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.
EABL takes on SABMiller with a Sh3.9bn war chest
The brewer will build a canning plant in Kenya to help boost the uptake of its products outside the traditional bars and restaurants as regulations restrict beer consumption.
It will also build a bottling plant in Uganda to capture a larger share of growing market that has caught the eye of SAB Miller that is building a second plant in the country—underlining the growing beer wars.
“We are going to make investments of between ?25 million and ?30 million to grow our capacity and enhance our distribution channels in the region,” said Seni Adetu, the chief executive of EABL.
EABL is betting on the investments to support growth that saw it announce a 17.3 per cent rise in net profit for the six months to December to Sh4.8 billion on revenues of Sh27.7 billion, reflecting a 36 per cent growth.
The profit growth was cut by increased investments in plants, higher financing costs and a depreciation of the Kenya shilling in the period under review.
Analysts at Standard Investment Bank (SIB) say the new investments could reduce EABL’s dividend payout for the full year despite the company expecting Sh6.3 billion from the sale of a 20 per cent stake Tanzania Breweries Limited.
“Despite healthy cash flows, we see the additional investments leading to a lower payout, despite the expected full year earnings per share,” SIB said in a statement to investors.
EABL maintained its interim dividend payout at the same level as last year’s Sh2.50 per share and new investments including the purchase of a 20 per cent stake in SAB Miller is expected to pile pressure on its cash.
It borrowed Sh20.7 billion from its parent company Diageo to buy the stake. Its cash pile has reduced from Sh8 billion in July 2010 to Sh2.6 billion in December 2010 and Sh1.52 billion in December.High taxation and increased costs--especially those brought by volatility in the currency market and commodity booms--include the major challenges that EABL will have to navigate in coming months.
Its share price rose to Sh179 at the close of trading on Friday from Sh176 on Thursday and has shed 5.2 per cent in the past year—making it one of the most resilient counters at the Nairobi Securities Exchange where firms have shed upto 35 per cent over the period.
It needs to defend and grow its share of the regional market—which is increasingly becoming a battlezone among multinationals SABMiller, Heineken and Diageo led EABL that has plants in Kenya, Uganda and Tanzania with distribution networks in Rwanda and South Sudan.
Already, a vicious battle for dominance is underway in Uganda between Uganda Breweries, owned 98.2 per cent by EABL, and Nile Breweries, which is 60 per cent owned by SABMiller--which is opening a second brewing plant in Uganda at a cost of $80 million (Sh6.6 billion).
SAB Miller has also re-entered the Kenyan market with a focus on the premium market with brands like Miller Genuine Draft, Redds and Castle Lager – a segment that has also caught the eye of Heineken, which recently opened a regional office in Nairobi.
In Tanzania, Diageo through EABL ended a partnership with SABMiller over the running of Tanzania Breweries Limited and bought a majority stake in rival Serengeti Breweries where it has increased investments.
20 Feb. 2012