2012 Northwest Cider & Perry Seminar The Cider Market & - - PDF document

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2012 Northwest Cider & Perry Seminar

The Cider Market & Industry

Class Leader: Peter Mitchell, Director Mitchell F&D Limited

History of Cider Production

• In 6500 BC apples first cultivated in the Tien Shan (“Mountains of Heaven”) ‐ modern‐

day Kazakhstan in Central Asia.

• When the Romans invaded England (55 BC – 43 AD), native Britons in Kent were found

to be making cider.

• From the 8th C, adoption of apple milling & pressing technology & establishment of

cider & perry production ‐ spreading north from Spain to France and into England.

• From 13th C, cider became valued as a safer drink than water and became used as a

means of paying farm workers.

• 17th & 18th C, the “heyday”. Key technological developments e.g. in‐bottle
• fermentation. Taken to the “colonies”.
• Popularity and quality declined at the end of the 19th C.
• Formation of Long Ashton in 1903. Much R&D work was undertaken here until 1985.
• Substantial growth in cider consumption and production occurred between 1970 to the

mid 1990s.

• After a short period of Industry “troubles” and a decline in cider value in the late 1990s,

new quality products were introduced to make cider & perry fashionable again in the 21st century.

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• 1st cultivated apple trees planted in Boston by Blackstone in 1623
• Apples became widely planted – encouraged by individuals like “Johnny

Appleseed” (early 1800’s)

• However, in Washington State planting did not properly start until about

Cider in the USA

However, in Washington State planting did not properly start until about 1850 – also for fresh fruit, not cider

• Cider became widely established in 18th & 19th centuries (a ‘store’ of

apples; payment for work; safe drink; family drink) – notably:

• 1726 – a village nr. Boston produced 10,000 barrels
• 1767 – 40 gallons annual per capita consumption In Massachusetts
• 1810 – 198,000 barrels made in Essex County, NJ (ca. 307,000 gallons

distilled cider spirit) p )

• President John Adams popularised health benefits
• However, after mid 1800’s (as in UK) – urbanisation, beer production

…. plus ….. Temperance Movement …… poor quality >>>>

• 1915(ish) – only 13m gallons produced (55m gallons in 1899)
• 1919 – Prohibition
• 1990: 0.75m gal ….. 2004: 4.25 m gals …… 2011: 9.2m gals

Legislation & Cider Definitions

• In many countries (includes UK, USA, Canada), definitions

and ‘controls’ on permitted practices are contained only within Excise legislation. d d f

• In France, Spain and Germany definitions & practices are

more restricted by specific vertical legislation ……. however …… – for example, in France: Boisson fermentee a base de pomme is used for any beverage which does not conform to a regulatory definition.

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USA Definitions – Hard Cider

Still wine (CO Still wine (CO2

2 <3.92g/l)

<3.92g/l) derived primarily from apples or apple concentrate and water (apple apple juice juice, or the equivalent amount of concentrate reconstituted to the original brix of the juice reconstituted to the original brix of the juice prior to concentration, must represent more must represent more than 50% of the volume of the finished product than 50% of the volume of the finished product) containing no other fruit product nor any no other fruit product nor any artificial product artificial product which imparts a fruit flavor

• ther than apple; containing at least 0.5%and

at least 0.5%and less than 7% alcohol by volume less than 7% alcohol by volume; having the taste aroma and characteristics generally taste, aroma, and characteristics generally attributed to hard cider; and sold or offered for sale as hard cider.

Canadian Definition

• Product of the alcoholic fermentation of apple juice
• 2.5% ABV ‐ 13.0% ABV
• A number of permitted ingredients / processing aids are

listed

• Cannot sell cider if it contains more than 2.0g/l VA
• Includes definition of “Champagne Cider”

Ref: Food and Drug Regulations (C.R.C., c.870, Section B 02 120 [S] Cider) B.02.120. [S]. Cider)

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USA Definitions – Other Categories

Broadly, cider is classified as a wine and thus permitted practices and allowable ingredients are generally the same as for a wine. For full details, see The Electronic The Electronic Code of Federal Regulations, Title 27: Alcohol, Tobacco & Firearms, Part 24 Code of Federal Regulations, Title 27: Alcohol, Tobacco & Firearms, Part 24 – Wine Wine. The following excise tax categories apply to cider: Wine 0.5% to 14% ABV: $1.07/gal Wine 14.1% to 20.9% ABV: $1.57/gal Wine 21.0% to 24% ABV: $3.15/gal Carbonated Wine (CO2 > 3.92 gl‐1 ): $3.30/gal Sparkling Wine (CO2 > 3.92 gl‐1 ): $3.40/gal Hard Cider (as previous): $0.226/gal $0.226/gal In addition, there is a “Fruit Wine “category, a “Farm Cider” category ‐ which is exempt from a tax class subject to certain provisions (FR: 27.24.76) ‐ and reduced levels of tax for small producers small producers (150,000 gal/yr) e.g. $0.056 credit on 1st 100,000 gals

• f hard cider.

Cider & Perry: World Market

South Africa Aust & NZ 1% Eastern Europe 1% South America North

Cider: World Market 2010 Sources: Various

South Africa 13% America 2% North America 3% Finland 3% France 6% United Kingdom 55% Germany 5% Ireland (ROI) 4% Spain 5% Sweden 1% Switzerland 1%

• UK cider & perry market

largest in the world – 940m litres in 2011

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Cider & Perry: Growth in World Market

140.0 160.0 180.0

Development of World Cider Market (ex. UK): 2002 – 2008 (Various Sources)

40.0 60.0 80.0 100.0 120.0 Vol (million ltrs) 0.0 20.0

South Africa France Spain Ireland Central & South America Asia Finland North America Eastern Europe Sweden Australasia

US Cider Market – Historical Changes

35.00 40.00 .Litres

For the 7 month period to end July 2012 , the US cider market showed an increase of 77% compared to the same period of time in 2011

22.1% up from 2010 15.00 20.00 25.00 30.00 As Still Wine Bottled) M 0.00 5.00 10.00 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Cider Vol. (A

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Cider: US Production / Releases

FL GA WA 2% TX 1% OH 1% Il 1% KS 1% OR 1% Other 2% VT CA 16% PA 5% FL 3% 2% 2% 1% VT 65%

Cider Production in the USA (vol.) ‐ 2011

(Source: TTB Statistical Reports)

er Market

3,000,000 3,500,000 4,000,000

Cider Sales (Volume) Ontario

Overall in Canada, sales vol. increased by 4% in 2011 to 23m litres. 8% value increase.

Canadian Cide

1,000,000 1,500,000 2,000,000 2,500,000

The C

500,000 2007 2008 2009 2010 2011

Domestic Production Imports

Source: LCBO (via Ilnyckyj, 2012)

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UK Alcoholic Drinks Market (Volume)

Wi Spirits 4%

UK Alcoholic Drinks Market (Vol): MAT Summer 2011

Beer 64% Cider 11% Perry 1% RTDs 2% Wine 18% 4%

UK Alcoholic Drinks Market (Value)

Spirits

UK Alcoholic Drinks Market (Value): MAT Summer 2011

Beer 41% Wine p 21% Cider 6% Perry 0% RTDs 2% 30%

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Emerging Cider Markets & Growth Forecasts

See following link: http://www.candcgroupplc.com/__dat a/assets/pdf_file/0019/19252/Canade an‐International‐Beer‐Strategy‐ Conference‐30‐May‐2012.pdf Global Cider Market – Recent Headlines

• Declining demand in Finland: ‐3%

3% volume in 2011 (Euromonitor)

• Sales of Somersby cider (Carlsberg) in 2011 exceeded

exceeded expectations

• Cider consumption in Japan decreased by 4%

4% in 2011 (Euromonitor)

• “Stellar” growth

“Stellar” growth of cider in Australia to 52m litres in 2011; value of A$552m (Euromonitor) Volume growth at 42 8% 42 8% MAT (Feb 2012) and 58% 58% value (Euromonitor). Volume growth at 42.8% 42.8% MAT (Feb 2012) and 58% 58% value (Nielsen)

• Long‐term decline in cider consumption in Ireland: ‐2%

2% volume in 2010 and 2011 (Euromonitor).

• Increased

Increased sales in 2011 in Argentina, Venezuela & Brazil (+8% (+8% vol vol, +16% , +16% value value) (Euromonitor)

• 23%

23% volume growth in 2011 in Singapore and 4% 4% vol vol growth in Hong Kong g g p g g g (Euromonitor)

• Westons Cider (UK) purchases World Brands Australia in 2012 to form

Westons World Brands

• Ireland’s C&C Group acquires Vermont Hard Cider in October after

Heineken took over distribution of Strongbow in August 2012

• Global cider market to reach $2.6 billion by 2015 (GIA inc.)

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Sales Trends

In the 20th & 21st century, the key factors that have affected (will affect?) consumption include:

• Advertising
• Weather
• Taxation
• Taxation
• Widening product range – in draught & packaged formats
• Distribution & supply (of product & raw materials)
• Packaging & product innovations
• Regional preferences
• Gender and age
• Changes in PDI

g

• Pricing, product quality and value
• Image
• Provenance & eco/health‐credentials
• Events & occasions

The Raw Materials – Apples & Pears

Apples

• 1. Dessert

2 C li

• 2. Culinary
• 3. Cider
• 4. (Crab)

Pears

• 1. Dessert
• 2. Perry

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Cider Apples

Characterised by phenolics (polyphenols; tannins) 1. Sharps e.g. Tom Putt 2. Sweets e.g. Sweet Coppin 3. Bittersharps e.g. Kingston Black 4. Bittersweets e.g. Dabinett

The UK Cider Industry & Orcharding

400.0 450.0

Cider maker’s usage of apples in 2011 estimated at 57% of all UK apples Cider maker’s usage of apples in 2011 estimated at 57% of all UK apples

150.0 200.0 250.0 300.0 350.0

'000s of Tonnes Balance of UK apples to consumption NACM use of Other Apples:

0.0 50.0 100.0

2006 2007 2008 2009 2010 2011 est NACM use of Cider Apples:

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The UK Cider Industry & the Rural Economy

Industry reports growth in directly dependent jobs from 1,000 in 2008 to 1,500 in 2011 ..... plus .... an increase from an estimated 5,000 to 7,500 in rural cider‐related jobs Approaching 250 000 tonnes of apples valued at ca £26m p a for the Approaching 250,000 tonnes of apples valued at ca. £26m p.a. for the rural community Cider apple orchards are an important tourist amenity and local benefit:

• verall, orchards are estimated to return in various ways 8x the cash

profit from the apples (Herefordshire Orchards Community Evaluation Project – 2008‐2010) £2.75bn retail value (NACM estimate from CGA/IRI) delivering £461m VAT & £318m excise duty = £770m+ directly result ....... as well as other income and business tax revenues

Cider Making Practices in the UK Cider Making Practices in the UK

• The UK Cider Industry:

The UK Cider Industry:

• Majority of ‘craft’ producers only use

fresh‐pressed juice and thus make all their cider in the “season” their cider in the “season”.

• All the big producers & many of the

medium‐scale makers use AJC in some or all of their cider.

• Contract packing is widely used
• The 250,000 tonnes of apples grown

in the UK for cider will produce about 2 hl f j i Th b l f b t

Major Producers: Bulmers (Heineken) Aston Manor

2m hl of juice. The balance of about 5m hl finished cider will come from imported AJC plus other ingredients added to fermented juice to make up the final product.

Bulmers (Heineken), Aston Manor, Magners GB (C&C Group), Thatchers, Westons, Aspall, Merrydown, Sheppy’s Henny’s

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Producing Apples for Cider in the UK Producing Apples for Cider in the UK

• 80% of fresh apples used in cider production are cider

apples, 20% are cull dessert/culinary

• Cider orchard practices differ from growing dessert fruit:
• Degree of ripeness
• Machine harvesting
• Cider apples are not put into cold‐store although some

producers will use cull dessert/culinary fruit out of cold store

• Recently established long‐term research strategy associated

with cider orcharding – Themes:

• Genomics

Current research projects:

• Varietal development
• Pest & disease management
• Orcharding systems
• Apple scab genetics
• Role of conidia & varietal resistance
• Mycorrhizal relationships with Malus
• Use of apple genomic & phenotyping

Growers & Cider Producers in the UK Growers & Cider Producers in the UK

• Over 95% of cider fruit grown is either under contract to the major

cider producers or produced in the maker’s own orchards:

• Bulmers

Bulmers: : 75% contract, 25% own orchards

• Thatchers

Thatchers: : 75% contract, 25% own orchards

• Westons

Westons: : 80% contract, 20% own orchards

• Magners

Magners GB: GB: 97% contract 3% own orchards

• Magners

Magners GB: GB: 97% contract, 3% own orchards

• Contracts:
• Typically for 20 – 25 years, with extensions of 5 – 10 years
• With original “Incentive Schemes” (Bulmers & Taunton), much of the

cost of orchard establishment was carried by the cider maker ‐ repayment over 4 years or from a % of apple crop each year.

• Features:
• Quality standard increasingly including a bonus for cleanliness
• Quality standard, increasingly including a bonus for cleanliness,

sugar content and for hand‐picked fruit;

• Delivery point i.e. Cider factory
• Permitted orchard chemicals & records
• No inflation clause – minimum price negotiated with grower group

Current price: £113/tonne Current price: £113/tonne

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Growing Cider Apples in the UK Growing Cider Apples in the UK – Start Start‐Up Costs Up Costs

• Typical planting densities: 300 – 620/acre
• Machine planting costs (tree, stakes, wire, guard, labour): £7/tree
• Machinery costs (100 acres / 1 man managed orchard):
• 2 x tractors @ £30k ea.

3 t il @ £4k

• 3 x trailers @ £4k ea
• Sprayer @ £14k
• Mower @ £5k
• Fertiliser spreader @ £3k
• Shaker @ £14k
• Clearer / sweeper @ £20k
• Harvester @ £45k
• Loader @ £20k
• Break even point 5th year (if some existing equipment) to

to 8th year if all equipment purchased

Growing Cider Apples in the UK Growing Cider Apples in the UK – Operating Operating Economics

Economics

• Typical yields:
• 2nd year: 1 tonne/acre
• 3rd year: 3 tonne/acre
• 4th year: 8 tonne/acre

5th 12 t /

• 5th year: 12 tonne/acre
• 6th – 14th year: < 22 tonne/acre
• 7 – 18th year: < 24 tonne/acre ....... < 30 tonne/acre (best

managed orchards)

• Machine harvesting volumes: 70 – 150 tonne/day
• Typically need 100 acres minimum for cost effectiveness &

fit bilit profitability.

• Based on ave. 20 tonne/acre orchard, ca. £1000/acre profit
• 10, 000 acres of cider apples planted in past 15 years
• “Best paying farm crop

Best paying farm crop” (other than soft fruit e.g. Strawberries)