Dmitry Nekrasov’s Philosophy — on the Past, Present and Future of Ukrainian Brewing IndustryA meeting with Dmitry Nekrasov always turns into a training course: “Introduction to brewing business“. We are talking to a clever “playing trainer“ a person that can be called a godfather of the Ukrainian craft. He has a dozen of successful projects to his name. Dmitry told us about craft beer in Ukraine, on market cycles, on specifity of operating in retail and HoReCa, on union of Ukrainian brewers and certainly, how a brewery of his own, First Dnipro Brewery is doing.
The market of import beer in Russia: review and databasesThe market of import beer is rapidly growing and changing. But while in the past years it was growing due to brands variety, in 2019 major and affordable brands from TOP-10 were developing actively. It seems that the fact of a brand origin from far abroad counties, even if it is not well known but has moderate price and good distribution provides for million liters of sales in the territory of Russia. Among distributors AB InBev Efes was far behind, yet the role of Baltika and suppliers of the second row got more important. The boom of German brands was followed by stagnation of import from other traditional regions (and Belarus) instead the supplies from Mexico, Lithuania and Asian countries grew considerably.
Russia: Positions of Brewing CompaniesThe review contains an analysis of interim performance of brewers in the first half of 2019. There are rather dynamic changes behind a modest industry growth. Baltika is again experiencing a stage of volumes and market share slid due to competition with AB InBev Efes. Because of the price competition and presence expansion in the modern trade company #2. has come close to the leading position. At the same time sales of Heineken Russia have continued growing which makes the premium part of the portfolio heavier. The market premiumization trend had been also confirmed by import brands. MBC and Zavod Trekhsosenskiy have been the most successful among federal market players. The market share of independent regional brewers and Ochakovo have continued falling as they are being squeezed out by the market leaders at their competitive fields.
Ukrainian beer market 2019: companies and brandsIn 2019 beer production and market have been still fluctuating about zero point. However, the past season was successful for brewers judging by the sales profitability. The price mix has improved due to rapid general market premiumization, as well as its particular aspect, the growth of import beer sales. By the season end AB InBev Efes improved its positions considerably. It turned out that consumers had not forgot Efes brands that had to leave the market, but started to recover rapidly. Against the stagnating market that meant sales decline of other companies, in the first place Carlsberg Group that most of all beneficiated from Efes exiting the market. PPB turned out to be stable to branding activity of its competitor and Obolon kept the same volumes and at the moment it is the absolute leader of the economy segment. The share growth of independent producers took place thanks to leading craft breweries, that so far do not have a big market weight, but they are rapidly gaining it.
Brewing industry in Kazakhstan 2019During the first half of 2019, the majority of Kazakh brewers made their contribution into positive dynamics. Yet it was companies of the lower division, not the two transnational leaders that raised their production and sales. The shares of draft beer and aluminum can which is rapidly squeezing glass bottle out of the market, have been growing. The price segmentation has remained stable despite the substantial rise of retail prices and fluctuations of brand market shares, while the borders between segments have become blurred. The main events in the industry have been: the announced revision of the beer excise policy, launch of BeerKhan brand in the strong beer segment, and most important – purchasing assets of Shymkentbeer by Arasan.
The trend of complication of Russian beer market is going on and in several directions at the same time. The range has got wider, the import and small segments are growing, namely craft beer, alcohol-free beer and special flavor beer. At the same time, all ex-mega brands and light lagers by Russian brewers are experiencing a decline of their shares. AB InBev Efes, Heineken, MBC and Pivzavod Trekhsosenskiy have exceeded the market, Carlsberg was developing slower than the market and Ochakovo as well as some other mid-sized breweries have been cutting down their volumes. To a big extent brewers’ performance was connected to their ability to reach agreement with networks, sacrifice their margin and enter new markets. Craft brewers are facing a serious danger of producers’ registration introduction – de facto licensing. ...
US. Is Boston Beer About to Get Squeezed?
One of the biggest beneficiaries of that trend has been the nation’s most widely recognized craft brewer: Boston Beer (NYSE: SAM), maker of the Samuel Adams line. Its earnings have grown some 39% per year over the past five years. Shareholders, meanwhile, have enjoyed a 237% gain over that time.
But SAM faces trouble from both above, from major brewers, and from below, in the scads of microbrews all competing for the same tavern tap handles and shelf space in beer stores.
Can SAM continue to thrive, or is it doomed to fall victim to the big squeeze? Let’s take a closer look at Boston Beer, see where its strengths and weaknesses are, look at where it has opportunities for growth and identify what threats it faces in the months and years to come.
Brand recognition - Beer drinkers identify the Samuel Adams name with quality beer. Its beers may not always have the edginess of that super-hopped, double IPA you had at a brewpub last month, but beer drinkers can count on SAM’s offerings being good in a craft-brew market where the purchase of an unfamiliar beer can often be a coin toss.
A huge portfolio of brews - Boston Beer has long been recognized as an innovator in the U.S. beer market, long ago having launched extreme beers like Triple Bock and a 25%-alcohol Utopias ale. That has not changed. SAM now brews more than 60 year-round, seasonal and specialty selections, and it’s always adding beers to its portfolio. What's more, its product doesn’t stop at suds. Boston Beer also produces Twisted Tea malt-beverage drinks and it rolled out a new line of ciders under the Angry Orchard brand name earlier this year.
Jim Koch - In company chairman Koch, Boston Beer has a founder who remains passionate about its products. That’s something investors should value. How many corporate chairmen do you see enthusiastically pitching their products on YouTube?
It’s too small - Because SAM is so much smaller than the big beer companies (it has just 1% of the market), it cannot operate on the same scale, and does not have the ingredient purchasing power of a BUD, SABMiller or Molson Coors (NYSE: TAP). That puts it at a particular disadvantage when it comes to price fluctuations.
It’s too big - SAM is not a microbrew, and the long-term trend for beer drinkers has been toward micros, an industry that has exploded over the past decade or so. Some 174 U.S. microbreweries opened in 2011, increasing the total number by some 23% . SAM also competes with regional brewers like Yuengling that offer much cheaper, but still quality, distinctive ales and lagers.
Room to grow - With $538 million in sales over the past year, SAM is tiny compared with brewing behemoth BUD, at $39.7 billion, and even with Molson Coors, at $3.8 billion. SAM accounts for just about 1% of total U.S. beer sales. But while total beer sales across the US have stagnated in recent years, the craft beer market has grown. And SAM owns 20 percent of that market, which puts it in prime position to capitalize on the trend.
‘Tis the seasonal - Boston Beer has been building out a large rotation of seasonal and specialty beers. The array of seasonals and beers from SAM’s Brewmaster’s Collection allow the brewer to market its beers in variety packs, which sold particularly well last quarter, CEO Martin Roper said.
Beyond beer - Although Boston Beer rolled out its Angry Orchard ciders to locations across the U.S. this year, the brand still has a lot of growing to do. Roper characterized its distribution of the ciders as “still at a fraction of where we are with Sam Adams.” Ciders are a rapidly growing segment of the alcoholic beverages market, and Angry Orchard puts SAM in a great position to capture a sizable piece of that hot segment.
Micro-brews - Many craft breweries may never distribute beyond their local markets. But collectively, they present a threat to SAM, especially at a time when consumers are making conscious decisions to buy local products.
Mega-crafts - The big boys have caught on to the shift toward craft beer and have been trying to recapture some of the market share they have lost. Enter brands like BUD’s Shock Top and Molson-Coors’ Blue Moon. While seasoned craft beer drinkers may turn up their noses at these watered-down craft-style attempts, the brews could appeal to drinkers who are just getting a taste of craft beer and are turned off by some of the bigger, hoppier and more adventurous suds.
Pricing pressures - SAM is committed to producing craft-quality beer. And making that beer requires more barley, more hops and more adjuncts like wheat and fruit than making a beer like Budweiser or Miller does. That means SAM has even bigger exposure to price variations in the agricultural products it needs. Hikes in barley, wheat and hop prices could shrink margins and reduce profits. Additionally, its heavy use of specific, less common ingredients, such as Noble hops, put it at additional risk for crop failures and shortages of ingredients it must have. SAM has been able to offset recent cost increases by raising prices, but the company believes it may start to lose customers if it pushes the cost of a tall, cold one much higher.
No doubt, SAM is operating in a highly competitive market. But its brand recognition and great reputation gives Boston Beer an advantage over major brewers trying to gain a foothold in the craft-beer market and microbrews looking to expand beyond their local confines. In addition, SAM has bright prospects in its line of Angry Orchard ciders, and we’ve already started to see what growth is possible there.
Investors should keep their eye on ingredient prices and the impact they have on SAM’s margins in upcoming quarters. But for those looking to pour themselves a pint or two of craft beer and cider growth, SAM could hit the spot.
More Expert Advice from The Motley Fool
Boston Beer Company's Samuel Adams brand helped to redefine beer and kick off the craft beer revolution in the United States. Success breeds competition, though, and while just a few years ago Boston Beer had claim over most of the craft beer shelf, today the field is crowded. Can Boston Beer rise above the rest, or will it be squeezed between small local breweries on one side and global beer giants on the other? To help you decide, we've compiled a premium research report filled with everything you need to know about Boston Beer's risks and opportunities. Simply click here now to find out whether Boston Beer is a buy today.
4 Дек. 2012