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.
Heineken Revival in U.S. Starts With Multicultural Beer
Since becoming the third head of the Dutch brewer’s U.S. business in two years, Van den Brink has found a path to growth with imported Mexican brands including Sol and Tecate to meet changing American demographics and tastes for beer.
“We weren’t in a good position in 2008, 2009,” said Van den Brink, whose predecessor Don Blaustein left in August, 2009 saying he had a different view over how to expand Heineken in the U.S. during the recession. “For 45 years, we were a single- brand operation. We were set in our ways.”
After two years of declining volume in its Heineken brand in the U.S., the Amsterdam-based brewer bought Mexico’s Fomento Economico Mexicano SAB’s brewing unit early in 2010 for $7.4 billion, adding Dos Equis as well as Sol and Tecate to its Dutch-led portfolio. He’s now focusing on reviving the company’s namesake brew with new bottles, increasing advertising behind the Heineken brand and tripling the sales force to get consumers excited about James Bond’s beer again.
Progress in the U.S. mirrors the rest of the world, where the 148-year-old brewer is increasingly realizing that drinkers want more than its namesake ale. The company bought control of its Asia Pacific Breweries Ltd. venture this year to maintain control over brews including Tiger beer, which it said it will develop internationally.
“They’ve had a lot of false starts trying to get it right in the U.S.,” said Ian Shackleton, an analyst at Nomura in London. “We wondered if Van den Brink would be going in like Streetfighter with a machine gun to get things done. He does appear to have revitalized growth in the Heineken brand.”
The brand grew 3.2 percent in the past 12 months, according to Nielsen data cited by Van den Brink, outpacing market growth of 1.8 percent. According to Nielsen, Heineken’s U.S. market share is growing faster in volume terms than competitors Anheuser-Busch InBev NV (ABI) and MillerCoors LLC in the past three months. The brand’s U.S. market share fell to 2.2 percent in 2011 from 2.7 percent in 2007, Euromonitor research shows.
The recent improvement is partly reflected in the company’s shares. Heineken has risen 42 percent this year in Amsterdam trading, more than the 25 percent gain for SABMiller Plc (SAB), co- owner of MillerCoors and its closest rival, and just trailing AB InBev’s 44 percent advance.
“Heineken is, remains, will be the number one choice and priority of the company, and needs to grow -- and thank God, it is,” Van den Brink said in an interview in his office in White Plains, New York. Still, “you can’t just stand on one leg these days; you need a portfolio.”
The Heineken brand still represents about 42 percent of the Dutch brewer’s volume in the U.S., where the company gets less than 10 percent of profit, according to Nomura estimates.
Van den Brink, who joined in 1998, is used to tough challenges. Before taking the U.S. job, he spent four-and-a-half years helping double Heineken’s market share in the Democratic Republic of the Congo, despite operating amid militant uprisings in the African country.
His latest test hasn’t been much easier as Heineken has fought head on with the likes of AB InBev, created four years ago in a $52 billion merger, and the financial crisis has roiled U.S. beer sales. Other brewers were more agile in selling their beers, from creating new products to new packages, Van den Brink said, leaving the smaller Heineken, which sells about 4 percent of U.S. beer by volume, behind.
To halt the decline in sales of the Heineken brand, the executive has tripled the number of people selling the beer to bars and restaurants, particularly in Heineken’s urban U.S. heartlands such as New York. He’s also overseen a “significant uptick” in advertising spending, and sought to capitalize on what he sees as “headroom” in the draft beer market compared with the crowded space for bottled beers.
The next step is the introduction in early 2013 of the new bottle with leaner, taller packaging that Van den Brink says will help make the brand look more modern.
Getting more from the company’s U.S. employees has also been key to Van den Brink’s plan. All staff are trained to be certified beer servers, from the CEO to receptionists, requiring knowledge of storage and serving as well as beer styles and history. The executive is also keen to empower employees to speak up and take responsibility.
Meeting rooms in the White Plains office contain a set of brightly colored laminated cards with captions like “All In -- Ask Me Why!” and “Challenge -- Have Another Solution.” He’s remodeled the offices, making them lighter and more open-plan, with glass doors and walls to aid an open culture, which he says makes the company more agile and forward-thinking.
The results of Van den Brink’s work on the Heineken brand are starting to become visible in an improving U.S. performance. Selling quantities were “broadly flat” in the three months through August, according to analysis of Nielsen data by Sanford C. Bernstein. In the month through Nov. 3, the lager’s volume in the country rose 5 percent, the brewer has said.
Still, the executive isn’t placing all his eggs in one basket. In addition to the resurrection of the flagship label, the brewer needs the other brands to grow sales at between 20 percent to 40 percent a year, he said.
Brands such as Sol and Tecate are proving popular with booming “multicultural” consumers in the U.S., he said, particularly second- and third- generation Mexican immigrants. In the three months through September, volume of the brands rose 9 percent from a year earlier, according to Nielsen data. The Mexican brands represent about 50 percent of Heineken’s volume and growth was improved primarily as mainstream beer brand Tecate returned to growth.
To gain Hispanic customers, Heineken has introduced the Tecate Michelada, a pre-mixed drink mirroring a popular Mexican beverage of beer, lime, spices and a hint of chili.
“Mexico represents parties, fiestas,” said Nomura’s Shackleton, giving the brands an edge over conventional brews.
Still, the U.S. may in future represent a smaller piece of Heineken’s profit as the company expands in regions such as Nigeria and southeast Asia, where it spent S$5.6 billion ($4.6 billion) in September to gain control of Asia Pacific Breweries.
That won’t loosen the resolve of Van den Brink, who describes himself and his staff as having “green blood,” the Heineken company color, according to Fortune Magazine, which named him in a “40 under 40” business stars list this year.
“My main focus is, How do you keep people hungry?” he said. “You don’t want complacency to step in.”
4 Dec. 2012