growth||Owner|
|2||BUD Light||USA||-4.4%||AB InBEV|
|4||Corona Extra||Worldwide||9%||AB InBev|
|7||Coors Light||UK/US||25%||Molson Coors (NYSE: TAP)|
|9||Brahma||South America||-3.4%||AB InBev|
|10||Asahi Super Dry||Japan||2.5%||Asahi|
|Total top 10 Growth||32.24%|
As we can see, ABInBev produce some of the best-selling beers in the world. Anheuser-Busch also produce:
- 3 ‘Global brands’ – Stella Artois, Becks, Budwiser
- 2 ‘Multi-country brands’ – Leffe, Hoegaarden
- 200 + Local Champions
What about the company's finanicals?
Data Source: Motley Fool CAPS
ABInBev generates a very respectable gross margin of 65.5% and a pre-tax profit margin of 25.5%. This gives the company plenty of free cash flow, which it can use to return cash to shareholders or re-invest into the business.
However, this margin could come under pressure from increasing commodity prices.
Data Source: Motley Fool CAPS
ABInBev's growth strategy has been aggressive. It has been driven through acquisitions and aggressive pricing by the firm. This has led to a large increase in sales, but slow growth in EPS. (Although these figures are somewhat distorted by abnormally low growth in, Q4 2010 and Q1 2011). ABInBev is effectively buying market share from its competitors.
If we look at 3 year growth on a company level we get a much better growth picture:
|ABInBev||SABMiller||Heineken NV||Molson Coors|
|Revenue - 3 Yr Growth Rate||7.00%||21%||16.5%||7.45%|
|EPS - 3 Yr Growth Rate||18.43%||33%||25%||-4.22%|
|Dividend - 3 Yr Growth Rate||235.90%||34%||25%||11.82%|
|Dividend Cover 2011||3.5||2.4||3.2||3|
Data Source: Motley Fool CAPS
This data presents an interesting picture of BUD versus its competitors. Although BUD has the slowest revenue growth amongst its US-listed competitors, it has a EPS growth rate that is slightly better (second in the group). BUD has the highest dividend growth in the group, with the highest dividend cover, leaving plenty of room for extra dividend growth and plenty of free cash flow.
So in conclusion, ABInBev looks to be a decent investment. It products are some of the most popular in the world. However, its revenue figures are lacking behind its competitors as it seeks to drive sales volumes through lower prices. I believe BUD will continue to improve investor returns, with its vast portfolio of products.
With all these factors in mind i think ABInvBev is a good investment for the long and short term. Although if you are looking for more growth, bothSABMiller (NASDAQOTH: SBMRY) and Heineken NV (NASDAQOTH:HINKY) could be better stocks.
20 Nov. 2012