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.
Analysis of beer market in China (on Russian)
Beer market of Ukraine: big three losing weightIn 2016, fast increase of excises and resulting price spike stood in the way of the beer market stabilization. Most of competition (as well as mass sorts) moved to the economy segment of the market. The biggest losses were incurred by the leading three, especially Obolon, which again experienced pressure after reallocation of Efes market share. However, one should already speak of TOP-4. Group Oasis CIS (PPB) became a strong player and competitor to transnational companies. Besides the net sales of many regional medium breweries look rather good and 16-fold cost reduction wholesale trade license for craft brewers opens up a possibility of rapid growth in 2017.
India. United Breweries: Higher costs a worry, but outlook strong
The rising trend in the cost relative to sales would affect its bottomline in the near term even though the overall long-term outlook is positive, given the company's strong branding and increasing youth market in the country. In the past six months, the maker of Kingfisher beer did see an impressive growth in its topline, but it failed to curtail rising operating costs.
Its sales from operations rose by 26% year-on-year to Rs 733.2 crore during the half year ended September 2011. Operating costs, including raw material expenses, salaries, and fuel costs, rose even faster by 29% thereby impacting operating profitability. Its operating margin fell by 280 bps to 11.3% during the period.
While the overall cost pressure in the economy is cooling off as reflected from the falling rate of increase in the wholesale price index of late, economists feel it may take a while for prices to fall further and stabilise at those levels. Until then, companies, including UB, are likely to report lower profitability.
Another concern is rising interest costs, following higher borrowings. Loan funds went up by 13%in a year to Rs 641 crore in the September 2011. Though small in proportion, interest outgo as a percentage of sales inched up by 50 bps to 2.5% during the six months to September. As a result, net profit for the period fell by 7% notwithstanding the double-digit growth in sales. Higher costs are likely to impact its performance even though sales may grow.
Beer sales are expected to be buoyant, given the rising disposable income and higher propensity towards beer consumption. In addition, UB has been able to grow faster than the sector growth in the past. According to some estimates, its mild beer segment grew twice as fast as the overall growth of the segment last fiscal. This will offer some support to the stock in the coming months.
27 Dec. 2011