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4-2017

Global hop market

A 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 Russia

Germany 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.

AB InBev Is Tasty for Investors

Brewers do well in the currently challenging economic environment: latest example is Anheuser-Busch InBev, the world’s largest brewer, which serves drinkers around the world beers like Budweiser, Stella Artois or Becks.

The reason for the relatively solid share price performance of AB InBev or peers like Heineken is rather that consumers drink more alcohol in the crisis. In fact waning consumer confidence weighs on the industry results in mature markets.

But brewers have been forced much earlier than other industries to widen their global footprint to balance out revenue streams. Still, for AB InBev the U.S. is the largest market, with volume growth most notably is in Brazil and China, which almost offsets volume declines in the U.S. and Europe.

AB InBev’s shares have lost just roughly 4% of their value so far this year, making it one of the top-five performers in Brussels benchmark index Bel 20, which has lost almost 20% so far this year. Peer Heineken shows a similar performance with a year-to-date decrease of 6.5%, compared to a 16.7% decline of benchmark index AEX, despite both brewers having a significant exposure to mature markets like North America and Europe.

Analysts at KBC Securities said:

“Although low organic growth and the declining rate of cost synergies make it hard to find a short term trigger, the defensive earnings character, beer category leadership with strong market positions in some of the world’s largest beer profit pools [like the U.S. and Brazil] with also significant pricing power prompt us to reiterate our accumulate rating with a €47 target price.”

14 Ноя. 2011

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