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.
Weak Foster’s results give SABMiller’s offer a chance
An appreciation of the Australian dollar against sterling would mean that SABMiller was not only unlikely to enhance its A$4.90 (R36.76) a share offer but would use the A$500 million “cash return”, proposed by Foster’s chief executive John Pollaers, as an excuse to walk away from the deal.
Following last week’s release by Foster’s of a pedestrian set of results for the year to June, analysts and commentators appear to believe that SABMiller, the second-largest beer group in the world, is likely to succeed in its bid for control of the high-margin and cash-rich Australian beer group.
A number of analysts remarked that not only were the results on the weaker side of expectations but that Pollaers’ proposals for turning around the group were unconvincing. So unpersuasive were Pollaers’ revival plans that one analyst presumed he was already setting the scene for a compromise arrangement with SABMiller.
“Pollaers is an extremely ambitious individual and very competent, given what he did for Diageo in south Asia; if he could be convinced that there is a role for him at the second largest beer group in the world he might be persuaded to talk the board and shareholders into supporting the SABMiller offer”, remarked an individual who has worked with Pollaers.
However, analysts pointed out that such persuasion would have to include some sort of sweetener on the A$4.90 a share offer price.
The long list of conditions that SABMiller attached to the conditional offer it announced 10 days ago included that the offer would be reduced by the amount of any dividend paid and that any dividend payment would be limited to 15 Australian cents a share. Last week when Foster’s released its results, it announced a dividend of 13.25c a share.
Analysts believe SABMiller could lift its offer to just over A$5 a share, and allow the dividend, for a revived offer of an effective A$5.15 a share. This would represent a more appropriate premium for control of what Barclays Capital described as one of the few remaining sizeable and independent beer businesses in the world.
Significantly, after some volatility in the wake of the results announcement, the Foster’s share price appears to have settled at just over A$5.
Foster’s disappointing results, its pedestrian revival programme and the uncertainty surrounding global markets works to SABMiller’s advantage. In addition, the absence of any competing offer from one of the other major beer groups enhances the attractiveness of the SABMiller bid.
However, as the UK’s Financial Times noted last week in response to the results, while there has been no sign of another beer company making a bid, Foster’s is an extremely attractive cash-generating operation, which makes it an attractive private equity proposal. But the drivers of a private equity deal would have to be confident that they have access to the sort of management skills that can generate the improved performance that SABMiller is confident it can achieve.
In the absence of any competing offer in the coming weeks it seems likely that SABMiller will secure one of the last few remaining independents in this rapidly consolidating industry.
29 Aug. 2011