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.
Chinese craft beer
Quite recently, at the stage of the riot growth of the Chinese beer market, there was a decrease of small breweries’ number. Powerful finance infusions and the state support, low cost price and edgy marketing technologies of the major companies did not leave chances for small regional producers. Then they were playing on the same market field of low-margin regional beer with a flat empty taste.
The process of market invading by big companies is well reflected in the statistics of the brewing productions’ number. In 1996, in China, there were ... breweries. But the Asian finance crisis 1997-1998 led to a fast fall in their number and in 2001 there were only a little more than ... businesses left.
The market consolidation in the hands of major companies would have certainly resulted in further reduction of the businesses’ number, if not for mini-breweries uprise. This trend appeared approximately in 2008, when the Chinese market had only ... producers left according to the official data.
But as soon as in a few years new minibreweries numbered several dozens in the big Chinese cities. And by the end of 2015, number of minibreweries increased approx. to ... and went on growing rapidly.
The retail price of the craft beer usually exceeds 25 yuan for a glass, that is, belongs to the superpremium segment of the Chinese market. According to Hai Tong Securities research report, the craft beer market in China is growing rapidly and the gross margin and net profit margin in this sector amount to 50% and 30% correspondently.
This is much more than the producers of the traditional bottle beer earn.
Now the craft brewing is thriving in the central cities (Chongqing, Beijing, Shanghai, and Tianjin). Development of craft producers is equally prospective both in big cities and in third-tier cities (medium-sized cities of each province).
In Beijing the most popular brands are minibreweries Panda, Cow Beer Hall; and in Shanghai Boxing Cat, Tap House Workshop, and pub Wuhan No. 18 are most demanded. Equally high interest among the Chinese is enjoyed by Nanjing High Master, Chongqing Fung Rudder, Chengdu Harvest, and some other brands. Even Tibet and Ningxia have a craft of their own.
The current sorts’ range by the Chinese craft brewers is as good as their counterparts from the USA which corresponds to the westernization trend. Yet, striving for originality and driven with creative impulses local brewers also start manufacturing beers with Chinese characteristics and special national ingredients.
The fast growth of craft beer sales conduces to a lot of new bars and restaurants in the western style upspring, some of them specializing in craft beer sales. Minibreweries’ owners place their main stake on them. The most of craft beer is packed in kegs but not sold in retail.
Along with the market factors, the number increase of small brewers is promoted by China’s leadership on the market of minibreweries.
The major outlet market for Chinese producers of brewing equipment used to be the Eastern Europe which experienced a boom of the small brewing. Yet, the national currencies’ devaluation to yuan, which has happened in the recent years, obviously makes Chinese suppliers find growth opportunities on the home market. Over ten years of competition with European minibreweries producers, Chinese businesses have mastered the necessary technologies and know-how. They are able to manufacture rather affordable equipment of different quality, capacity, and complement.
The Chinese are increasingly interested in craft beer. However, the industry is still in its infancy in China because consumer awareness of craft beer is not strong. Yet, amid the beer market downturn, craft brewers will have to face a new challenge from the industry giants. The point is, brewing companies like AB InBev and Tsingtao, searching a way to compensate the losses from the sales decline of the tradition bottle beer, decided to fit into the craft niche, ousting the already existing players.
While in the USA according to the definition of the American Brewers’ Association, on being overtaken by a big brewing company, a small brewery loses its craft status, there is no such rule in China. Besides, the big players’ desire to enter the craft niche results in crafty style beer.
Tsingtao Brewery presented its own version of the IPA at the end of 2015. Beer is supplied to bars in 16 communities.
Zhuajiang Brewery, belonging to AB InBev by quarter invested 250 mln yuan into building of new production lines for “craft beer” filling in Guangxi, East Wan, Zhanjiang, Hunan. In May 2015, the company launched high-end market for the Fort Snow - Craft series including unfiltered beer, dark beer, and red beer.
Yanjing Brewery is also investing a lot of efforts into the “craft beer” development.
In order to promote their crafty brands, big companies hire bloggers, sponsor various events of craft brewers and festivals, they are even willing to buy extra shelf space with craft beer.
In this brewery sector, much depends on consumers. By no means all of them know what craft beer is and find nothing negative in possible monopolization of the industry by big national breweries.
However, can a beer produced in industrial volumes be considered craft? In order to protect their own and consumers’ rights, brewers create their unions such as China Craft Beer Association that help to raise the population’s awareness on the real craft beer.
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21 Sep. 2016