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.
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.
Analysis of import beer market in Russia
Against the background of negative dynamics of Russian beer market, the supplies of import brands continue growing according to various data by 2.6-3.5% in 2012. The volume increase mainly takes place in the EU countries, which raised their sales due to low euro rate, stronger loyalty of consumers and growing interest to import brands on the part of major players expanding their portfolio. At the same time the structure of expensive import beer saw some changes, that is, a brand from Germany became the #2, and brands with small sales volume continue their rapid gaining of market weight in 2011.
The below review develops the subject tackled in "Journal.Beer" #3-2011. While working at the article, we based on updated and more accurate data concerning the sales structure of import brands.
Russia as the world importer of beer
The history of beer import: 1985-2012
Parallel import regulation
Import beer market in figures
Beer from far-abroad countries - distributors and brands
In 2012 Russia again ranked sevenths among beer-importing countries in physical terms by supply volume. Despite its substantial growth, Russia did not get higher in the rating due to even more extensive growth of import supplies into Belgium. This also was the reason why the positions of Russian import by value did not change, it remained on the ninth place having outperformed Ireland but yielding to Belgium.
The United States continue to keep the absolute leadership, as this country imports more beer than Russia by an order of magnitude (more than half of the world import). Great Britain imports about three times as much beer as Russia. Germany, Italy, France and Canada also perceptibly outrun Russia.
The volumes of foreign beer supply are big enough to consider it a strategic importer and to draw the attention of many world manufacturers, above all, those who can't or don't want to bottle beer under a license. According to the customs statistics data provided by 1mosinfo.ru, the total amount of far-abroad enterprises, which supplied beer to Russian market in 2012, comprised ... (whereas with near-abroad enterprises the number reached ...). The number of represented producers grew by ...% against 2011 and by ...% against 2010.
With that, Russian market includes ... import far-abroad brands and about ... near-abroad brands many of which include several sorts*.
* In certain cases the division into brands and sorts
It follows from FAO UN statistics that in 2012 the increase of beer import volume in physical terms grew faster due to the extension of supplies from Germany, neighboring Ukraine and increase of beer volume imported from countries which previously supplied comparatively little of production. By value the supplies grew proportionally to the physical volumes.
Russian market of imported beer first began to form in the USSR. At that time Czechoslovakia, which accounted for 80% of foreign beer supply, was the main trading partner of Russia. However, the import volume itself was absolutely insignificant on a national scale; for instance, in 1985 the USSR imported 45 mln dal of beer which corresponded only to 1.5% of the market. Besides, import beer remained unobtainable for the mass consumer, as the majority of people could only hear about it.
At the beginning of 1990-s, the trade boundaries were opened. At that moment Russian consumers who lived in the era of depersonalized goods received an opportunity to buy branded products. Brands Holsten, Tuborg, Carlsberg, Bear Beer and Bavaria enjoyed the highest popularity (presently all of them are bottled under license). Though high quality and flavor profile of import beer were of secondary importance then, and decision to buy a product mostly depended on to the image and international status of the brand. As realized by former USSR citizens, who were in the middle of fast-moving transformation from a socialistic society into the consumer one, import brands were an essential condition of high living standard and western culture. This image was also formed by an extremely high price of import beer.
After the collapse of the Soviet Union, Russian brewing industry could not meet the demand for beer of any quality due to difficult economic conditions and lack of current assets and raw material. By 1995 the production volume fell twice against the result of 1990 (from 333 to 177 mln dal). It resulted in beer shortage against which the import was growing at quite a rapid rate, having reached 20.3 mln dal in 1995. At that time the official import share on the beer market reached its historical maximum value of 10%. Operating revenue of the importers comprised about $100 mln. By this time the number of trading partners increased abruptly and Germany became the leader on the import beer market.
Beginning with the second half year of 1996, the import share began to decrease. However, this decrease was caused by introduction of high customs and the fall in supply from Ukraine, where the situation in the brewing industry wasn't any better than in Russia. But for the beer importers from far-abroad countries this year was more than successful. The Czech Republic increased beer export to Russia 5.5 fold, Austria 3.2 fold, Ireland 2.3 fold, Great Britain, Germany and France by 35-38%.
The recession of 1998, abrupt loss of rouble value and the fall in purchasing power of the population resulted in beer market decline and an even more rapid fall in import. But on the threshold of crisis and after it, Russian manufacture was quickly recovering, the product quality increased and the beer shortage was eliminated. Due to this fact and also to the efforts of marketing managers of the beer companies who launched a range of national brands, Russian consumers almost entirely took to Russian beer. The most illustrative year here is 1999, when import share on the market fell to 0.4% (excluding beer from Belarus). Although in 2000 there was a trend to a gradual increase in beer import, from this point on, inexpensive Ukrainian and Belorussian beer took its dominative position in the structure of foreign supply.
As the welfare of the citizens was recovering and the consumer demand was growing, a new wave of the interest towards import brands could be expected. However, in 2000 half of Russian beer market was already controlled by transnational enterprises, which took the advantage of this trend and began to develop production under license. In 2001 licensed segment comprised about 1% of the market, at the beginning of 2002 it constituted 3% and by the end of 2003 it amounted to about 9%. The majority of import brands, popular in Russia were for the first time ever manufactured on its territory. During the period from 2000 till 2004, beer supply from far-abroad countries was practically discontinued.
Further trend towards beer export from far-abroad countries emerged against the background of fast population welfare recovery. By that time, many beer consumers developed the idea that beer produced under license ranked lower in quality and flavor than the product, imported from the country of origin.
Economic recession, which began at the end of 2008, resulted in the loss of rouble value which abruptly brought down the return of any business, based on import. For the same reason that in 1998 import sale significantly decreased. An abrupt decline took place in the fourth quarter of 2008, although the results of the whole 2008 were positive due to the marked seasonality of beer sales.
In 2009 recession consequences could be already estimated to the full extent: import of inexpensive Ukrainian and Belorussian beer increased, on the other hand, expensive far-abroad beer sales fell by 32%.
Economic advance recovery, rouble strengthening and stabilization against the background of purchasing power improvement in 2010 principally changed the dynamics of import segments. Far-abroad beer import volume started to recover (14% growth) and Ukrainian beer supply decreased (15% fall).
Inexpensive Belorussian brands, which reached its popularity peak in 2011, proved to be in demand in the market in the post-crisis period. However, as early as in 2012, they were superseded by import from other near-abroad countries. Brewers of the neighboring countries, mainly from Ukraine and Armenia, which previously showed no significant activity on the Russian market, supplied a variety of products to those who prefer authentic beer. Moreover, the trend towards a fast increase in expensive far-abroad beer import has remained unchanged since 2010.
In 2012 these trends resulted in an increase in beer import to Russia by ...% up to ... mln liters, which stands out appreciably against the background of sustained negative market dynamics. By value (that is, taking into account contract statistic value of the dispatched beer), import has slightly slowed down its growth and increased by ...% up to $... mln. Growth rate reduction has been conditioned by the bigger weight of relatively inexpensive near-abroad products.
Growth of expensive European import supplies correlates with Nielsen marketing audit data*, which define that premium segment, on particular mid premium and high premium, has been growing since 2011. The growth took place at the expense of high upper mainstream segment, which is formed by marginal Russian and inexpensive license brands. Wealthy consumers, who are guided by product image, seem to associate location of manufacture with beer quality even more decidedly.
* Anadolu Efes presentation with a report for 2012.
It is also necessary to mention that the growth rate of Russian beer retail price exceeded import beer dynamics threefold. The price level difference has certainly remained significant with average import beer price 2.4 fold lower than Russian. However, the price change itself can lead to reconsideration of consumers' preference.
Import supplies also grow due to little influence of state regulation of import beer sales. In particular, prohibition to sell beer in stalls had little effect on the import segment as foreign brands are mainly represented in supermarkets and HoReCa.
The total ban on beer advertisement in key media, also affected the brands produced, in the first place, in Russia, including licensed beer, which is the main competitor of import product, as rather heavy television advertising will not focus the attention of consumers on them anymore.
Beer flavor profile, location of production and package have got a special role in product selection and in this regard import beer frequently occupies a more advantageous position. However, intensification of the struggle for shelf place and a corresponding increase in the budget of largest companies for trade marketing can have a negative effect on import beer distribution.
Beside the "struggle for shelves" the market of import beer in years to come will be significantly influenced by the following trends:
- development of import trade by transnational brewing companies;
- supply growth of affordable local brands from near-abroad countries including transnational companies;
-change of legislation concerning parallel import;
- exchange rate of euro.
Changes to legislation concerning products importation can have an impact on brands sales volume and structure. Beer sorts bottled under license hardly get to Russia and importation of the majority of large foreign brands is carried out by exclusive importers in accordance with the direct permission of rightholders. It is connected with the fact, that in 2002 the law of "territorial principle of trademark rights exhaustion" was exerted in Russia and it stipulates that when a foreign brand product gets to Russian territory, the trademark holder gains a control over this product, including the right to prohibit its import.
Because of the territory principle, in Russia the legal owner of branded goods purchased abroad cannot fully dispose of them, as the rights for TM are defended by the rightholder. Only the official dealer has the right to import the goods and any other import is referred to as parallel. It is located in semi-official zone, that is a violation according to the civil code, but it does not carry responsibility under Administrative Offences Code. This is reflected in efforts to prohibit commercial consignments import of branded goods on the pretext of trade mark defence.
In practice, this mechanism is usually realized by way of writing open letters to the Federal Customs Service, composed on the basis of rightholders' applications. Trademarks, specified in these letters are included in the customs register of intellectual property and when such products are detected, the customs service expropriates them, estimating them as infringing merchandise.
The territory principle does not satisfy Federal antimonopoly service (FAS) and several other independent importer, who participate in numerous but eventually fruitless lawsuits.
Till 2009, arbirtazh courts in Russia satisfied demands of FСS to expropriate such goods, later Higher Court began taking legal steps against such importation for unfair competition.
The issue of permitting parallel import was raised on several occasions, but the RF government was in no haste to take decision and the final consideration of proposals was constantly postponed.
At the meeting dedicated to the issue of parallel import, which took place in April 2013 with first deputy prime minister Igor Shuvalov, it was decided to support FAS initiative to legalize the import of branded goods without permission from the possessor of the trademark rights, as the meeting participants told newspaper "Kommersant". First deputy prime minister himself said he supported the parallel import and promised to openly defend his positions. The issue can be settled in May, at the meeting with prime minister Dmitry Medvedev. If this happens the import of commercial consignments under trademarks will no longer be semiofficial. This, as FAS supporters say, will help decrease prices and increase demand. The official importers foresee the loss of control under production quality.
At the meeting with Igor Shuvalov FAS position, that is, "the current situation is not beneficial for competition" was supported by Ministry of Education and Science, "Skolkovo foundation", Vyacheslav Lysakov, first deputy chairman of State Duma Committee for Constitutional Legislation and State Construction, and by business ombudsman Boris Titov. The supporters of trade freedom referred to a wide variety of cases, when production supply by an official dealer costs many times more expensive than an alternative.
At the same time, it turned out that before the meeting, Ministry of Economy directed their arguments against parallel import to Kreml, a letter signed by minister Andrey Belousov "was a fulfillment of president's instruction", as the department explained. But the fact it was written without mister Shuvalov who curates this issue, made him comment on it, as the meeting participants told "Kommersant". "The stakes in this play are so high, that the officers ignored the risk of violating the power hierarchy," as Anatoliy Semenov, proxy representative of entrepreneurs for intellectual property right defence (there was a time when he defended rights of parallel importers of Evian and Panasonic in courts). He says that the main result of the meeting was Igor Shuvalov's support of "ombudsmen's positions" and protection of RF consumers against "the dictate of transnational corporations". The Ministries of Economy and Industry and Trade were about to ground their position by the report evidencing there was no influence of parallel import on prices, which was prepared by Higher School of Economics. "I stopped it, says Vyacheslav Lysakov, we live in Russia and know prices at the official traders and in the market".
In the end a decision to support FAS idea on parallel import legalization in the RF was made. The position of first deputy prime minister who "demanded but never heard any arguments for parallel import prohibition", was confirmed to "Kommersant by employees of mister Shuvalov's front office: "He listened to participants' reports, did not accept any argument against, voiced his position and oriented federal agencies to prepare a report to chairman of the government and he is also going to maintain his position publicly".
The final position on parallel import permission will be taken at a meeting with prime minister Dmitry Medvedev, which will take place after May holidays, as the officers answer the newspaper, but this meeting outcome is already fixed. Thus, according to mister Lysakov, "in the nearest future amendments into the civil codex of Russia concerning international principle of trade mark right exhaustion as well as amendments to Common Economic Space agreement will be initiated by the government". The latter will be easy for the White house. "Kazakhstan supports this principle, says the deputy, and the legislation can get in the Duma as early as in the spring session".
The permission of parallel import led to an increase in the number of trade organizations, which deal with beer import, improvement of competition in the segment and reduction of the product price.
According to FAO UN data, beer import to Russia, including deliveries from allied Belarus, increased by ...% up to ... mln liters* in 2012. Such evident dynamics as compared to depressed market, which has reduced by ...% approximately to ... mln dal indicates import share growth by ... p.p. to ...%.
* Total volumes of import supplies based on data FAO
UN and data from Russian part differ insignificantly. This results from small difference in evaluation of supplies dynamics. Hereinafter the data of Russian
customs statistics "1 Mosinfo" are used.
As noted above, in terms of retail price and geographical arrangement, import beer market can be distinctly divided into two segments. Lower premium, mainstream and economy segments are occupied by beer from near-abroad countries, namely Ukraine, Belarus and Armenia which is Russian beer alternative.
Premium and superpremium segments are occupied by beer from other countries, mainly from the European Union, which costs significantly more than Russian brands manufactured under license. Each of these geographical segments can be considered the main one, depending on whether we assess the market by volume or by value.
In 2012 changes within the structure of import beer supplies went on and far-abroad beer began to gain more weight. If in 2009 its share comprised approximately ...%, then by 2012 it increased to ...% by volume. In 2012 far-abroad import supply volume increased by ...% up to ... mln liters and share on the beer market increased by ... p.p. to ...%. Importers from this group of countries earned $... mln, which is by ...% more than in 2011.
Beer from CIS countries practically did not change its physical indicators and in 2012 its import comprised ... mln liters which corresponds to ...% of the market (+... p.p.). At that, Ukrainian, Belorussian and Armenian suppliers collectively earned $... mln which is by ...% more than in 2011.
Import beer market estimation by value can vary significantly. If we take Federal Service of State Statistics data concerning the average retail price of import beer (about ... roubles/l in 2011 and ... roubles/l in 2012) as estimation base, then with the above mentioned import volume in physical terms, beer sales volume increased by ...% and comprised approximately ... billion roubles ($... billion) and the share in the total beer sales volume in Russia remained on the same level, that is about ...%.
Import monetary weight steadiness can be explained by a fast Russian beer price rise, associated with attempts of manufacturers to compensate for the fall in physical volume.
For a consistent assessment we should divide import beer market in terms of geographic arrangement and by draught and packed beer segments, as consummation conditions, distribution and price vary significantly in them.
The structure of packed and draught beer supplies from far-abroad countries has been quite stable over the last two years. The largest volume in import segmentation by package belongs to beer in glass bottles; it accounts for ...% of supplies. Can share comprises ...%. Beer in PET is practically not supplied to Russia from far-abroad countries which can be explained by the rarity of this package. Draught beer, transported in metallic and plastic KEGs, accounts for ...% of the supplies respectively.
As is evident from the foregoing, the structure of import from far-abroad countries significantly differs from the structure of Russian market, where on-trade segment accounts for only ...% of sales and draught beer comprises a slightly bigger share taking into account specialized retail trade.
On the basis of physical volume we can cite packed beer market estimation by value, having applied the prices of some import brands, established in several retail units. When packed beer manufactured in far-abroad countries was sold at the average price of ... roubles/l its sales comprised about ... bln roubles (about $... mln) in 2012.
If we assume that the cost of import draught beer in HoReCa facilities exceeds the retail price (... roubles/l) on the average by ... times and beer sales volume in HoReCa amounts to the above mentioned ... mln litres, then we can calculate that draught far-abroad beer total sales comprise about ... billion roubles ($... mln)
Total sales of far-abroad beer, both in off-trade and in on-trade segments have increased by ...% up to $... mln.
According to the data of 1 Mosinfo, it is possible to suggest that beer from near-abroad countries is practically completely supplied in package (draught beer share comprises just ... %). When beer manufactured in Ukraine and Belarus was sold at the average price of ... roubles/l its sales comprised about ... billion roubles ($... mln).
Thus, by our calculation assessment, the total import beer market volume comprises about ... bln roubles or $... mln. and its share in total volume of beer sales in Russia comprises ...% having increased by ... p.p.
Profitability in two price (and geographic) segments is significantly different. On the average Ukrainian and Belorussian enterprises took $... for 1 liter of beer supplied to Russia (+...% against 2011), whereas manufacturers from far-abroad countries on the average made $... for each liter sold.
It is worth noting that in 2012 there was a significant reduction in customs value of beer from Western Europe. On the average, customs value reduction comprised about ...% to $... for a liter in the main importing countries (in 2010 and 2011 they made approximately $... for a liter of beer). The fall of contract prices in roubles and dollars has been certainly caused by a drop in the exchange rate of euro. Weakness of currency made trade companies more profitable and became an import growth driver in 2012.
Import beer market is getting less consolidated. In expensive beer segment, represented predominantly by European brands, this process intensified with the beginning of recession. Since 2009 top ten brands have significantly lost market weight, previously their share comprised ...% and in 2012 it was as low as ...%. It should be noted that the point at issue is not a reduction in sales of the largest brands but a faster growth of brands with a relatively small market weight.
Top ten make-up did not change in 2012, popular brands still remain popular. The share of Krusovice continues to decrease but mass Czech brand still twice outruns its immediate competitor, which suggests that it has a long-term perspective to be a market leader. But other market positions underwent significant rearrangement.
A fast market weight gain of German beer Spaten, import protege of Moscow brewing company, is the most crucial instance. An increase in supplies by ...% is a significant achievement for such large brands. Physical indicators of Spaten, according to our estimation, in fact slightly exceeded the volume of Budweiser Budvar, which for a long time ranked second on the beer market. Besides, the supplies of Czech national brand are also controlled by Moscow brewing company and therefore the rearrangement took place within its portfolio.
Increasing its market weight at a high rate, one Munich brand outran other beer from the same region by the sales volume. It turned out that Paulaner, which in 2012 grew at a decent rate as well, moved from the ... to ... place in TOP10 rating. Other six large import brands kept status quo, which suggests that consumer preferences are relatively stable; they have already developed though they do not remain unchanged.
Market structure from the point of view of leading foreign manufacturers generally resembles sales structure of separate trademarks, as the majority of foreign companies supply one brand which forms the basis of sales. But the brands, which are not included in the number of sales leaders, help some manufacturers gain additional market weight.
For instance, the share of market leader Heineken Ceska Republika A.S. fully reflects the share of Krusovice brand. The companies Budweiser Budvar N.C., Paulaner Brauerei Gmbh and Asahi Breweries Ltd., represented in Russia only by one title brand, have similar plain sales structure. At the same time, Spaten-Franziskaner-Brau Gmbh owns two sorts, which in fact are found in the name of the company. Small but noticeable part of sales falls within one or two secondary brands belonging to Hartwall Ltd., Diageo Ireland and InBev Belgium NV/S.A.
This situation has certainly not been caused by the fact that foreign manufacturers intentionally limit their product range. Russian sales partners accomplish it for them, making efforts to create a well-balanced famous brands portfolio. As a rule, large brands are included in the portfolio of national distributors. Asahi (its import variant, in particular) and Lapin Kulta brands, represented only in certain districts and supplied by local trade companies, are an exception. But import beer market also includes a range of small companies attempting to attract beer lovers by a wide choice of import brands, little known in Russia.
Moscow brewing company (MBC) in 2011 became the leading importer of beer from farabroad countries to Russia. The market share growth of MBC coincided with deterioration of competitive positions of former leader, company Russian Tradition. In 2012 MBC went on increasing sales dynamically and remained №1 in the list of suppliers notwithstanding the competitor's market weight recovery.
The main impact into the company's sales growth was made by brand Spaten, with a share comprising a fifth of the portfolio. We should note that in 2011 considerable volumes of this beer were supplied by intermediary company ..., whereas the final consignee is unknown to us. In 2012 the main volumes were directed to MBC, though as we know, it has not yet become an exclusive supplier of brands by Spaten-Franziskaner-Brau Gmbh. as much of beer Spaten is still imported by company Interbeer (Svam Group). The same can be said about beer Franziskaner which is the fourth most important brand for MBC.
It is worth noting that the product range of MBC is growing more and more German, as beer from Germany comprises a major part of this product range. In particular a considerable contribution into the company sales is beside the mentioned ones made by popular brand Erdinger, which achieved its sales peak in 2011. Several other beer brands are supplied from Germany as well.
In particular in 2011 considerable consignments of beer Clausthaler were imported. This is one of the leading non-alcoholic beer brands in Germany. Clausthaler is brewed only in Frankfurt and has no license production in other countries, although this brand is actively promoted in foreign markets. In 2012 the sales volume was lesser, but the share of Clausthaler in the segment of import beer from far abroad countries exceeds ...%.
Ireland is represented in MBC portfolio by brand Harp. According to the company, this is the only brand of Irish lager in Russian market, which is referred to as younger brother of Guinness because Harp is produced by Diageo Ireland. On this beer label one can see the logotype of the famous harp of Brian Boru, which is also on the label of its "elder brother". All this gives reasons to believe to lovers of expensive beer and promotes the brand dynamic growth. In 2009 its market share amounted to ...% in the segment, and in 2012 this figure changed into ...%.
The largest brand in MBC portfolio was and still is Budweiser Budvar. In 2010 Budweiser Budvar accounted for about ...% of company sales in the segment of import beer, but in 2012 the company's import direction development brought about a reduction of its share to ...%, as we calculated.
Russian consumer has known Budvar for a long time and many people associate the image of Czech beer precisely with this brand. Starting from the middle 1990s, the national Czech brand was imported by many trade companies. But in the early 2000's, the leadership among the suppliers of Budweiser Budvar to Russian market was taken up by distribution company North Winds, which then became its exclusive importer. North Winds belongs to Detroit Investments Ltd, which is famous for its successful capital investment projects on the beer market (namely for the foundation of PIT group and its sale to Heineken). Today Russian beer business of Detroit Investments is reorganized into Moscow brewing company (MBC), which received the right for exclusive distribution of the brand.
Brand of "Czech flag colors" is produced on state-owned enterprise Budweiser Budvar N.C. Its sales share in the imported far-abroad beer segment was gradually growing from 2008 and in 2011 it reached its peak of ...%, that is, twofold less than the share of Krusovice.
In 2012 two multidirectional but probably connected processes took place, that is, Budweiser Budvar market share decreased, but beer supplies directly to MBC grew. The company de-facto became the exclusive importer of Czech brand. As of today only a small part of Budweiser Budvar sales are made by other companies, mainly by those which work in duty-free trading.
In the segment of Czech import beer, Buweiser Budvar share is ...%. This brand can easily be found in network retail. But in HoReCa it is represented not so widely because only a third part of Russian brand supplies of the general volume is made in kegs.
Russian subdivision of Heineken only recently has become a player in the import beer market. The central place in the structure of its import sales belongs to the "royal" beer Krusovice, the largest brand, imported from far abroad.
Krusovice remains an absolute leader, which is twice ahead of its immediate competitor. Until recently the market share of Krusovice was quickly growing but from 2010 the brand suddenly began to yield its position. The key reasons for this are sales reorganization as company Russian Tradition gave the brand under the control of Heineken as well as the growing business competition and wider beer range on import beer market.
According to the official letter of the Federal Customs Service (dated July, 26 2011), only two companies, Cross-Logistik and Pivgorod-S, received the authority to import and distribute Krusovice on the territory of Russia.
In particular, the right for draught beer supply to HoReCa was transferred to company Pivgorod-S which is a part of the group of companies Pivdom (one of the largest Russian distributors of FMCG). Krusovice in cans and glass bottles is attended by another Heineken distributor, company Cross-Logistik.
Reduction of Krusovice market share in 2011 resulted from a substantial fall of draught beer supplies due to transit of sales under the supervision of another company. Probably at that moment Russian Tradition had stronger positions in HoReCa establishments. Though packed beer Krusovice on the contrary increased its sales, which perceptibly exceeded supplies of beer in KEG, which can be explained by wide distribution of Heineken in retail networks.
In 2012 the situation changed, that is, under the pressure of growing competition the sales of packed beer shrank a little bit, "Pivgorod-S" instead, was successful in supplying beer to bars and restaurants. Today the brand is equally represented in both segments.
Only beer Guiness among other widely known in Russia brands is directly supplied to Russian Heineken subdivision. This brand has been well-known to Russian consumer since early 90-ies which is itself a good precondition for successful development. Also the connection of Guinness to Irish culture appealed to beer lovers. That is why the brand possessed a special image even before it got widely spread in Russia.
In 2005 Saint Petersburg Heineken Brewery started bottling Guinness Foreign Extra Stout. Simultaneously the company applied its distribution network to sell beer Guinness Draught and Kilkenny in kegs, which was still imported from Ireland for HoReCa. However, in 2008 Heineken prohibited independent importers from importing sort Guinness Foreign Extra Stout, and in 2009 it even stopped its production having launched Guinness Original instead. Thus, at the moment, brand Guinness is presented by only two sorts, namely packed license Guinness Original and draught import Guinness Draught, which are distributed by Heineken.
Due to product range widening of HoReCa the market share of Guinness Draught starting from 2010 was decreasing to ...% in the import segment in 2012. But, according to our estimation, Guiness supplies grew by ...% and every year bars and restaurants buy more and more Irish beer.
Company Pivdom (Pigorod-S, Ale Trade) is one of the biggest Russian distributors of FMCG, including beer both domestically produced and imported beer. Not only Heineken but also Baltika and Efes Rus are among its clients. The sales structure of import beer suggests that the main direction of company activity in this segment is supplying of draught beer, which accounts for nearly ...% of the total supply volume. In the first place it is certainly conditioned by Krusovice domination in the beer range from far-abroad countries. Under our estimation, this brand, packed in KEGs comprises about a half of import beer supplies from Pivdom. A special subdivision, namely Ale Trade deals with draught beer distribution.
Apart from Krusovice, the company does not have any other import brands which would form more than ...% of supplies, though several brands known to expensive beer lovers are supplied either exclusively or in bigger volumes than to competing companies.
For instance, Pivdom is the sole supplier of beer Karlovec, which is imported both in packed and draught variant. This brand by company Mestansky pivovar Havlickuv Brod appeared in the Russian market as early as years ago, but it is gaining market weight very quickly, which is promoted by distribution growth and "heartwarming" design with distinct geographic link to Czech region. So far the brand occupied ...% in the far-abroad import segment and ...% in the segment of Czech import beer.
Besides, if we speak of well-known brands in Russia, practically all English beer Newcastle Brown Ale as well as Belgian Blanche de Bruxelles, which can be bought on tap in restaurants, is supplied by Pivdom company. We should say that most of it is realized in KEG.
The group of companies Russian Tradition is a leader in far-abroad import beer segment and one of the oldest companies in Russia, dealing with beer distribution. Since 2000 it has been focusing solely on import brand deliveries and particularly succeeded having become a market leader within a few years. On the other hand, according to our estimation, MBC is currently slightly outrunning Russian Tradition by the scope of delivery (beginning with 2011), but this advantage is so small that it does not seem possible to allocate clearly the positions of the company in the ranking list of importers to the first and second ranks.
We should note the positive fact that Russian Tradition showed a remarkable steadiness after the withdrawal of import brand #1 Krusovice from its portfolio in 2011. The group managed to achieve such popularity of this brand during the pre-crisis period that by 2009 each fifth sold bottle of far-abroad beer was Krusovice. Later on, the market leader found itself under the pressure of competitors, though by 2010 the brand still held one third of sales, realized by Russian Tradition. If we merely subtracted Krusovice share from the market share of the company, it would comprise just ...% but following the results of 2011, this figure was twice as big. Russian Tradition succeeded in retaining its sales at nearly the same level.
After the expiry of contract for Krusovice the company still reserved one large brand, namely German wheat beer Paulaner, which became the focus of its sales. As early as in 2007 Paulaner ranked third in leading import brands rating; moreover, Paulaner became a leader in import German beer segment. In 2008 it achieved the largest sales volume of about ... mln liters. This growth became a logical consequence of exclusive relationship of Russian Tradition with one of the world's largest export-oriented companies, Paulaner Brauerei & Co.
In 2011 Paulaner increased its sales and superseded Krusovice in the portfolio, that is, its third part. However, at year-end the brand decreased its market weight in spite of the sufficiently high activity aimed at its promotion. Subsequent heavy growth of Spaten beer deliveries from the competitive company resulted in its shift to the fourth position in market leaders rating and to the second position in German import list.
Sustainable development of the company is supported by four owned trademarks: two of which are of Czech origin, namely Prazacka and Cernovar as well as two brands from Germany, Liebenweiss and Grotwerg. All these sorts were launched in 2005. And in 2012, the brands produced abroad under contract, accounted for as much as a half of total scope of Russian Tradition deliveries.
The bottling contract Czech brands at various times was carried out by three Czech enterprises. From the beginning of 2010, the main volume of supply was realized from the large enterprise Budejovicky Mestansky Pivovar.
This enterprise, just as two other well-known manufacturers, is famous for owning the rights of ТМ Budweiser. Along with the supply from Budejovice enterprise, in March 2011 the company commenced the supply of Prazacka and Cernovar, manufactured by Tradicni Pivovar v Rakovniku, which is related to Russian Tradition. 60 mln krones (more than $3 mln) was invested into the enterprise after the purchase.
Naturally, in 2011 the supplies of Tradicni Pivovar v Rakovniku to Russia went up. At its own plant Russian Tradition group produced slightly less than a half of contract beer and in 2012 nearly its total volume. According to the data, rendered by Russian Tradition, ... as much beer was produced at Tradicni Pivovar v Rakovniku in 2012 against the previous year and its sales volume in Czech Republic increased by record-breaking ...%.
Prazacka is certainly the most popular and widely promoted private label. Fast market share growth of this brand went on till 2009 fueled to well-developed distribution, low price, very attractive package and active promotional campaigns, carried out by Russian Tradition and participation of regional partners. This brand, which by that time became more mature, subsequently slowed down its growth and its market share began to decrease against the background of dynamic development of other import brands.
In 2012 the sales of packed beer Prazacka grew sharply. This performance can in our view be explained by company's decision to convert the bonus from the exchange difference into the market share as well as by completing of the production relocation to the brewery of their own. Besides, last year there was a considerable sales growth of the second private label from Czech Republic, namely beer Cernovar. It already accounts for ...% in the supplies structure of Russian Tradition.
It seems logical that in 2011 the import of Bakalar, the brand which is popular abroad and has a great history, produced by Tradicni Pivovar v Rakovniku, increased practically from nothing to a noticeable volume. This brand took up a share of ...% on import beer market and ...% in Czech beer segment. Bakalar continues to win the recognition of import beer lovers and according to our estimation the growth of its supplies comprised ...% in 2012.
Private labels of the company from Germany showed multidirectional but in general positive dynamics. Year 2012 was unsuccessful for "traditional Bavarian beer of the 21 century" that is, brand Grotwerg as its supplies almost halved. Late in 2012 Russian Tradition decided to support the brand image and notably changed its design. The transformation goal was "to draw consumer's attention to the brand and maximally underline the product unique character". The redesigning was carried out by producer's staff, that is, by the employees of Allgauer Brauhaus. On the other hand, the supplies of unfiltered wheat beer Liebenweiss, which provides for more than half of sales, grew by nearly ...%, having come close to ... mln liters.
Svam Group (Interbeer), one of the leading beer suppliers to HoReCa, in 2012 considerably raised beer supplies both from far- and near-abroad countries. Due to the company specialization, mainly beer in KEGs was supplied.
If we speak only of beer from far abroad, then we must say that the main impact into the sales growth was made by the market #2 brand, namely, Spaten brand in draught format. Obviously the role of Svam Group as well as the coverage width of the bars and restaurants network made its parallel cooperation with MBC reasonable. Currently Spaten accounts for almost one third of the general beer supplies volume from far abroad. Probably for the same reason as Spaten, brand Franziskaner belongs to the company's portfolio, though its sales are modest. Besides the popularity of German wheat beer Maisels Weisse is still growing rapidly.
Czech beer Klaster is imported into Russia exclusively by Svam group. As far as we know, this brand (like Prazacka and Cernovar) is produced mostly for Russian trade partner, and it obviously owns the rights for the brand. Nearly a fifth of Klaster supplies accrues to for by packed beer, which can be considered as a necessary attribute of brand promotion. Finally, semi-dark beer Velvet is imported from the Czech Republic. In 2012 this brand by Pivovary Staropramen demonstrated a good sales gain.
Svam Group is one of the notable suppliers of special beer sorts from Belgium, namely Belle-Vue Kriek Extra, Leffe, Blanche de Namur and Lindemans. Though the share of these brands in the general volume of European beer supplies comprises about ...%, one can consider them very important from the point of view of added value.
Company Interportfolio as well as bigger competitors, has its own distribution system in Moscow, it "is in" the federal retail networks and can provide marketing support for the brands. Beer to big cities of Russia is only delivered through regional distributors. Judging by the impressive results of 2012, when Interportfolio increased its supplies twofold, we can expect the company to become one of the key players in the market of import beer.
About ...% of the company supplies accrues to beer Velkopopovicky Kozel and next ...% to Pilsner Urquell. These two brands are imported despite the availability of licensed analogues. However, the sales growth of Velkopopovicky Kozel can be considered as a recovery after a severe decline during the recession, if we take into consideration that in 2008 this brand ranked fifth in the segment of import beer from far abroad with a market share of ...%. The fall of Velkopopovicky Kozel was aggravated by the fact that during some time (even before becoming a part of Interportfolio) Velkopopovicky Kozel was not supplied to Russia at all. The trading company began investing into distribution of Velkopopovicky Kozel from scratch after the import analogue practically disappeared from the market.
As far as we know, currently there are exclusive contracts between Plzensky Prazdroj and Interportfolio for distribution of brands Velkopopovicky Kozel, Pilsner Urquell and Gambrinus. While it is obvious why the first two brands are popular, the sales growth of Gambrinus looks quite logic too, if we keep in mind that the leader in Czech market must be known at least to tourists and beer lovers.
Rather quickly, within one year 2012, there was a considerable gain in the market weight of brand Praga by Czech Pivovar Samson and beer DAB by German Radeberger Gruppe, which are supplied by direct contracts. Besides, Interportfolio has contracts with Brasserie Lefebvre for distribution of beer Blanche de Bruxelles and Belgian Kriek, which boosted the sales and market share of these Belgian brands.
The article materials were prepared using statistics of import supplies provided by and "1 Mosinfo" (www.1mosinfo.ru). Data from Food and Agriculture Organization of the United Nations as well as national statistics services Rosstat and Belstat were also used in the article. A number of estimations are based on info provided by importers, producers and research companies. Publications in "Kommersant", "Vedomosti" and Forbes as well as materials of portal Sostav.ru were used in the preparation of the article.
The data on beer import volumes and their interpretation are our assessment based on the current trends in case the source has not been named.
We do not claim the given information to be absolutely correct, though it is based on data obtained from reliable sources. The article content should not be fully relied on to the prejudice of your own analysis.
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7 Jun. 2013