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.
SABMiller plc Trading Update
Lager volumes for the third quarter were 2% ahead of the prior year and soft drinks volumes were 3% higher, both on an organic basis. Group revenue grew by 8% in the third quarter and group revenue per hectolitre was up by 5%, both on an organic constant currency basis, reflecting selective price increases and helped by improved brand mix in most regions. On a reported basis, including the effect of acquisitions and disposals, total volumes were up 6% and group revenue was up 17% compared with the third quarter of the prior year. Overall, financial performance for the quarter was in line with our expectations.
In Latin America the third quarter saw improved growth, with lager volumes up 6%. Colombia lager volumes grew by 7%, with a price increase taken at the start of December 2012. The growth was supported by the bulk pack introduced in the prior year as well as strong market execution during the peak period, with Aguila Light performing particularly well. In Peru, where we also took a price increase in December 2012, lager volumes were up 6% aided by expanded trade and fridge coverage. In Ecuador lager volumes declined by 1%, impacted by softer economic conditions and increased trade restrictions over the peak period. In Central America lager volumes were up 8%, with a notable performance in our premium brands in Panama. Lager volumes in Honduras were also boosted by growth in our premium brands, while in El Salvador the focus on affordable bulk packs and widened trade coverage resulted in double digit lager volume growth. Soft drinks volumes were up 5%, with increased availability and pack range extensions of our non-alcoholic malt brands.
In the third quarter Europe lager volumes were up 1% on an organic basis, with some beer markets impacted by depressed consumer confidence. Following an exceptionally strong first half, volumes in Poland were down 2% as the quarter was impacted by significantly weakened consumer sentiment although the overall beer market performed better than some other alcohol categories. Czech domestic volumes were down 11%, impacted by the continuing decline in the high value on-premise channel, in which we are more strongly represented, along with the impact of reduced promotional activity and the selective price increases in October 2012. Volumes grew by 23% in Romania driven by the continued strong performance of the new PET pack of economy brand Ciucas. Despite the challenging economic backdrop, volumes were up mid single digits in other European markets. Our associate, Anadolu Efes, delivered total volume growth of 5% on a pro forma basis in the third quarter, with a 7% pro forma decline in beer more than offset by growth in soft drinks of 24%.
MillerCoors domestic sales to retailers (STRs) declined 1.1% in the quarter on a trading day adjusted basis. Premium light brand volumes were down low single digits, as low single digit growth in Coors Light was offset by a mid single digit decline in Miller Lite. The Tenth and Blake division saw double digit growth driven by Leinenkugel’s and Blue Moon. Economy volumes were down low single digits. Domestic sales to wholesalers (STWs) were down 1.4% in the quarter compared with the prior year.
In Africa lager volumes grew by 4% on an organic basis, cycling double digit volume growth in the prior year. Most markets continued to grow strongly. Lager growth of 10% in Zambia continued to benefit from improved availability and distribution networks, further supported by the operation of the new brewhouse at Ndola from November 2012. Uganda returned to growth this quarter with lager volumes up 4% despite a slower economy. In Mozambique the affordable and mainstream segments continued to perform well helping deliver lager volume growth of 9%. Tanzania volumes continue to decline, down 13% for the quarter, following the excise related pricing. In Ghana, volumes grew by 9% driven by a strong performance by the Club brand while South Sudan continued to grow strongly. Lager volume growth moderated to 5% in Zimbabwe following a price increase taken in the quarter as a result of an unanticipated excise increase. Our associate Castel delivered lager volume growth of 5% on a pro forma basis including the combined Angola business. Soft drinks grew by 12% on an organic basis assisted by strong performances in Nigeria, Zambia and Ghana.
Lager volumes in Asia Pacific declined by 1% on an organic basis (which excludes Australia volumes altogether), largely as a result of subdued volumes in China, which declined 3%, due mainly to an exceptionally cold and wet winter across the country. In India, volumes grew by 18% with continued strong growth across the portfolio. There was an improving trend in lager volumes in our Australian business, with sales for the quarter 4% below the prior year on a pro forma basis, excluding the impact of the termination of some licensed brands, compared with an 8% decline in the previous six months. Total lager volumes, including discontinued brands, were 15% down. Flagship brand Victoria Bitter grew by 2%, the first quarter of growth in over 10 years, benefiting from the brand restoration programme and improved retail engagement. The integration programme in Australia remains ahead of schedule in respect of both synergy delivery and capability build.
In South Africa, lager volumes grew by 3% despite a challenging economic and trading environment. In the face of strong competition, the mainstream brand portfolio grew in aggregate with Castle Lager performing particularly well. Castle Lite, our principal premium offering, continued its strong performance with more than 20% growth. Targeted brand investments as well as improved retail execution and customer service continued to have a positive impact. Soft drinks volumes declined by 3% following a price increase on some packs in November 2012, partially offset by growth in still drinks.
On 6 December 2012, the group successfully completed an issue of €1,000 million 1.875% Notes due January 2020 under its US$3,000 million Guaranteed Euro Medium Term Note Programme. The net proceeds were used to repay in part the bank borrowings incurred to finance the acquisition of Foster’s in December 2011.
In January 2013, the group agreed to sell its non-core milk and juice business in Panama to La Cooperativa de Productores de Leche Dos Pinos R.L. (“Dos Pinos”) for a total cash consideration of US$86 million. Completion of the transaction is subject to approval from the Panamanian competition authority.
22 Jan. 2013