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.
AB InBev Said to Bar Modelo Plant Sale in Takeover Bid
Any insistence by U.S. antitrust regulators for divestiture of the plant, located near Piedras Negras, Mexico, would be a dealbreaker, either triggering litigation or causing AB InBev to walk away from the transaction, said the people, who asked not to be named because the matter isn’t public.
Talks between the companies and the Justice Department, which is reviewing whether the transaction would hurt competition in the domestic beer market, center on how to structure a long-term supply and pricing agreement for importing Modelo’s brands to the U.S., three people familiar with the matter said Jan. 15. The department hasn’t demanded sales of production assets or outsourcing of production to third parties, the people said.
The antitrust division is examining a clause in the merger contract between AB Inbev and Modelo that would allow AB InBev after 10 years to buy back Modelo’s current U.S. importer, Crown Imports LLC. Under the proposed deal, control of Crown would be sold to Constellation (STZ) Brands Inc.
Competitors have argued the buy-back option should be removed to ensure the importer remains independent, said another person familiar with the matter.
AB InBev. Modelo
Marianne Amssoms, a spokeswoman for AB InBev, and Jennifer Shelley, a spokeswoman for Modelo, Mexico’s largest beer maker, declined to comment.
AB InBev agreed in June to buy the 50 percent of Modelo it doesn’t own already in a transaction that would marry Budweiser with brands including Corona Extra, Negra Modelo and Pacifico. Constellation plans to buy Modelo’s stake in Crown, the U.S. distribution joint venture of the two companies, for $1.85 billion.
Modelo invested about $600 million in the Piedras Negras plant, which it describes as “the most modern in the world” in its 2010 annual report. Located close to the border with Texas, the facility has a production capacity of 10 million hectoliters a year, according to company statements. Modelo spokeswoman Shelley declined to disclose the company’s current valuation of the plant.
Under terms of the merger contract, AB InBev is required to show “reasonable best efforts” to obtain the required antitrust approvals short of selling assets of more than $3 billion or any other action that would devalue the company by that amount, according to the brewer’s SEC filing. In that event, AB InBev may have to pay Modelo a termination fee equal to $650 million, according to terms of the contract reported in the filing.
Small brewers are concerned that the merger could hurt their access to the market through wholesalers and retailers, said Dan Kopman, chief executive officer of The Saint Louis Brewery, an independent beermaker in St. Louis that produces Schlafly Beer.
“It’s going to be most critical where you have high market share for both Modelo and AB InBev,” such as southern California, south Texas and Chicago, Kopman said. The related proposed purchase of Modelo’s 50 percent stake in Crown Imports by Constellation won’t reduce AB InBev’s influence over its newly acquired brands, Kopman said.
“I don’t see that as a true separation,” Kopman said. “AB InBev is not going to allow Constellation to go off on a rogue mission in how they market Corona.”
The agreement to sell control of Crown would prevent AB InBev from having influence in marketing, distributing and pricing Modelo’s beers in the U.S., Constellation Chief Executive Officer Rob Sands said in an interview June 29. Constellation would become the sole U.S. importer of Modelo’s brands. The deal also gives Crown more flexibility to import other non-Mexican brands, Sands said.
AB InBev has the right to buy back the entire Crown business every 10 years at a multiple of 13 times earnings before interest and tax, according to the merger agreement. The clause is subject to regulatory approval.
Mexico’s antitrust regulator approved the transaction in November. AB InBev, which is based in Leuven, Belgium, controls 18 percent of the global beer market. Its Bud Light brand is the top selling U.S. beer and Modelo’s Corona is the top import.
Grupo Modelo, based in Mexico City, ranked fourth in the North American beer market in 2011 with a 5.5 percent share by volume, according to Bloomberg Industries and Euromonitor International. AB InBev ranked No. 1 with a 48 percent share of the market, far ahead of No. 2 Molson Coors Brewing Co. (TAP), which had 16 percent market share during the same period.
17 Jan. 2013