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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.

Malaysia. Cheers to brewery stocks, shares rise on price increase

Brewery stocks advanced on the back of a price increase by an average of 2% to 2.5% effective July 1, 2016.


This was a result of the expiry of the Anti-Profiteering Act on June 30, where both brewers reported a price adjustment that resulted in a hike of 2% to 2.5% in average selling prices (ASPs).

Heineken Malaysia Bhd reported a higher increase in ASPs of 2.5% while Carlsberg Brewery Malaysia Bhd’s ASP increase was at a lower 2% quantum.

Carlsberg’s stock was up 14 sen at RM13.72 while Heineken was up 48 sen at RM16.68 yesterday.

CIMB Research noted that this was not a surprise given that both companies have not passed on any goods and services tax costs since the law’s implementation, while the recent 2% to 5% price hike was solely to account for the 10% to 12% hike in excise duty back in March.

Carlsberg currently holds an estimated 40% of Malaysia’s malt liquor market (MLM), with its range of beers including Carlsberg and Asahi.

Meanwhile, Heineken has the larger share in Malaysia with its products consistently holding a 60% share of the local market.

“In our view, a 2% to 3% increase is fair, as brewers have been absorbing additional cost from GST since April 2015.

“However, we opine that the net impact on earnings from the increase should be minimal in the short term but positive in the long term.

“In the near term, we expect MLM volumes to be to some extent negatively affected, as consumers may opt to reduce consumption from the price hike.

“However, MLM volumes are set to recover once consumers adapt to the higher prices, as we believe demand remains inelastic,” said CIMB Research.

CIMB Research said based on its channel checks, price increases varied for different products for both brewers.

It said the quantum of ASP increase was dependent on various factors including the amount of cost previously absorbed.

“On average, products with lower MLM volumes and lesser alcohol content have had lower increases in prices.

“In contrast, high-volume products recorded higher price increases, likely due to inelastic demand for its mainstream products, which have alcohol content of 5% and above,” said CIMB Research.

CIMB Research is of the view that this development is a long-term positive, as it expects MLM volumes to recover whilst consumers adapt to the higher prices.

Thus CIMB is raising financial year (FY) 2016 to FY18 earnings by 2.6% to 3.1% and 2.1% to 3.5% for Heineken and Carlsberg, respectively.

It is maintaining an “overweight” call on brewers and believes that earnings will continue to be driven by an inelastic demand for alcoholic drinks as well as internal efforts to increase operating efficiencies.

Its top pick for the sector remains Heineken for its diversified product portfolio as well as dominant market share in Malaysia.

It has a target price of RM16.60 for Heineken, and a “hold” call on Carlsberg with a target price of RM13.60.

7 Июл. 2016



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