The beer market dynamics in Russia is approaching zero, yet major brewers are divided into those who developed considerably in 2017 and those who considerably reduced their volumes. For instance, company Efes has managed to substantially extend their sales due to restrained pricing policy and activity in the modern trade. Heineken has also demonstrated an excellent performance promoted by significant increase of advertisement budgets launching a non-alcohol sort of the title brand and unusual activity in the economy market segment. Carlsberg and AB InBev have been focusing on margins and lost a market share of their inexpensive brands. Serious dependence on PET package and mass enthusiasm about Zhigulevskoe have negatively impacted the most of big regional brewers, that have been for the first time pressed by the leaders in the key sales channels, especially in Volga and Central regions. In the small business there has been a noticeable slowdown in appearing of new restaurant breweries, yet the number of craft breweries has been growing rapidly. In 2018, the beer market is likely to grow a little, while the share of AB InBev Efes may decrease due to the integration. ...
“Catalogue of Russian Beer Producers 2018” includes 1070 businesses ranging from large subsidiaries of international companies to rather small restaurant and craft microbreweries.The catalogue includes 32 large breweries, 75 regional breweries, 693 industrial mini- and microbreweries as well as 270 restaurant breweries. ...
Global hop marketA local alternative to mass beer suggested by independent brewers has been successful and is now altering the global market. Beer is becoming more diversified, so transnational companies have to accept the new game rules and to switch focus to young and fast growing markets. All these processes increased the demand for aroma and bitter hop as well as their acreage expansion on two continents. However now there appeared a downward trend of alcohol consumption in the world, so even special sorts can soon turn to be sufficient. In this connection the dynamic American hop market is already facing some problems. EU hop producers have become more cautious, they are not racing to exceed the demand and look forward with more confidence, judging by the contract terms.
Hop Market in RussiaGermany still dominates the Russian market, yet over the recent two years one has been able observe a continuous success of Czech hop suppliers. Their expansion and growing popularity of hops from the United States became the drivers of supplies growth in 2016 despite the preceding modest harvest crop in the EU, as well as the factor of relative stability in 2017. In this connection, in 2017, the ratio of the varieties continued to shift towards the aroma ones, and the supplies of Magnum hop and other alpha varieties were reduced. However, the import of bitter hop pellets is partially replaced by extracts, especially from the major beer manufacturers. Total volumes of alpha acid supplies, according to our estimation, decreased by approximately 5% and returned to the level of 2015. Barth Haas Group continues dominating the hop products market; HVG also increased its weight. At the same time, Morris Hanbury significantly reduced the supplies in 2017.
Norway sheds light on ‘dark’ – ad-free – beer marketing
That is because as Norway’s biggest beer producer, Ringnes has great experience of operating in a “dark market” – a situation where little or no advertising is allowed. The visiting executives have come from the Carlsberg Group, Ringnes’s owner, which is about to see Russia, representing about 40 per cent of group sales, plunged into a dark market.
“We have had a few people coming to Norway to see how it works in a real dark market,” he says in his office in Oslo.
His message is a reassuring one to the worried executives: A dark market is good for dominant players. “If you have a strong portfolio it is difficult to attack you,” he says. “Launching something totally new with just the product itself and not being able to tell any kind of story is very difficult.”
For Carlsberg, the leading beer brand in Russia with nearly 40 per cent market share, that is welcome news. Russia was meant to be the promised land for the Danish brewer, which in recent years has taken full ownership of Baltika, a St. Petersburg-based company that is Europe’s leading beer brand.
But regulations designed to crack down on excessive and underage drinking, combined with the financial crisis and poor barley harvests, caused Carlsberg’s sales, profits and market share to tumble in the country and investors to query its strategy of concentrating so heavily on Russia.
The marketing ban – TV and Internet advertisements have been outlawed since the summer, and print advertising will be illegal from Jan. 1 – represents a second wave of regulatory tightening.
But using some of the tools developed in Norway, Carlsberg has fought back to record three consecutive quarters of increasing market share.
“I am very pleased with the trends we have been seeing in Russia. We did a lot of work to change the business model and it is good to see that we are getting the benefit from it,” says Jorgen Buhl Rasmussen, Carlsberg’s chief executive.
Carlsberg’s market share, which slipped from about 40 per cent in 2010 to 37 per cent at the end of 2011, was 38.9 per cent in the third quarter.
Its three biggest competitors in Russia – SABMiller PLC, Anheuser-Busch InBev SA and Heineken NV – each have about 15 per cent of the market and will be similarly affected by the ban.
The most important area Mr Roed points to is design. “We spend quite some time and quite some resources on developing the perfect packaging and the perfect design for these products,” he says. “It is the one lever we have. But in my opinion it is the most important in any fast-moving consumer goods [market]. People tend to give TV commercials and advertising too much weight.”
So in Norway the recent launch of a one-litre can for Ringnes proved to be a big success, and Mr Roed places a lot of attention on what is written on the front and back labels. Similarly in Russia, Carlsberg has benefited from introducing products such as 2.5 litre plastic bottles and multipacks. New product launches accounted for 15 per cent of its Russian volumes in the year to July.
Mr Buhl Rasmussen points to the introduction of Holsten, one of its many brands, in Russia shortly before the ban takes effect. “It is important to establish products before the ban … I always prefer not to have an advertising ban. But if it happens we normally see the leader, the best known, benefit more than the complete unknowns.”
Denis Sherstennikov, head of marketing for Baltika, highlights several things the brewer has done. It has introduced new designs for beer fridges in shops with special sections for new products, and has relaunched Tuborg successfully. Baltika was also able to conduct limited marketing, such as its sponsorship of the 2014 Winter Olympics in Sochi.
Carlsberg still faces big questions in Russia. Besides the advertising ban, tax increases will raise the price of beer and questions remain about its dependence on a single market. But Mr R?ed at least has good news about the financial aspects of being in a dark market.
“Norway is still a profitable market. It hasn’t been destroyed by promotions,” he says. “The margins in this market are much better than they are in other markets having a much more liberal policy.”
8 Jan. 2013