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.
Over the recent 3 years, weather has been often mentioned among the reasons for the decline in beer production and sales, though it is clear that it cannot be a constant negative factor.
As we have already noted, better dynamics in 2013 conflicts the social and economy context and the link between the beer market and the GDP. The reason is obvious – unusually hot summer breaking temperature records.
The area of the temperature anomaly is located in the eastern China. While it was just hotter than average in Beijing located to the north of this territory and in Guangzhou located to the south, territories from Shanghai to Xi’an broke temperature records for the recent 140 years. The prolonged spell of scorching temperatures is a result of stationary high pressure off the eastern coast, which has prevented tropical moisture from delivering normal summer rainfall.
As we match the temperature fluctuations to the production dynamics since 2012, we can conclude that if not for the weather affect, the dynamics would have looked like a smoothed curve or even straight line, that is, a gradual transition from growth to stagnation and decline.
The hot summer of 2013 created the high base effect. In 2014, when the weather was usual, it cannot support the beer sales. The simultaneous decline of the average price and the beer production dynamics from June to September 2014 can be seen at the graph*.
* In order to calculate the temperature, we used the weather monitoring archive data for 11 cities which in our view reflect the general situation in the country: Beijing, Shanghai, Chengdu, Wuhan, Kunming, Guangzhou, Chongqing, Harbin, Xi'an, Shenyang, and Qingdao. For daily data in each of the cities the monthly temperature average was calculated, then, the average for city data was calculated.
In order to check if the weather really played such an important role, let us analyze the dynamics of demand change for another seasonal product and beer rival – soft drinks. We can see the obvious connection between their production dynamics and beer output in the high sales season.
In 2015, the weather was rather favorable to the brewers’ sales. On an average in the country July was a little cooler versus 2014, yet the other months of the season were hotter. As for the weather, the base effect of 2015 can be considered neutral or moderately negative.
However the season of 2016 started not very well, and by the end of July we can speak of a pronounced negative effect not only for beer sales but for the country’s economy in general.
The weather in May in the central and eastern regions was comparatively cool, which had a minor negative effect on the production dynamics. In June, the temperature was already at the level with 2015, and in July it became much hotter. The number of days with precipitations in 2016 increased in April and May, but decreased in June and July. However, this year not the rainy days number but precipitation quantity matters.
Every year heavy rains in China occur along the seasonal Mei-Yu (“plum rains”) front extends from eastern China across Taiwan into the Pacific south of Japan. Associated with the southwest monsoon, these rains typically affect southeastern China from mid-May to mid-June and northern China during July and August.
In July 2016, record-breaking heavy and incessant rains caused dramatic floods in central and eastern regions of China. Torrential rains affected 33 million people in 28 provinces, submerging huge areas of cropland. Heibei province population suffered the most.
Heavy rains could not substantially affect beer production and sales in the first year half 2016, but will seriously influence brewers’ performance in the second half of the year.
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21 Sep. 2016