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4-2017

Global hop market

A 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 Russia

Germany 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.

The Chinese beer market welcomed the merger of two giants

The merger of two beer giants AB InBev and SAB Miller will lead to a monopoly in the market of China and USA.

Currently SAB Miller holds 49% of shares of the largest Chinese beer producer China Resources Snow (CR Snow). At the same time, AB InBev is the third largest company in terms of production and sales volume in the Chinese beer market. Following a process of the merger the total share of these companies in the Chinese beer industry will be 42%.

The merger will be a kind of “big bang” for China. However, further consolidation may lead to more rational competition. According to the analysis of the Goldman Sachs agency, the expansion of the Chinese beer industry and profit growth in 5-7 times is expected in the next 5 years.

The main issue is what will be the response of the Antimonopoly Committee of China to the merger. Analysts believe that the Chinese government can offer AB InBev to reduce the share in the portfolio of CR Snow to 37% of the shares.

If the merger is successful, the operating margin of CR Snow is expected to increase from 7% in 2015 to 19% in 2019.

23 Dec. 2015

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