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. Foreign bank to snap Mallya ties
Overseas banks have now started to tighten the screws on the beer baron who scurried out of India last month after a passel of local banks declared him a wilful defaulter and initiated court proceedings to recover over Rs 9,000 crore in unpaid loans.
The Royal Bank of Scotland (RBS) has now declared that it will stop offering banking services to Kingfisher Beer Europe Ltd (KBEL), the London-registered company that markets the eponymous beer that has a 36 per cent market share in India.
Kingfisher Beer Europe Ltd (KBEL) - a key operating company within the beleaguered baron's group - has its offices at Springfield House, Maidstone, Kent.
In a filing with the US securities regulator, Securities and Exchange Commission, earlier this week, Mendocino Brewing Co Inc said RBS had informed KBEL of its intention to terminate "all banking services" from May 31.
Mendocino is a Mallya-owned maker of specialty beers and malt beverages based in California and listed as "intermediate parent" of KBEL in the latter's filings with Companies House, UK's registrar of companies.
RBS wanted to terminate the relationship with KBEL from February 26 but has since extended the date twice.
KBEL's financial statement for the year ended December 31, 2014 - filed with Companies House in September last year - lists RBS as its only banker.
The RBS move could not have come at a worse time for Mallya. Last week, a two-member bench of the Supreme Court asked the tycoon's counsel to submit an affidavit by April 21 indicating when he intended to return to India and start a meaningful dialogue with a consortium of 17 local banks to clear their dues.
Last Saturday, Mallya also failed to appear before the Enforcement Directorate (ED) to respond to questions over an alleged money laundering investigation relating to a Rs 900-crore loan extended by IDBI - the third time he has ignored the ED's summons. The earlier summons had sought his appearance on March 18 and April 2.
RBS credit facility
KBEL had signed an agreement in April 2005 for a £1.75 million (roughly $2.8 million) revolving line of credit with an "an advance rate based on 80 per cent of KBEL's qualified accounts receivable".
The initial term of the credit line was for a one-year period. Either party could terminate the credit line with a six months' notice.
"The credit line carries an interest rate of 1.38 per cent above the RBS base rate and a service charge of 0.10 per cent of each invoice discounted," Mendocino's filing with the SEC said.
But on November 24, 2015, KBEL received a notice from RBS in which the bank said it intended to terminate the credit line on February 26 this year.
The amount outstanding on the credit line as of September 30, 2015 was £538,400 (approximately $813,900).
The Mendocino filing said KEBL was in talks with third parties to "find alternative financing to replace the credit line and other banking services presently provided by RBS".
KBEL's immediate parent is United Breweries International (UK) Ltd which, in turn, is owned by Mendocino. Mallya retains control over these overseas units and, through them, parts of his overseas empire which is tightly controlled through a network of shell companies registered in well-known tax havens.
Documents reveal that KBEL has been granted an exclusive licence by United Breweries Ltd of India that confers "rights to brew, market, develop and sell Kingfisher Lager in the United Kingdom".
This pact and secondary agreements with United Breweries International (UK) Ltd are due to expire in October 2018.
The company has in turn granted a sub-licence for brewing Kingfisher beer in London. "In October 2013, the holder of the brewing sub-licence changed from Shepherd Neame Ltd to Heineken UK."
In October 2013, Heineken UK provided KBEL with a secured term loan facility of £1 million to be repaid in 12 equal quarterly instalments starting January 2014 along with interest at the rate of 5 per cent above the Bank of England base rate. The principal outstanding at the end of September 2015 was £416,700.
For the year ended December 31, 2014, KBEL reported a turnover of £13.46 million, which is "principally derived from the sale of Kingfisher beer", the company said in its financial statement.
UK sales of beer accounted for £11.92 million, over 88 per cent of KBEL's turnover. The company earned an operating profit of £645,681. It had a net debt of £1.23 million.
The financials of Mendocino Brewing, United Breweries International (UK) Ltd and KBEL are consolidated in United Breweries Holdings Ltd - the BSE-listed company that controls Mallya's diverse interests. UB Holdings has a 68.1 per cent ownership interest in all three companies.
11 Apr. 2016