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.
India. United Breweries: the beer drought ends
Beer guzzlers went on a binge in the December quarter. What prompted this is not really known, but the industry is not complaining. Sure, there was a low base effect, but not enough to explain the 13% increase from a year ago in the beer industry’s growth.
United Breweries Ltd’s (UB’s) earnings release called this growth extraordinary. In the year-ago quarter, volumes had risen by 1%. In the first half of FY16, volumes fell by 1%. The December quarter marks a sharp deviation in trend. If it reverses in March, it will go down as an aberration.
The growth in industry volumes obviously benefited UB too, whose net sales rose by 15.1% over a year ago. A Kotak Institutional Equities note had estimated sales growth at 9% and Ebitda (earnings before interest, taxes, depreciation and amortization) growth at 19%. UB also benefited from soft input prices, with its material costs rising by only 10.2%. The company attributed this to product mix, that is, due to selling more of higher margin products.
UB’s Ebitda, therefore, rose by 50.8%, even after accounting for increases in expenses on salaries, promotions and other expenses. Its profit after tax rose by 80.6% over a year ago. The company’s results were announced post-market close on Tuesday. Since January, its share has declined by 14.9%. These results may help the share get back on its feet.
Investors will want to know what is driving the recovery in volumes and if it is sustainable. Fortunately for the company, the low base effect will continue all the way till mid-FY17. Even if the December quarter’s level of growth is not fully sustained, even if some part of this growth is repeated, it is better than a decline and should mean a healthy performance from UB in the near-to-medium term.
3 Feb. 2016