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.
India. United Breweries sees beer demand growing 5-7% in 2016
In an interview, managing director Shekhar Ramamurthy talks about recovery in the beer market, speculation of a takeover, the impact of the liquor ban in a few Indian states and his expectations from the Union budget.
What is helping the recovery of the beer market?
It is a combination of things: volume growth, input prices being stable and the fact that we had a good state mix. Having a good state mix is important because we make different margins at different price points in different states. There is (also) a base effect that the third quarter of the previous financial year last year was difficult.
Which markets drove sales in the third quarter?
If you look at North (India), which had a relatively warmer winter than usual, we had good growth in Rajasthan and Delhi.
Kerala has been growing for us the entire year. Beer is being allowed to be sold in bars and spirits are not. So that market continues to grow.
Telangana has grown in the third quarter because new licences came in on 1 October. Maharashtra and Karnataka have had single-digit growth. So, a combination of all this has given us double-digit growth. All in all, we are seeing a mild recovery.
Do you see a good fourth quarter too?
The third quarter is a precursor to the season, and we are quite hopeful that the fourth quarter will be similar to the third quarter, probably not double-digit growth, but 6-7% growth.
How do you see the AB InBev-SABMiller deal affecting you? Do you worry about losing share in emerging markets?
As far as we are concerned, it’s business as usual. We always have a pipeline of new products, because we have to cater to new emerging consumer profiles and constantly changing consumer palate. It just so happened that we had Max and Buzz this year.
There is speculation about Heineken eyeing control of United Breweries.
Every time we have a quarterly result, this comes out. Like we have clarified and the chairman has clarified, this is pure speculation.
But Heineken has raised its stake in your company.
Yes, that’s true. We are clear what shareholding of Heineken group is; currently there is no change in the management, no change in the vote or board structure.
Some analysts say if Heineken was to buy a majority stake in UB, it will trigger an open offer and a possible delisting?
I don’t see anything happening. If anything was to happen, our chairman would tell you.
So how is the Heineken portfolio growing under you?
It’s truly a global brand, growing at 40% annually albeit at small volumes. As long as it keeps growing at this rate, there will be a time when it will become big.
Carlsberg has been growing at a rate far superior than the market. Will they eat into your share too?
Carlsberg India Pvt. Ltd has indeed grown. The brand that has grown on their side is Tuborg Strong. They have been investing a hell lot of money on brand, on packaging, trade discount. They are in the very heavy investment mode, but they are clearly making losses.
Their mandate is to invest to grow, and yes, SABMiller is finding it difficult to hold their place; the way we see it, there will always be competition.
We are very focused on the consumer, on the market and on the brand. We continue to sustain market leadership.
How will prohibition in Bihar affect you?
We are having conversations with these state governments saying that whilst we are sympathetic and objective of the effects of liquor, it is an urban product and if poor people cannot consume it (because it is not so affordable), then you are not in the space of causing social evil.
The category which causes this kind of trouble is country liquor. They should discontinue that. But Bihar has gone the whole hog and not only discontinued country liquor, but also closed down 70% of the shops.
So we won’t come back on our investments, we have a brewery and we continue to manufacture. We are hopeful they will be more rational.
So do you see volumes dipping there from 1 April?
There will be a decline, definitely a decline, because if number of shops goes down from 3,000 to 650, there will be an impact.
It is becoming a big market now. It’s No.3 in eastern India.
What are you expectations from the Union budget? What are your thoughts on the alcohol industry lobbying for inclusion in goods and services tax (GST)?
Union budget impacts us only in the cost of input materials, but that’s also a big issue if government decides to raise duties on input material. Our business gets impacted by state budget, which will happen in the course of February to April.
The way it is today, we have been kept out of GST as a category. That’s going to have a big impact on our business.
How do you expect demand to grow in 2016?
We believe that in the current scenario there will be growth in the industry of 5-7%.
9 Feb. 2016