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.
Heineken and a western brewer’s return to Myanmar
“On the layout, the shop floor, there is no logic yet,” laments Mr Djaffar, sales director for Heineken’s joint venture in the fast-changing Southeast Asian country. The young executive reminds himself with a twinkle that “we don’t see this as problem, but as an opportunity”.
Myanmar is exciting frontier territory for Heineken and its newly arrived international rivals. The return of a civilian-dominated government after decades of military dictatorship has thrown up a rare opportunity for the foreign companies not just to compete for existing market share, but also to use savvy promotion to release latent demand.
However, the process of tapping that anticipated consumer market is not straightforward. Heineken’s Myanmar joint venture is already grappling with logistical difficulties, the complexities of marketing in a new environment and the entrenched supremacy of its local competitor Myanmar Brewery.
“I like the story of the potential of the country more than the [actual] growth,” says Lester Tan, the Heineken venture’s managing director, who is upbeat but cautious. “It’s a long-term investment.” He is speaking in his office a short drive from the brewery, where some staff are still housed in a repurposed container.
A wheel turned full circle when Heineken launched its Myanmar operation in July 2015, two months after its Danish rival Carlsberg and four months before the landslide election victory of Aung San Suu Kyi’s National League for Democracy. Two decades before, international condemnation of the then military regime’s persecution of Aung San Suu Kyi and her fellow opposition activists had led Heineken to abort its Myanmar plans before production started.
Now the company has been tempted back by the prospect of millions of potential drinkers in a country that has more than 50m people and low beer consumption by regional standards. Heineken estimates that Myanmar’s average beer intake is three litres per person a year, not even a tenth of the figure in Vietnam.
Heineken has built a new brewery at a site outside Yangon, commercial capital of the country, in a joint venture with a company majority-owned by Aung Moe Kyaw, a local businessman with interests in the spirits industry.
On a ferociously hot spring afternoon, a cleaner is dusting white sacks of barley and hops from Europe piled high in the warehouse, while bottles and cans of beer rattle off the production line at a rate of about 750,000 a week. Staff members ranging from a Belgian master brewer to a Myanmar chemical engineering specialist peer through windows into vast brew vessels that are warm to the touch.
Donald Otten, supply chain director, speaking on the factory floor above the rattle of bottles and the whirr of a forklift carrying the finished boxes, says the operation is running more smoothly after some early hiccups that held back the launch by half a year. Heineken was delayed by more than three months because customs officers rejected equipment over small errors in the import paperwork — delays Mr Otten suspects were aimed at extracting illegal bribes.
The biggest operational challenge so far is Myanmar’s chronic power shortages. Heineken used its back-up generator 19 per cent of the time on average during its first nine months, rising to 44 per cent in March, when the heat and beer consumption spike.
Such teething troubles mean the company is careful to strike a balance between optimism and realism.
Then there is Myanmar Brewery, the incumbent brewer. It has enjoyed a beer market share estimated as high as 80 per cent, through brands such as Myanmar Beer and Andaman Gold.
Myanmar Brewery has powerful connections. It is 45 per cent owned by Union of Myanmar Economic Holdings Limited, a conglomerate closely linked to the still-influential military. Heineken built a brewery in the mid-1990s in partnership with UMEHL, which still uses the facility and is now in a joint venture with Kirin of Japan.
“They are tough competitors, and with the arrival of Kirin they are international players,” says Mr Tan. “They are not just a single-brand company.”
Mr Tan, a veteran of Heineken’s operation in vodka-loving Mongolia, is familiar with another hurdle for companies that want to make beer bigger in Myanmar. Locally made spirits are popular: whisky is cheap, and $1.50, little more than the price of a beer, can buy a 700ml bottle of hooch.
Heineken has chosen to target drinkers who are wealthy by the standards of one of Southeast Asia’s poorest countries. The marketing team’s “man of new urban Myanmar” — the clientele of the ubiquitous roadside bars known as beer stations is overwhelmingly male — earns between $200 and $500 a month. He may be a blue or white-collar worker, or own his own small business. In one visited by the Financial Times, customers ranged from an off-duty engineer to a gaggle of merry students ordering beer by the tower.
One fillip for Heineken is that, because of the change of ownership involving Kirin at Myanmar Brewery, it won back the rights to use the established ABC Extra Stout and Tiger beer brands. It has also developed a mass-market product to go head-to-head with Myanmar Brewery’s flagship Myanmar Beer. Regal Seven, named after the number of workers who built the foundation for the new brewery, is made from Myanmar rice and typically sells at around a third less than the classic Heineken brand.
Heineken has already had to rethink promotion plans for Regal Seven. It planned a table football tournament before realising drinkers prefer simpler promotions, such as Myanmar Beer’s bottletops offering free drinks or cash.
Now Regal Seven’s own bottletop contest has a grand prize of seven 113g bars of gold, five of which had been claimed by the end of May. The promotion helped it beat its sales target by 30 per cent. That is heartening for the company, but Leen de Schutter, Heineken joint venture marketing director, speaking in her container accommodation, says: “It’s extremely hard to build a challenger with a giant competitor.”
Back in the Yangon supermarket, Mr Djaffar is pressing on with his task of improving Heineken’s visibility by moving bottles to a better spot and away from the personal hygiene products. He is not worried that better shelf spots for the brand may also lift its rivals.
The new Myanmar brewers’ bet is that market growth should raise all brands: “We are OK to let them win more — but we will win as well.”
7 Jun. 2016