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.
Boozy battle-ground: a turf war brews in Myanmar
All over Myanmar, domestic brands such as Myanmar and Dagon have dominated the beer market since the early 1990s, when the military regime established the Union of Myanmar Economic Holdings Limited (UMEHL) conglomerate and founded Myanmar Brewery Limited. At the time, an import ban on foreign beer ensured their hold on Myanmar’s drinkers. Drinking beer became a de facto toast to the military elite.
But, like everything else in The Golden Land lately, the beer landscape is changing – rapidly. The USDP-led former government loosened restrictions, and in 2013 Carlsberg Group secured one of four foreign beer brewing licences. The Danish company formed a joint venture with U Thein Tun’s Myanmar Golden Star (MGS) to build a US$75 million brewery in Bago, where they now brew Carlsberg, Tuborg and a Myanmar-specific brand called Yoma. (U Thein Tun also owns the majority share in Myanmar Consolidated Media, which publishes The Myanmar Times.)
Heineken’s Asia Pacific Brewery (APB) scooped up a licence two years later, joining with U Aung Moe Kyaw’s Alliance Brewing Limited and building its own $60 million plant in Hmawbi, less than 100 kilometres from the Carlsberg facility. Along with the namesake brand, Tiger Beer and ABC Stout, the Dutch company has begun marketing Regal 7 beer, a Myanmar-specific brand that will compete with Yoma and Myanmar.
Despite international reach and clout, however, both companies have struggled to make a dent in the military’s substantial market share, estimated at roughly 60 percent of the market. UMEHL – which saw Japanese giant Kirin buy a 55pc stake for $560 million after former partner Fraser and Neave was booted – brews Myanmar Beer, Black Shield, Andaman Gold and Myanmar Premium out of its Myanmar Brewery Limited. It also wholly owns and operates Mandalay Beer, the country’s oldest brew dating back to the 1850s. The Myanmar Economic Corporation (MEC), which functions in a similar fashion as UMEHL and was also founded by the military, claims another 10pc of market share, brewing Dagon, Dagon Light, Dagon Super, Dagon Malta Fresh and Dagon Extra Strong.
FINGERS IN MANY ... GLASSES?
In addition to ABC’s joint venture with Heineken, U Aung Moe Kyaw is one of the largest players in another drink market: whisky.
Through his International Beverages Trading Company Ltd (IBTC), founded in 1997, he owns a 50pc stake in the Myanmar Distillery Company (MDC). The company claims to control roughly 80pc of the total whisky market, with its Grand Royal whisky line (plus all of its derivations) being the most popular brand.
The other 50pc stake in MDC has been owned by TPG Capital, an American private equity firm, since 2015.
Among others, MDC also produces Eagle whisky, Golden Island rum and Grand Royal gin.
Grand Royal has also been Chelsea FC’s “official whisky” in Myanmar since 2012.
Beer, whisky and Premier League sponsorships; he certainly has the liquid version of fingers in many pies.
That leaves roughly 30pc of the market up for grabs. Anthony Clark, CEO at Myanmar Carlsberg, said he estimates more than two-thirds of the leftover space is currently occupied by illegal beers smuggled over the Thailand border.
“The border states would have a much higher degree of smuggled beer, for which there is little in the way of reliable information,” he said, guessing that Chang beer would hold a clear lead in that area.
The stream of illegally imported beer often works its way through ethnic armed groups thirsty for funding, said one industry source who asked to remain anonymous. The source added that the smuggling issue may be factored into upcoming peace talks.
After accounting for these illegal imports, Heineken, Carlsberg and Mandalay brands are left to battle for less than 10pc. And in many instances, they are battling more than each other.
According to notes from a recent Myanmar Carlsberg meeting, the outgoing government made changes to licensing laws in December 2015. Now, breweries are required to obtain distribution credentials by district rather than state or region, effectively quadrupling the number of fees and amount of paperwork needed to pump beer into bellies across the country.
Furthermore, many beer stations and restaurants have five-year contracts with Myanmar Brewery Limited. Those businesses that consider terminating the contract would face a ban on selling competing products for at least one year. Effectively, the only way to get Yoma or Regal 7 into a beer station is to step in as soon as one opens.
The foreign brands are doing just that. Zita Schellekens, the director of corporate relations for Heineken’s joint venture in Myanmar, APB Alliance Brewery Company Limited, said that getting into bars and restaurants is often difficult.
“Of course we take a proactive approach in going to bars that we believe fit our brands,” she said.
So far, premium restaurants have been the main staging ground. New, high-end restaurants in Yangon choose between Carlsberg’s three brands or Heineken’s four, and territory is staked out business by business. Penthouse? Carlsberg. Hummingbird? Heineken. The next fancy joint? Anyone’s guess.
But the staging ground is set to grow. Myanmar’s current beer per capita hovers around 3.7 litres – by comparison, neighbouring Thailand guzzles 33 litres per person, and Vietnam downs more than 40. According to research agency Euromonitor International, the value of Myanmar’s beer market will double from an estimated $375 million in 2015 to $675 million in 2018. During that time, many of the beer stations’ five-year contracts with Myanmar Brewery Limited will elapse, creating a potential gold rush as the foreign brands try to bite into UMEHL territory.
“The fact that the current market is underdeveloped is a challenge but even more so an opportunity,” said Schellekens. “In short, we want the ‘pie’ to get bigger and of course we want to have a bigger part of that pie.“
7 Jul. 2016