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.
The Wehring Interview – Heineken – Part II
Just prior to upping its presence in Brazil and Mexico, when it bought FEMSA Cerveza in January last year, Heineken finally settled its protracted discussions with The UB Group in another emerging market for the world's brewers, India. Almost two years after teaming up with Carlsberg to buy Scottish & Newcastle, which held a 37.5% stake in UB's United Breweries unit, Heineken finally came away from the discussions with a deal with the Indian drinks giant.
Two years! What on earth could the two sides have not talked about in two years? “It was a very simple – and understandable – issue,” explains van Boxmeer. “(UB Group owner) Vijay Mallya made a deal with Scottish & Newcastle. Suddenly, we pop up, and he's expected to sit with someone else at the table. That needs some talks, and I think that's normal.
“You have the legal side of things and what the contracts are, but then you have to cut through these things. You have a guy who has a partnership with someone and then that someone becomes someone else. It's normal you sit and discuss the matter. For us, the partnership we were working out with Dr Mallya was a very important one, one which will be meaningful for the next 25 years. So, it was worth taking our time.”
Since settling the matter in late-2009, van Boxmeer appears more than happy with the cut of Heineken's cloth in the country.
“India has subsequently been stellar for us – there is no other word,” he says. “In terms of margin and market improvements and how the market is performing generally, everything is heading in the right direction. United Breweries is above 50% market share now, and we were below that when we started. So, no, it's really stellar.”
Looking back to early-2008, when Carlsberg and Heineken ganged up on S&N, I recall how it looked at the time like the two brewers were sharing the spoils nicely. Since then, however, some observers – ourselves included – formed the opinion that maybe Carlsberg had fared better from the carve-up than Heineken. Maybe, van Boxmeer's in that camp as well?
No, I didn't think so either.
“No, certainly not,” he retorts, when I ask if Carlsberg got the better half. “It's a matter of timing. The lion's share of the value of S&N when we did the acquisition was the UK. But, the UK has suffered a perfect storm. So, we came in at the wrong time. But, today, Heineken UK is the leading beer and cider company in the country. In the last three years, we've had to restructure a lot more than we thought we'd have to. But, we're now back on track. The UK is a difficult market, but it's not the only difficult market in Europe.
Heineken's CEO, Jean-Fran?ois van Boxmeer
“If you take the long view on Europe, it's still a good environment to do business in, even if it's much tougher than some emerging markets.
“Take a look at the India part of the S&N deal,” he continues. “If you look at the demographics, they only drink 1.3 litres of beer per capita – that's where China was 35 years ago. Even if the country gets to half of what China has raised to in the next 20 or 25 years, it's a huge opportunity - this is the strategic price of S&N. We didn't only want to make sure we would stay leaders on our home turf in Europe.”
A sound investment, then. Meanwhile, back in the present, one of the main regions for investment for Heineken is in Africa. Not only has the company teamed with Diageo to build a brewery in South Africa, but only this month the company won the bidding race for two facilities in Ethiopia. Although both examples I cite are recent, van Boxmeer is keen to highlight that the company has form in the region.
“Africa was one of Heineken's first anchorage points,” he says. “We were quick to get a presence in the French, Belgian and British colonies. The Dutch sailed everywhere and took a presence in such markets. We have been present in Africa since between the two world wars.
“Political stability in the African markets is improving, and the middle classes are emerging – that is what our business is thriving on. Africa won't be left at the side of the road; the rest of the world needs Africa. I see big improvements there, it's the cornerstone of our business. We have been multiplying the profits from our operations in Africa by five in around eight years – it's one of the biggest growth engines we have. What Brazil is for A-B InBev, Africa is for Heineken. Sure, it's smaller than Brazil, but we are also earlier in the growth curve.”
As we've already discussed in our hour together, Heineken has stepped deeper into A-B InBev and SABMiller's back yards – Brazil and South Africa - in the last 18 months. How's that for a statement of intent?
“I'm not looking to attack whoever aggressively,” van Boxmeer clarifies. “We target consumers, we don't target competitors. We're there to take opportunities in those two markets, not to commit suicide!”
The analysts that van Boxmeer is scheduled to meet after talking to me are starting to mill, and one or two of them look handy. Time for one more (question, not beer).
Last year, Heineken enjoyed what must have been a perfect day, marketing-wise: As well as the final of rugby's Heineken Cup in Paris, Saturday 22 May also saw Bayern Munich and Inter Milan duke it out in football's Champions' League final – a tournament Heineken is also a major sponsor of – in Madrid.
“I went to the Champions League final,” said van Boxmeer. “It's not that I don't like rugby, I just don't understand it!”
Jean-Fran?ois van Boxmeer is a native of that rugby powerhouse, Belgium.
27 May. 2011