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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.

Diageo Completes Beer Business Deal

London-based Diageo Plc. (DEO) has completed its joint venture with India’s largest spirits company United Spirits Limited, to own United National Breweries' traditional sorghum beer business in South Africa. Diageo has bought 50% of the business for approximately 25 million pounds sterling ($36.0 million). The remaining half of the company will be held by a company affiliated to Dr. Vijay Mallya, Chairman of United Spirits Limited.
The deal dates back to November 2012, when Diageo and Mallya had signed a Memorandum of Understanding (MoU) for the traditional sorghum beer business of South Africa-based United National Breweries. The 50-50 joint venture will foray into certain emerging markets of Africa and Asia (excluding India).
Along with the signed MoU, Diageo also agreed to acquire a 53.4% stake in United Spirits for 1.285 billion pounds sterling ($2.05 billion), in order to venture into the fast growing alcohol market in India. Besides financial strength, the acquisition is expected to help to reduce debt and provide United Spirits with the opportunities it seeks. For Diageo, United Spirits will not only open up the growing market Indian market, but also assure access to a burgeoning middle class and a rising beer consumption trend.
Entrepreneur Mallya sold the 53.4% stake in United Spirits to Diageo as he requires sufficient cash to bail his Kingfisher Airlines out of bankruptcy.
Diageo, the owner of leading brands like Smirnoff and Johnnie Walker explores opportunities to expand geographically through acquisitions, within its financial criteria. The acquisitions of companies with strong local routes to market and brands like Mey I?ki in Turkey and the investment in ShuiJingFang in China and Halico in Vietnam in fiscal 2012 are particularly appealing.
Currently, Diageo Plc. carries a Zacks Rank #3 (Hold). We would also recommend that investors to consider Boston Beer Company Inc. (SAM), and Compania Cervecerias Unidas S.A. (CCU) that carry a Zacks Rank #1 (Strong Buy) and Constellation Brands Inc. (STZ) with a Zacks #2 (Buy). These companies offer a more attractive exposure to alcoholic beverage segments.
30 Янв. 2013



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