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 cider market set to ‘explode’ – C&C Group
Shore Capital analyst Phil Carroll, in a note on a C&C investor day held in the UK, wrote that CEO Stephen Glancey and finance director Kenny Neison had spent four years stabilizing the plc. (key cider brands Bulmers, Magners) and were now moving on to the ‘transform’ phase.
Praising C&C’s “high quality” management team, Carroll calculated that the company had further acquisitive firepower – namely a war chest of over €100m ($130m) based on a balance sheet leverage level (debt ratio relative to total assets) of 1.5x that has the potential to rise to 2.5x.
“Arguably, there is already clear evidence of the commencement of this stage with the recent acquisitions (subject to competition authorities’ approval) of the [craft-based] Vermont Hard Cider Company (VHCC) and the Gleeson Group,” Carroll wrote.
Shore Capital said that C&C had a significant international opportunity, especially for its cider business, but added that Tennent’s beer also had strong potential as an export brand, and was already sold abroad in Italy, Spain, Ukraine, Canada and the US.
Specifically in the US, C&C management said that its US acquisitions provided access to a market that was about to ‘explode’, a trend the Shore Capital analyst agreed with.
“This looks to be confirmed, in our view, by the recent market data showing cider volumes up 57% in the past six months and more recently up 81% in the past month,” Carroll said.
Cannibalization ‘should’ be limited
Although cider only account for around 0.3% of the long alcoholic drinks market in the US, growth to 1% in the next five years would imply category CAGR of 36%, while a 3% share would imply 78%.
“Cider falls into the craft beer category where it is currently circa. 7% of the total US beer market. Data shows that in areas such as Seattle and Washington, craft beer accounts for circa. 20% of the market, so again, the potential for category growth looks very promising,” Carroll said.
“Furthermore, we also note that, generally, imported cider and domestic cider do not compete for the same customer, which should limit any cannibalization impact on C&C’s total US sales.”
C&C could also use VHCC to distribute Magners in the States, the analyst said, noting that the underlying valuation of VHCC did not account for the potential for filling the gap left by the end of a deal (in mid-August) whereby the firm distributed Heineken USA cider brand Strongbow.
“Profits from the international business are expected by C&C’s management to account for circa. 20% of group profits by the year end to February 2016,” the analysts said.
4 Dec. 2012