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.
Heineken, Carlsberg ratings will survive French beer tax: Moody’s Investment Service
On December 13, the French Constitutional Court (Conseil Constitutionnel) rubber-stamped government plans to raise beer excise duty by 160% from January 1, senior analyst at Moody’s Investor’s Service, Yasmina Serghini-Douvin, noted in a sector comment.
As of January 2013, the standard excise duty rate for beer in France will jump 160% to €7.2 ($9.56) per hectoliter/degree of alcohol of finished product (from €2.75 in 2012) for breweries with a yearly production exceeding 200,000 hectoliters. Serghini-Douvin wrote.
“French market leader Heineken, with an estimated market share (in volume) of approximately 32.4% and Carlsberg Breweries, with 29.1%, are likely to bear the brunt of the proposed tax hike,” she added.
Operational weakness risk
But the analyst said that the French tax hike would not affect Moody’s ratings for the brewing giants – Heineken: Baa1, Carlsberg: Baa2 – because they continued to focus on generating cash flow and diversification.
Heineken’s recent acquisition of Asia Pacific Beverages (APB), in particular, would reduce its Western European net sales exposure from 45% to 41%, Serghini-Douvin observed
That said, she warned that Heineken’s credit metrics would deviate from targets set out for the Baa1 rating category: debt/EBITSA of below 3.0x and retained cash flow (RCF)/net debt in the low to mid-20s in percentage terms.
Similarly, Carlsberg’s credit metrics had deteriorated since 2011 driven by weak performance in Eastern Europe, the analyst said; the firm had RCF/net debt of 23.3% in 2011, while debt/EBITDA was 3.1x “above level deemed appropriate for its rating category”.
“The above metrics leave these companies in a somewhat more vulnerable position to cope with operational weakness,” Serghini-Douvin said, “driven by a challenging macroeconomic and fiscal climate across Europe and an uncertain input cost environment.
Retail price hikes of 15-20%
The analyst said that, as a result of the tax increase, Moody’s expected beer sold in supermarkets (the bulk of volumes sold in France) to see much steeper price rises than drinks sold via on-premise channels, because beer duty was based on volumes, not prices.
Moody’s expected Brewers to pass on the higher tax to consumers, Serghini-Douvin said, with Carlsberg and Heineken estimating price increases of 15% to 20%. the analyst wrote.
The threat to beer volumes was compounded by French plans to raise standard VAT to 20% from 19.6% and its reduced rate (in restaurants, for instance) from 7% to 10%, she added.
Worse still, beer volumes in France had fallen in recent years, Moody’s noted, prompting Heineken to focus on its premium portfolio (including its eponymous brand) and push brands such as Desperados and Pelforth in the on trade.
Kronenbourg losing ground
The premium category gained share in recent years as a result, Moody’s said, while Carlsberg also reported market share improvements in 2011, particularly in the on-trade channel.
“However, the company has suffered from the steady decline in the mainstream category where its popular Kronenbourg brand has been losing ground. To boost market share and growth, Carlsberg announced restructuring efforts in the country.”
Beer taxes had risen across Europe in recent years as governments tried to curb national deficits, Moody’s said, with Holland’s recent hike, and measures planned in Italy and Finland.
“Overall, we believe that brewers most exposed to Europe will continue their cost-cutting efforts in order to preserve their margins in the region in 2013,” Serghini-Douvin wrote.
“However, we remain concerned that cost-cutting might not prove sufficient to mitigate weak demand in light of largely unfavorable trading conditions across most European countries, driven by austerity measures, higher taxes and still high unemployment rates.”
20 Dec. 2012