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.
Crafting beer with Chinese characteristics
Swedish-born Thomas Gaestadius, brewmaster and co-founder of Beijing-based microbrewery Arrow Factory Brewing, works surrounded by stainless steel tanks filled with his latest concoctions, which release a thick and pleasant malty scent.
The small brewing facility next to Liangmahe in eastern Beijing opened to the public in January, serving food and craft beer.
It was only two years ago that Gaestadius and British business partner Will Yorke started brewing on a small scale to supply their sausage restaurant Stuff'd, near the Lama Temple in the Chinese capital.
They now brew 1,000 to 2,000 liters per week, also supplying craft beer to other restaurants in town.
The business partners, who used their own savings to start the brewery, say craft brewing is a demanding business not right for everyone.
"It is an expensive business to set up and it is very labor-intensive," said Gaestadius.
"The necessary equipment can cost 500,000 yuan ($78,000) to 1 million yuan. You also need a lot of space, and getting a commercial venue in downtown Beijing is not cheap, either."
Their microbrewery is now growing organically, with most of its profits reinvested in expanding capacity to capitalize on China's new thirst for craft beers.
"It is crazy now. Both Chinese and foreigners here are increasingly interested in craft beer," Gaestadius said.
Only five years ago, China's craft beer scene was virtually nonexistent, with only 20 microbreweries operating in the country. That number increased to some 200 in 2015, putting specialty beers on the map, according to industry sources.
China's overall beer market is worth an estimated 543.3 billion yuan－the world's largest by volume at 47.5 billion liters, according to Simon Moriarty, head of emerging markets research at Mintel Research.
Craft beer, however, remains a niche product, accounting for less than 1 percent of the Chinese beer market, meaning that it is still a barely tapped business opportunity.
In 2007, Xinjiang-born Jackie Zhou opened a bar, Jackie's Beer Nest, in Shanghai to sell imported bottled craft beer after falling in love with the complex and flavorful brews.
Three years ago, he decided to turn the bar into a serious brewpub with the acquisition of specialized brewing equipment, including containers, boilers and fermentation tanks.
He calculates he invested around $80,000 to make his dream possible. Though still a small business, Zhou estimates that sales of his craft beer have been increasing by at least 30 percent a year.
Zhou, whose best-selling products include his Chinese tea pale ale and a yellow lotus seed and mushroom ale, thinks that the local industry still needs to develop its own identity. "China doesn't have its own reputation for craft beer production in the beer world. We need to try our best to change this," he said.
Despite slight decrease in sales volume in 2015 and 2014, Euromonitor International forecasts that China will see beer sales increase to 49 billion liters in 2016.
Beijing-based market research group Daxue Consulting says the increase will be boosted by sales of premium brand beers, reflecting increasing opportunities to capitalize on the growth of the premium segment.
Even though demand for craft beer is increasing, the segment remains in its infancy, with producers saying that sourcing materials, particularly malts, hops and yeasts, are one of their biggest challenges. But some help appears to be on the way.
In November, the United Kingdom signed a $151 million deal to export 150,000 tons a year of barley to China over the next five years, mostly to tap into the country's appetite for premium beer.
"This indicates that the market is becoming more mature and there is a wider offer of choices for us and for customers," said Will Yorke, co-founder of Arrow Factory Brewing.
Chandler Jurinka, owner of Beijing-based Slow Boat Brewery, says trade deals for beer ingredients are crucial for the nascent industry.
"When we first started doing business, we could barely get anyone interested in selling barley to us," Jurinka said.
Slow Boat opened in 2011 using an investment of $1.3 million raised in part with the help of angel funding from family and friends.
Nowadays, the microbrewery, which has its own taproom in Beijing, ships its beers across China.
Slow Boat now sells 250,000 liters of artisanal beer, having registered a 300 percent year-on-year growth in revenues in 2015.
Brewery officials complain that there is still a very limited selection of locally produced grains and hops available for nonindustrial brewers.
"The hops we are using are almost 100 percent from the United States. Meanwhile, grains come from Europe and New Zealand," Jurinka added.
Still, China's agriculture is undergoing some important changes that could benefit local craft brewers.
"We have been contacted by some nongovernmental organizations that are helping farmers repurpose land for high-quality grains. So, there is something happening in that respect," Jurinka said.
The brewery is using domestic ingredients such as herbal tea, spices from Guangzhou and honey from Yunnan province to give a local taste to their brews.
"The craft revolution that everyone seems to be talking about is not only about the boom of high-alcohol and highly flavored beers," Jurinka said. "The revolution is all about localizing a global product."
Great Leap, one of the leading establishments in Beijing's craft scene, puts a special emphasis on sourcing local products whenever possible for its beers. The brewery signed an agreement with China National Cereals, Oils and Foodstuffs Corp, the country's largest food association.
"COFCO supplies 100 percent of our base malts. For hops, we are also using Qingdao flower, which is the closest thing you can get to an indigenous Chinese hop here," founder Carl Setzer said.
Setzer, from the United States, opened Great Leap Brewing in 2010 near Houhai and in 2013, in order to meet increasing demand, inaugurated his largest brewpub in the capital's trendy Sanlitun area with an investment of $1.1 million.
Great Leap Brewing now has the capacity to produce 550,000 million liters and expects 2016 to be its biggest year ever thanks to adding a second location.
Setzer sees the increasing popularity of microbrewing culture in China as a direct consequence of the ongoing economic and social changes in the country.
"Craft brewing is an example of where China wants its economy to go in the future. They don't want mass produced and low-margin goods. They now look for something that is high quality and representative of the new China," he said.
17 Feb. 2016