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.
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