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.
Part 1. Beer market – perfect storm or fundamental changes?
Beer and Economy
Over 2007-2016, the brewing industry reflected the situation in the country. One can clearly see the correlation between the beer production dynamics and the GDP.
Thus, through to 2007, the beer production in China was growing at two-digit rates. Amid the recession of 2008, its dynamics slowed down sharply, but then recovered at the same speed. The brewing industry was developing in tune with the cycle of the Chinese economy.
However, after the peak year 2011, the dynamics of beer production went unexpectedly down. Companies’ reports and business press gave objective reasons, namely the weather in the third quarter of 2012 was unusually cold and wet. But could it actually play such an important role?
It is obvious now, that the decline in brewing was transient and resulted from the accumulated structural economic and social problems of China and from moving to the “new normal” reality which is currently widely discussed in the business press. The slower growth of GDP affected the beer market too.
Population’s income fluctuation is considered to be the main reason for consumer preference change. Beer is not an essential commodity; it does not satisfy a basic need. Basing on this, it would be logical to suppose that the lower production level of beer was in mainly caused by income decline among Chinese citizens.
But if we look at statistics of the living standards of the Chinese after 2011, we’ll note a discrepancy. Unlike the GDP, beer production dynamics is not directly connected to the official income. Population’s incomes did not decline so sharply, on the contrary, people’s wellbeing was still growing, though slowly.
If we consider this connection basing on a shorter period of time, for example, quarterly over 2014-2015, we will not find any dependence either. Obviously, the change in the standard of living (according to the official statistics) was not the key impact factor in this case.
A certain improvement of the dynamics in 2013 goes beyond the context of the link between the beer market and GDP. And in 2014 there was a significant drop in brewers’ performance, while the official dynamics of the GDP downturn growth rates became smoother. That is when the industry faced a decline for the first time. Starting from 2014, monthly operational data on beer production were mostly negative.
Thus, 2014 turned out to be the moment when the problems of Chinese brewers became obvious. But even years 2012-2013 contradicted the general context of the previous four years and became critical in the riot development of the brewing industry.
In order to make the situation clear, one has to define the fundamental reasons for the change in beer consumption and distance them from local fluctuations.
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21 Sep. 2016