10+1 trends of Russian beer market 2015-2017Despite of the moderately negative prognoses for 2017, the beer market can be stabilized soon. Yet the years of the negative dynamics have resulted in marketing being limited just to “optimization” and the art of balancing between price and volumes. Bigger supermarkets share means stronger trade marketing. These processes are connected to the majority of the described trends. At the same time, the federal brands inflation leads to searching for new tastes, sales channels and contact formats that expand the product range and diversify the beer market, but do not imply a substantial volume increase. Let us enumerate and further discuss the ten trends of the beer market we can see in 2015-2017 as well as the major event of 2017.
Beer market of Ukraine 2017In the first half of 2017, the Ukrainian beer market goes on decreasing slowly. Yet, the companies manage to compensate their lost volumes by raising prices and improving the sales structures. This results in the mid price market segment reduction while the sales of premium brands are rising. These processes are connected to position strengthening of companies Carlsberg Group and Oasis and the market share reduction of Obolon. Most of the novelties by the market leaders belong to craft or hard lemon categories.
Beer market of Russia 2016: PET goes to draftThe beer market of Russia was warmed up by the hot summer, but the preparation for large volume PET prohibition has already impacted it negatively. The year was successful for Efes, MBC and regional producers; Carlsberg’s positions were virtually stable but AB InBev and Heineken lost a part of market share having focused on the sales profitability. The dynamics of big brands was determined by how much the companies were willing to keep the prices down or by their promotional activity. In this context the economy segment of the beer market and sales of inexpensive draft beer were increasing. The premium segment started shrinking due to license brands migrating to the mainstream segment.
Beer market of Vietnam: “Young tiger”Vietnam is one of the few big beer markets that continue to grow steadily. The beer popularity results from its low price, street consumption culture, and social motives. The outlooks of beer market as well as the Vietnamese economy inspire optimism, though the country is heavily dependent on export of goods. The state regulation can be called liberal, but the key risk for brewers is harbored in intensive rising of excise. Within TOP-4 there are two leaders, Sabeco and Heineken that grow at the fastest rates. The first company effectively employs its capacities, the second one focuses on marketing technologies. Almost 80% of the market belongs to century-old brands, yet the middle class and the youth are shifting their interest toward international premium that is growing taking share from the mainstream.
FITCH affirms Foster’s at ‘BBB’; outlook stable
The rating affirmation follows Foster's 4 May 2011 announcement that the Supreme Court of Victoria had approved the Scheme of arrangement for the demerger of Treasury Wine Estates Limited. The Scheme was approved by shareholders at the Scheme Meeting held on 29 April 2011. Fitch concluded that the credit profile of the post-demerger "New" Foster's, consisting of Carlton and United Breweries and the International Beer Business, remains commensurate with the pre-demerger Foster's 'BBB' rating.
Foster's credit profile is supported by its leading market position in the duopolistic local beer market. "The Australian beer market is considered mature, with loyalty to incumbent local brewers, capital intensiveness and retailer shelf space acting as significant barriers to entry. These characteristics support the long-run collection of economic rents with modest levels of recurring investment requirements," said Johann Kenny, Director in Fitch's Corporate team.
Constraints to Foster's rating include its modest global scale and its limited geographic and product related diversification. Notwithstanding the adverse impact of the demerger on said product and geographical diversification, an improved management focus, asset intensity and a reduced exposure to the cyclical cash flow impacts associated with agricultural assets, will support the quantum and stability of Foster's cash flow generating capacity.
"Short term risks to Foster's credit rating profile include the threat of corporate action and the execution of the demerger strategy within the management announced demerger cost estimates," added Mr Kenny. Fitch takes comfort from the fact that Foster's has strong cash flow coverage and leverage metrics that provide some headroom and capital structure flexibility within the BBB range.
Longer term risks to Foster's credit rating profile arise from secular changes in consumer preferences leading to a decline in aggregate market share in the event of an unchanged sub-segment mix. Fitch considers Foster's short-term priority to realign and reinvest in its beer portfolio to be appropriate. Fitch also notes that Foster's has the required financial flexibility to effect such a change.
Should the financial structure post-demerger result in an improved financial profile such that adjusted net debt (i.e. capitalised for operating lease expense) falls to below 2x EBITDAR on a sustainable basis, then a positive rating action could result. Negative rating action may result from adjusted net debt to EBITDAR increasing to over 3.5x, and FFO interest cover reducing to below 3.75x on a sustainable basis.
Foster's is an Australia-based global producer and marketer of alcoholic beverages. Since its establishment in 1962, the company has owned and operated iconic Australian beer brands such as "VB" and "Carlton Draught".
Heineken Reckons Ethiopians Would Drink More Beer Given the Chance
If companies head to emerging markets to fuel top-line growth, many of them have the so-called BRIC countries in mind. By contrast, Dutch Brewer Heineken said Thursday it is about to buy two state-owned breweries in Ethiopia for a total of $163 million.
The fast growing and profitable Ethiopian market is a good pick for Heineken, which sees sales flat in mature markets. Ethiopian beer consumption has grown by around 20% a year for the past five years with the average annual consumption of beer around 3 liters per person at present. With a global annual average beer consumption of 27 liters per person, there is ample opportunity to get the Ethiopians to drink more beer.
The flipside of Ethiopia however is its fragile political system. The country’s political stability is currently rated at D by the Economist Intelligence Unit, with E being most risky. And the nation’s first ever multiparty elections were held just a decade ago.
That a brewer is not immune to political turmoil in a country can be illustrated by Heineken’s Egyptian operations. The brewer was forced to shut down its operations for two consecutive weeks during the unrest in January, hurting first quarter volumes.
To be fair, Heineken has long been criticized by the market for its over-exposure to the low growth Western European market where it generates around a third of its operational profit, hence expansion in the fast growing and profitable African market is most welcome to boost its earnings.
But a move into the rapidly expanding Asian market may be a safer bet. On Wednesday, Heineken’s peer Anheuser Busch InBev reported that its premium brands, such as Budweiser, grew over 7% in the first quarter in China. Heineken has hardly any presence in China, but aims to opens its own brewery there during the summer where it will make its premium brand Heineken. In the hope, of course, that it will refresh the parts other beers cannot reach.
6 May. 2011