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Baltika improved results in Q3

Company’s volume market share increased by 1.4%* in comparison with the similar period of 2015. Baltika’s shipments in Q3 went up by 16%. The quarter results positively influenced on company’s 9 months 2016 performance.

Russian beer market:

According to Baltika internal estimates, in Q3 2016 the Russian beer market slightly grew in comparison with Q3 2015. The company attributes it to warm weather conditions during summer months on the majority of the Russian territory. At the same time the Russian beer market declined by an estimated 1% over 9 months in comparison with the similar period last year. The beer market dynamics is still affected by regulatory restrictions established in beer industry and weak macroeconomic environment.

While the beer market was declining, according to the retail audit Nielsen Russia, over 9 months 2016 the non-alcoholic beer segment, where Baltika is leading, has grown by 14% compared to the same period last year. One of the growth drivers of the non-alcoholic beer category as a whole was advertising of the non-alcoholic brands. Such advertising is accomplished in accordance with the Federal law 38-FZ on advertising, as well as the Code of commercial communications on beer-based non-alcoholic products, developed by the Russian Beer Union in cooperation with the Federal Antimonopoly Service, with obligatory clear message that the advertised product is non-alcoholic.

Baltika’s overall performance:

The company’s shipments in Q3 2016 went up by 16%, over 9 months the indicator also demonstrated increase as opposed to the similar period last year.

As a result in Q3 2016 Baltika’s market share raised compared to Q2 and similar period last year reaching  35%*, 1.4% increase opposed to Q3 2015. Warm weather and sell-in of large-size PET bottles had positive impact. The major growth drivers were sales in the Modern Trade channel. In general, over 9 months 2016 the company’s market share is still slightly lower than that of the similar period last year.

Apart from that, in 9 months 2016 года Baltika increased its volume share in DIOT channel  by 5.8%* compared to the similar period last year.

Over 9 months 2016 Baltika’s total tax contribution amounted to almost 51 bn RUB (+8.8%  compared to the similar period last year). The company also paid around 36 bn RUB of excise duties (+ 15.5% compared to 9 months 2015).

Brands results:

Positive dynamics over 9 months 2016 was demonstrated by the brands Zhigulevskoye (+ 1.3 p.p.* share growth), Baltika 9, Carlsberg (+1.7 p.p.* share growth) and energy drink Flash Up. Baltika 0 – leader of the non-alcoholic beer segment continues increasing sales volume (the share in the non-alcoholic beer segment over 9 months 2016 amounted to 59.3%*).

In August the famous classic lager Baltika 3 was relaunched in new packaging with emphasis on fresh look and admired taste that stays unchanged since 1992 when its production started. Restyling of Baltika 3 packaging took place for the first time over the past 9 years.

Baltika stays focused on developing the key brands and supporting sport for the purpose of its development and formation of high culture of cheering for sports. With the support of the official sponsor of UEFA EURO 2016 brand Baltika 7 held a large-scale campaign that opened the Russian fans 7 different sides of the main event of the season. In addition, Baltika continues the partnership with the Russian Olympic Committee and was a partner of the "House of fans of the Russian Olympic team," in Rio de Janeiro, Baltika 0 activated federal advertising company in support of the Russian team "We can do everything!".

Export:

Q3 was successful for Baltika export as positive dynamics continues. During 9 months the growth of export sales volumes was more than 10% compared to the similar period last year. Sales in the far abroad countries went up by 9%, in Europe and Baltics – by 18%. Baltika purposefully develops export of brands from non-alcoholic portfolio. Sales of the energy drink Flash Up in the Central Asia contributed significantly. Today around 20% of the drink’s production volumes is exported. Sales of non-alcoholic beer in the Middle East raised by 32%. Special attention should be paid on the company’s success in Georgia where leading import positions were restored over 9 months 2016 and the share in the imported beer segment amounted to one third of sales volumes. The company also succeeded on the markets of New Zealand and Costa Rica where sales increased more than twice.

Jacek Pastuszka, president of Baltika Breweries LLC, executive vice president Carlsberg Group Eastern Europe Region:
«In Q3 our business built up its commercial power that had a positive impact on our results. In Q4 we will focus on getting our business maximum prepared for new conditions, in which we are to work in the coming year due to regulatory changes.  At the same time it is important to mention that the key factors for the sustainable development of business and regions where we operate are dialogue between corporate sector and government, fair and predictable regulatory and tax environment».

Financial results of the Carlsberg Group’s Eastern Europe region:

In Q3 2016 net revenue of Carlsberg Group in Eastern Europe grew organically by 16% (9 months: + 11%) driven by 5% price/mix (9 months 2016: + 7%), and 11% growth in total volumes (9 months 2016: + 4%).

Commenting on the Carlsberg Group results, Cees ‘t Hart, Chief Executive Officer at Carlsberg Group, says: «We’re satisfied with our Q3 results. Our value management approach, which targets the optimal balance between market share, gross margin and earnings, continues to progress well. In addition, our Eastern European business delivered a good set of results in the quarter, ahead of our expectations. Consequently, we upgrade our 2016 earnings expectations. We continue to see good momentum across the organisation in Funding the Journey and good progress in the operationalisation of the SAIL’22 priorities in our business plans for 2017 and future years».

*Source:  Nielsen Retail Audit, Urban & Rural Russia

***

Baltika Breweries, a part of the Carlsberg Group, is one of the largest FMCG producers in Russia. Since 1996, the company has been ranked Number One in the Russian beer market. Baltika owns 8 breweries in Russia and enjoys an expanded brand portfolio. The Company forms a significant part of the Carlsberg Group and its Eastern European region including Azerbaijan, Belarus, Kazakhstan, Ukraine and Uzbekistan. Baltika Breweries is a top exporter of Russian beer: Baltika’s reach includes over 75 countries; the company accounts for over 50% of all Russian beer exports. In 2015, Baltika's products became available in Romania, India and New Zealand. Its brands have won over 670 Russian and international professional and consumer awards.

9 Nov. 2016

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