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.
Malaysia. Cheers to brewery stocks, shares rise on price increase
This was a result of the expiry of the Anti-Profiteering Act on June 30, where both brewers reported a price adjustment that resulted in a hike of 2% to 2.5% in average selling prices (ASPs).
Heineken Malaysia Bhd reported a higher increase in ASPs of 2.5% while Carlsberg Brewery Malaysia Bhd’s ASP increase was at a lower 2% quantum.
Carlsberg’s stock was up 14 sen at RM13.72 while Heineken was up 48 sen at RM16.68 yesterday.
CIMB Research noted that this was not a surprise given that both companies have not passed on any goods and services tax costs since the law’s implementation, while the recent 2% to 5% price hike was solely to account for the 10% to 12% hike in excise duty back in March.
Carlsberg currently holds an estimated 40% of Malaysia’s malt liquor market (MLM), with its range of beers including Carlsberg and Asahi.
Meanwhile, Heineken has the larger share in Malaysia with its products consistently holding a 60% share of the local market.
“In our view, a 2% to 3% increase is fair, as brewers have been absorbing additional cost from GST since April 2015.
“However, we opine that the net impact on earnings from the increase should be minimal in the short term but positive in the long term.
“In the near term, we expect MLM volumes to be to some extent negatively affected, as consumers may opt to reduce consumption from the price hike.
“However, MLM volumes are set to recover once consumers adapt to the higher prices, as we believe demand remains inelastic,” said CIMB Research.
CIMB Research said based on its channel checks, price increases varied for different products for both brewers.
It said the quantum of ASP increase was dependent on various factors including the amount of cost previously absorbed.
“On average, products with lower MLM volumes and lesser alcohol content have had lower increases in prices.
“In contrast, high-volume products recorded higher price increases, likely due to inelastic demand for its mainstream products, which have alcohol content of 5% and above,” said CIMB Research.
CIMB Research is of the view that this development is a long-term positive, as it expects MLM volumes to recover whilst consumers adapt to the higher prices.
Thus CIMB is raising financial year (FY) 2016 to FY18 earnings by 2.6% to 3.1% and 2.1% to 3.5% for Heineken and Carlsberg, respectively.
It is maintaining an “overweight” call on brewers and believes that earnings will continue to be driven by an inelastic demand for alcoholic drinks as well as internal efforts to increase operating efficiencies.
Its top pick for the sector remains Heineken for its diversified product portfolio as well as dominant market share in Malaysia.
It has a target price of RM16.60 for Heineken, and a “hold” call on Carlsberg with a target price of RM13.60.
7 Jul. 2016