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
More than 300 mln liters of beer are imported to Russia. This beer import forms a market of $1 bln and yields more than $180 mln revenue to its producers. Besides we can see the import beer market as 200 enterprises presented by 400 brands. The beer import includes two major and dissimilar segments. Beer import from near abroad, mainly «Obolon» and «Krinitsa» contributes to the market by volume and a variety of brands from far abroad form the main part of market by value. Today the sales structure is experiencing an increase of expensive European beer segment; the range of such beer is expanding and brands with modest sales volume are growing dynamically. Besides, unlike Russian market as a whole, about 40% of beer from far abroad is realized in HoReCa and only 60% is presented by traditional lagers.
Russia as the world importer of beer
The development of beer import in Russia
Regulation of beer import in Russia
Import beer consumers
The structure of import beer market
Main countries — beer importer
Beer from near-abroad countries
Beer from Ukraine
Beer from Belarus
Beer from the European Union
Beer from Czech Republic
Beer from Germany
Beer from Belgium
Beer from Finland
Beer from UK
Guinness and Grolsch
Beer from Asian countries
170 leading import brands: producer, main traders, volumes
According to the data of FAO UN for the year 2010, Russia ranks the sevenths on weight basis among beer-importing countries. The United States continue to keep the absolute leadership, as this country imports many times more beer than Russia (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. In estimating the import volume in money terms, Russia is on the ninth place, yielding to Ireland and Australia along with the above mentioned countries.
The volume 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 license. According to the customs statistics data granted by IA «Kominfo», the total amount of far-abroad enterprises, which supplied beer to Russian market in 2010-2011, comprised 190 (whereas along with nearabroad enterprises the number constituted 208). At that, Russian market includes 369 import far-abroad brands and about 50 near-abroad brands many of which include several sorts*.
* In certain cases the division into brands and sorts was indistinct.
It follows from FAO UN statistics that in 2010 the decrease in beer import volume in physical terms persisted due to the reduction in supply from neighboring Ukraine. Nevertheless, the supply in money terms remained at about the prior level on the account of an increase in import from the European Union. Thus, the structure of Russian beer import began to change in favor of more expensive products.
The development of beer import in Russia
Russian market of import 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 4.5 mln dal of beer which corresponded only to 1.5% of the market. Besides, import beer remained unobtainable for the large 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 brand 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 second- ary 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 re- sulted 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 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 improvement. By that time many beer consumers developed the idea that beer produced under license ranks 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 farabroad 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).
The official results of the first five months of 2011 show the stabilization of import volume dynamics on the whole, there was observed a 2% growth. However, importation structure continues to change. Ukrainian beer sales pass from a decline to stabilization (-2%), and the sales of beer from farabroad countries keep growing quickly (+17%). But the data mentioned here do not include the volume of import from Belarus (see the detailed evaluation below).
It is necessary to note that an increase in import supply of expensive European beer can be to some extent related to Nielsen market audit data * according to which in the second quarter of 2011 there was an increase in the super premium segment, where licensed brands take dominant positions. However, during all year 2010 the share of super premium segment stayed unchangeable. Against the background of a slight decline in Russian beer market and due to the dynamic growth of expensive import volume it is possible to suggest that far-abroad brands began to exert pressure on licensed brands.
* Presentation of Carlsberg Group with the first half of 2011 report.
The reduction and further stabilization of inexpensive Ukrainian beer is explained by the improvement of competition in mainstream segment.
As history shows, further import beer market development will be in the first place determined by the factors mentioned above: purchasing power of the population, rouble rate and the activity of trade importing companies. All these factors come to the economic resilience of Russia. At that, reinforcement of state regulation on the beer market on the whole, to our mind, will not produce a great effect on import far-abroad beer sales.
In particular, the two most important innovations, transitory provision about the prohibition to sell beer more than 5% proof in stalls and absolute prohibition to sell beer in stalls from 2013 had little effect on the import segment as foreign brands are mainly represented in supermarkets and HoReCa.
The stiffening of advertising legislation, up to the total ban on beer advertisement in key media, will also influence the brands produced, in the first place, in Russia, including licensed beer, which is the main competitor of import product, as extremely heavy television advertising will not be anymore focusing the attention of consumers on them.
Beer flavor profile, source of production and package will play 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 and a possible transition of import brands to the category of licensed ones;
— promotion of private trade marks by independent importers;
— diversification of import beer for the account of sorts which are still little known to Russian consumers;
— government regulation of beer import in Russia.
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.
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 it, estimating it as infringing merchandise.
The territorial principle does not meet views of the Federal Antimonopoly Service and some independent importers who take part in numerous but totally ineffective legal claims. Federal Antimonopoly Service elaborated liberalization of parallel imports proposal, but Russian Federation government takes its time to accept a decision, the final review of all proposals is postponed till spring 2012. Experts link these terms to the completion of negotiations concerning the entry of Russia to the WTO, because if the territorial principle is rejected, the negotiation process can be blocked by large foreign manufacturers associations.
Nevertheless, experts state that trade legislation liberalization is highly probable and sooner or later parallel imports will be permitted. This can lead 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.
To our opinion, the increase in far-abroad beer sales is associated with the formation of several types of consumption, which, though, are not in contradiction to each other and can overlap.
The predominant type of consumption is conditioned by a relatively extensive distribution and historical image of large import brands. Apart from flavour profile their image is created by the price (it is higher than that of the licensed brands manufactured in Russia), long-term availability in retail and HoReCa, and also advertising campaigns, basically BTL, conducted occasionally by importers. It is worthy of note that large brands in their turn belong to the largest importers who can manage logistics and establish adequate communication with consumers. Summing up, we can say that the first model of consumption is TOP-10 import brands and consumers who are guided by the product image.
However, until now, import beer market was getting more and more fragmented. If in 2008 TOP-10 brands accounted for ...% of sales, then in 2010 the number was as low as ...% and from January till May 2011 it comprised ...%. It is getting more difficult for an unsophisticated consumer to wade through the great variety of sorts, shelved in supermarkets.
That is why it is possible to mention an increase in significance of the second type of consumption. It is targeted at the inquiring consumers who «collect» beer flavour and are ready to share their impressions with others. They often get to know the brand through the word of mouth advertisement and internet. Besides wide brand distribution, as well as its advertising, pale into insignificance for a sophisticated consumer.
One more group of import product purchasers is formed by a small number of people, who visited European Union countries, tasted local sorts of beer and got much of an impression of it, choosing the brands they have taken fancy to also in Russia.
The structure of import beer market
Depending on the base values one can suggest that there is a decline or, on the contrary, there is a slight growth of import beer market following the results of the previous year. In particular, in accordance with official statistics data, Russia imported ... tons of beer in 2010 which is by ...% or ... thousand tons less than in 2009. However, the foreign supply remained practically at the same level by value and comprised $... mln (...% or $... mln).
To estimate import volumes more adequately, we should take into account that gross beer weight and capacity in litres diverge significantly. Thus, in accordance with customs statistics data, ... mln of litres of beer was imported to Russia, which is by ...% less than the level of 2009.
Besides, when estimating import volume, we will take into account that official statistics do not include the supply of beer from Belarus owing to the transparent border between these two countries. That is why in our estimation we will apply foreign trade statistics of FAO UN, that is the third party data. According to FAO UN reports, ... mln litres of beer were imported to Russia from Belarus over 2010 (growth ...%).
Therefore, we can calculate that total volume of import beer supply in 2010 comprised about ... mln litres, having decreased due to the dynamically growing import from Belarus not by ...%, but ...%. Hence we can cite our estimation, based on the adjusted trade balance data: in 2010 import share on Russian market practically did not change, having comprised ...% by volume.
As noted above, in terms of retail price and geographical arrangement, import beer market can be distinctly divided into two segments. Mainstream and economy segments is occupied by beer from near-abroad countries, namely Ukraine and Belarus, 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.
As for volume in physical terms, Ukrainian and Belorussian beer by all means dominates on the import market with the share of ...%. These two countries in 2010 accounted for ... mln litres of beer and far-abroad countries accounted for ... mln litres.
Import beer market value estimation in monetary terms can vary significantly. If we take Federal Service of State Statistics data concerning the average retail price of import beer (about ... roubles/l in 2010) as estimation base, then, with the above mentioned import volume in physical terms, its volume in money terms will comprise ... billion roubles ($... mln) and its share in total volume of beer sales in Russia will comprise ...%.
But for correct estimation we will also divide the market into the segments of draft beer and beer in different package types, since consumption conditions, distribution and price vary significantly in them.
Far-abroad beer supply distribution shows considerable weight of draft beer: ...% or ... mln litres. That is why it is possible to suggest that import brands, as opposed to products manufactured in Russia, are more commonly consumed in bars or restaurants *.
* The data concerning draft and packed beer sales should not be entirely associated with on-trade and off-trade segments, as bars and restaurants segments do not deal only with draft beer but also with packed beer and specialized retail units sell import draft beer. That is why we can cite only rough estimate.
IA «Kominfo» data show that packed far-abroad beer market size comprised ... mln litres or ...% of the total import following the results of 2010. At that, beer in glass bottles accounts for ...% of import beer sales and beer in cans, therefore, accounts for ...%.
On the basis of physical volume we can cite packed beer market estimation in money terms, having applied the price of 40 top-selling 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 ... billion roubles (about $... mln) in 2010.
If we assume that the cost of import draft beer in HoReCa facilities exceeds the retail price (... roubles/l) on the average by ... times and beer sales volume in HoReCa amounts to the above mentioned ... mln litres, then we can calculate that draft far-abroad beer total sales comprise about ... billion ($... mln)
According to the data of customs statistics, it is possible to suggest that beer from near-abroad countries is practically completely supplied in package (draft 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 will comprise ...%.
Two main price (and geographic) segments are comparable by money weight, however economical efficiency in them vary greatly. Ukrainian and Belorussian enterprises on the average took $... for 1 litre of beer imported to Russia, while manufacturers frm far-abroad countries on the average received $... for one litre sold. With that, joint revenue of distributors and retail trade by litres sold is approximately fivefold higher when selling beer from far-abroad countries.
By FAO UN assessment, in 2010 beer manufacturers from Ukraine and Belarus earned $... mln by importing beer to Russia, $... mln of which accounted for Ukraine and $... for Belarus.
At the same time, far-abroad manufacturers, according to customs statistics, earned $... mln. Czech breweries made $... mln, German enterprises made $... mln and other countries, correspondingly, made $... mln by importing beer to Russia.
Consolidation of import supply in two main segments differ significantly. Thus, ...% of importation from near-abroad countries is provided by two national independent companies, Obolon and Krinitsa. At the same time, the supply from far-abroad countries is very fragmented, as half of its volume is divided between eight leading manufacturers. Both in the first and in the latter cases there is a gradual increase in the weight of the companies, which deliver small volume of beer to Russian market.
Ukraine remains an absolute leader among importing countries and Obolon brand was and still is an unchallenged leader among import beer. It accounts for ... of the total foreign supply volume in physical terms. Correspondingly, Obolon beer forms the basis of importation not only from nearabroad countries but also of the importation on the whole. This brand overshadows all other trademarks, perhaps except for beer Krinitsa which also goes behind the leader. As a rule, the research companies don’t consider Obolon and Krinitsa brands to be import on account of its geographical location, broad distribution and low retail price.
The Czech Republic keeps its leadership among importing far-abroad countries. However, today Germany also makes a claim for the first position, especially, taking into account the supply volume of German breweries in money terms. Other countries fall notably behind the leading dyad, accounting for about ...% of import supply as a whole.
Summarizing the results of 2010 the TOP-10 of far-abroad import brands includes the sorts from seven countries. An absolute leader, standing out of them is Krusovice, with the share of ...% (estimating the market share on the basis of import supply volume). Dynamically growing Budweiser Budvar is noticeably ahead of other brands, with the share of ...% in 2010. These two Czech trademarks are the most distinguishable. One more Czech brand, manufactured specifically for Russia is beer Prazacka, ranks the seventh in the list of leaders. Nevertheless, it does not yet imply that large Czech brands prevail on the market.
Germany is represented by such brands as Paulaner and Spaten (3th and 4th positions in TOP-10), each accounting for ...% of the market. The fifth position of our chart is occupied by Finnish beer Lapin Kulta with the market share of ...% and sixth position belongs to Japanese beer Asahi Super Dry. From the eighth to tenth place we can see such brands as Hoegaarden from Belgium, Guinness from Ireland and Corona Extra from Mexico.
Note that in 2011 supply volumes of brands Hoegaarden and Corona Extra decreased abruptly, which are imported exclusively by the leaders of beer market in Russia. The reason for the reduction in imports of Corona Extra, can be as yet attributed to the periodicity with which Baltika purchases this brand. The positions of these two sorts in TOP-10 chart of brands imported to Russia were occupied by Cernovar from the Czech Republic and Grolsch from Holland.
The composition of beer manufacturers and their market weight do not quite correspond to the distribution of leading brands shares, as some brewing companies supply several beer brands to Russian market.
So, the leading positions in the list of manufacturers are occupied by Czech company Heineken Ceska Republika A.S., which bottles beer Krusovice and the company Budweiser Budvar N.C. with the homonymous brand. But the two following manufacturers are not represented by single but by several famous trademarks. Thus, the third place with the share of ...% belongs to German company Spaten-Franziskaner-Brau Gmbh., which imports two name brands to Russia. Budejovicky Mestansky Pivovar A.S. is represented by three main brands: Prazacka, Cernovar and Budweis Bohemia, which secure the company’s ...% share of the market. Paulaner Brauerei Gmbh is represented by only one name brand, which determines its fifth position in the list of leading manufacturers.
The list of leaders will also change if it is estimated separately by draft and packed segments. In 2010 six brands, such as Krusovice (...%), Hoegaarden (...%), Guinness (...%), Spaten (...%), Budweiser Budvar (...%) and Paulaner (...%) accounted for more than half of draft beer supply from far-abroad countries. As is obvious, the consolidation here is noticeably higher than on the import market as a whole.
It should be noted that practically total amount of import draft beer is supplied in reusable metallic kegs, although in 2010 about ...% of draft beer from different European countries was supplied in non-returnable modern containers. It is possible to suggest that a significant part of reusable second hand kegs is sold on the domestic market.
In 2010 Krusovice occupied the share of ...% on the market of packed beer, that is, less than in the draft beer segment and on the market on the whole. On the other hand, the share of the next brands is noticeably higher than in the draft beer segment. In particular, Budweiser Budvar accounts for ...% of the packed import beer market, Paulaner accounts for ...%, and the share of Asahi Super Dry and Lapin Kulta each account for ...% of the market. Import Velkopopovicky Kozel also appeared in the TOP-10 of packed beer brands with the share of ...% (and showed a trend towards its enlargement) Karjala and Tzingtao.
In the total import far-abroad beer volume the share of lager sorts comprises ...%. Dark beer accounts for ...%, wheat beer has the share of ...%, and semidark, special and non-filtered barley beer in total account for about ...% of import (the type of ...% of sorts could not be specified). It should be noted here that the share of lager beer in the structure of Russian manufacture comprises ...%. On the one hand, this difference indicates the variety of consumer preference for import beer, on the other hand it suggests that when buying foreign brands the consumer quite frequently wants to receive not only a high-quality product but also beer with an unusual taste.
In the structure of import from near-abroad countries lager sorts accounts for ...% of the identified sorts from the total volume. Non-filtered barley beer takes about ...% of the supply.
Among all beer importers Obolon can be proud of the deepest historical roots in Russia (see «Journal.Beer» 2-2006). The enterprise has always been aimed at the manufacture of products meant not only for local consumer. Its international mission is emphasized by Kyiv brewery №3 establishment date, which was associated with 1980 Olympic Games in Moscow and the first export delivery of Soviet brand Zhiguli to Great Britain. As opposed to other large Ukrainian manufacturers, Obolon still manages to retain its independency.
In the beginning of 90s Ukrainian beer had certain demand in Russia, as being product with satisfactory quality, it was lower in cost than the local one. But in 1996 Russia introduced minimum duty of $0.45 for 1 litre. This measure and the subsequent default resulted in a steady decline in official Ukrainian beer import, which has persisted for 4 years.
Economic depression of 1998 made import from Europe unprofitable but the supply of Ukrainian beer decreased only on the pages of government statistics reports. Wholesale dealers purchased beer on their own and sold it in Russia, doing their best. In 2000 the official beer supply from the Commonwealth of Independent States became profitable again. The dynamic growth of beer import within this year was achieved owing to Ukraine, which accounted for almost 60% of the total foreign supply. By 2000 an active Obolon expansion to Russia enabled the company to tap about 0.7% of the market (according to our estimation). Russian brewers, alarmed by an abrupt import increase, obtained the introduction of value-added tax on Ukrainian beer, which became 30% more expensive. But the rate corrections could not any longer influence the supplies, carried out by well-established sales directions. In 2000-2004 the distributors were ready to receive bigger beer volume than the company could offer.
In 2004 Obolon had problems with Russian customs, which blocked the supply for several months. The reason was customs authorities inspection of Russian company Lider, which accounted for more than half of Obolon supplies to Russia. However, even this fact did not prevent the company from enhancing its positions by the year-end. By 2006 Obolon Russian market share reached its maximum value i.e. 2%, according to our estimation.
Since 2007 the company supply volume has stabilized at about the level of 200 mln liters and the market share slightly decreased against the background of the leading growth of Russian manufacture. In 2009 the economic depression and sales decline on the domestic market encouraged the company to raise export supply volume, and again Obolon share reached 2% against the background of slight increase in physical volume and a fall in Russian beer market. However, excise tax growth and abrupt competition improvement in mainstream segment resulted in the reduction of sales in Russia by about 15%. Following the results of 2010 Obolon share on Russian market comprises 1.9%.
Obolon positions are unique in every respect, analysts even don’t consider Ukrainian beer to be import one. To our opinion, the main reasons for Obolon success are the historical reputation of the brand and its alternative image, although the company didn’t spend much on publicity in Russia. The reasons for the brand popularity also become clear if we match the market shares by volume and value. We can notice that high indices of import volume growth are associated with the retention of low retail price.
After all, the brand steady development can be explained by relative freedom of distributors in market policy, considering that the leading transnational companies, represented on Russian market, put their trading partners in rather tough conditions by reducing their margin and leaving them only logistic functions.
Obolon products in Russia are represented by the following three trading companies: Lider, ... and .... The main volume of supply is provided by Lider, which began to work with Ukrainian beer as far back as in 1994. In 2010 Lider share in the structure of Obolon import to Russia reached ...%.
Tula trading company ... has also been selling Obolon products for a long time, dealing with wholesale beer supply and non-alcoholic beverages in retail. Transport and trade company ... accounts for ...% of the total Obolon import volume in Russia.
Trading company ... provides Obolon with about ...% of Russian sales, although it doesn’t import only its products. ... is keen to represent the wide range of Ukrainian and Belorussian beer to Russian consumers. However, for the time being Obolon accounts for more than ...% of Ukrainian beer purchases.
The last few years showed an interesting trend towards the increase in beer import, manufactured by transnational companies.
In the first place we should note the dynamic increase in the import of beer, produced by Ukrainian subdivision of AB InBev. Russian consumers went for ... brand, especially its non-filtered sorts (... and ...), which account for almost half of AB InBev import. It is particularly remarkable that in 2011 Russian subdivision of AB InBev started to purchase significant volumes of ... in PET. The largest importer of AB InBev products is ... .
The growth of Ukrainian import by Carlsberg Group in 2010 (as well as its subsequent reduction) is also associated with the fact that the products, manufactured by Slavutich enterprise, Carlsberg Group were purchased not only by trading companies but also by Tula branch of Baltika. In 2010 Ukrainian subdivision sent a large batch of ... beer in PET to the Russian branch. In passing, ... brand sales on Ukrainian market were quickly decreasing at that time. In 2011, when the company began its active actions to restore the brand power on Ukrainian market, the supply to Russian subdivision discontinued. The company products were purchased only by independent commercial establishments.
Beer from Belarus
Russia is the main trading partner of Belarus and the main consumer of Belorussian beer. Trading and customs boundaries between these two allied states are absent, that is why Belorussian beer import development is, on the one hand, conditioned by market trends and, on the other hand, by export activity of brewing companies, which has been encouraged by the state over the period of recent years.
Due to customs control absence Belorussian beer import is not registered by foreign-economic activity statistics. Belorussian party publishes only the data concerning beer export on the whole (... mln litres in 2009 and ... mln litres in 2010), without specifying Russian direction. However, in our estimation we can rest on FAO UN data, which reflect beer supply statistics from 1998 till 2010 quite close to the official numbers.
According to FAO UN, Belarus was the main supplier of import beer to Russia, at least during the period from 1998 till 2000. However, official supply volume was not so large to make Russian consumers remember Belorussian beer. All the more so, with Russian production growth and domestic brands development the import began to decline at a high rate, by 2007 Belorussian beer almost disappeared from the market. One of the main reasons is the decrease in Belorussian beer quality. Besides, Belorussian brewers concentrated on satisfying the quickly growing demand on the domestic market.
Import growth in 2008 was determined by the fact that Belorussian government was searching for the source to reinforce its foreign exchange reserves, which in command economy conditions meant the development of export scheduling for each enterprise. By that time the majority of large brewing companies became part of transnational companies, who did not see any perspectives of the national brands on foreign markets. However, the largest brewing joint stock company Krinitsa remained under control of government, and that was the company to provide the motive power for Belorussian export.
As a rule, the price of Krinitsa beer on Russian market belongs to the lower margin of mainstream segment. This segment includes many brands of large and middle manu facturers, but Belorussian food products in Russia are considered to be healthier than the domestic ones, and obviously the same applies to Belorussian beer. This, and also the desire to diversify the product range occasionally, can stimulate the inexpensive products consumers to buy Krinitsa beer.
Growing export schedules speeded up Krinitsa activities in building its business on Russian market. By summer 2010 the company set up its own logistics and trading branch KrinitsaBelTrade in Smolensk, which now establishes the price of the company products. Having set up its branch Krinitsa raised the factory price and refused to enter into direct contracts for its products supply. This resulted in complications in the work with some distributors but, judging by the growing sales dynamics, it did not prevent the operating efficiency from growing.
While at the initial stage of expansion to Russian market Krinitsa accounted for almost total volume of sales, by 2010 it accounted for about ...% of Belorussian export. Other two enterprises have noticeably reinforced Russian direction. State ownership company ..., despite relatively small manufacturing rate, increased its share in export up to about ...%. It is also quite logical that the share of ..., which is a part of ..., increased up to about ...%. Since ...i does not have its own production on Russian market, Belorussian enterprise routes its production there (along with Finnish one).
Belorussian monetary crisis of 2011 can also become an additional beer import power force. Today export is the only reliable source of currecny reserves replenishment for Belorussian enterprises and the pressure exerted on manufacturers by the government has increased. It is also not improbable that the number of large exporters can increase at the expense of transnational companies, Carlsberg and Heineken, which would like to convert their profit to hard currency. Thereupon, one would expect factory price reduction and diversification of Belorussian beer on Russian market.
In 2010-2011 Czech beer assortment range in Russia was represented by ... brands. Besides, the segment of import from the Czech Republic is quite consolidated, five leading brands account for about ...% of the supply.
The central place in the segment 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 these are a new Russian distributor, growing business competition and deconsolidation on import beer market.
The factors for the change of official importer arose as early as in 2007 when German company Radeberger Gruppe sold Krusovice to Brewery Heineken N.V. However, the official letter from the executive management of Krusovice brewery to Russian Tradition reads as follows: «Since our main objective is to guarantee the stability of your business and to prevent possible rumors, notice is hereby given that, within 2-3 years as from now our company is not going to recall any distributor rights of your company».
Having been assured by the manufacturer, Russian Tradition continued the active promotion of the brand on the market and protected it from parallel supply on the basis of exclusive importer rights.
By 2009, according to the survey of OMI (Online Market Intelligence), Krusovice got the sixth place in the «Favorite brands in Russia» list under the notion «beer» with the share of ...%. In the same year the brand market share in far-abroad import reached the maximum value of ...%. However, consolidation of the position determined only a slower decrease in the brand sales than in the market on the whole. According to the data of the company itself, in 2009 the sales in Russia and Ukraine fell to a greater extent than on any other export markets.
In 2010 Krusovice moved to the ... place in the opinion poll of OMI, appearing in the company of such well-known brands as Sibirskaya Korona and Heineken, having upon that retained the share of ...% in the consumer preference distribution. At the same time, following the results of 2010 the brand market share fell to ...%, and in 2011 it continued to decline having reached ...% over the period from January till May.
At the end of 2010 Heineken on the habitual global basis performed Krusovice brand restyling on every export market, including Russia. The changes were made to the bottle shape, and also to the label and bottleneck foil design as well as to the can design. The company members believe that a new approach to the product visual representation will make Krusovice more colourful and recognizable on the shelves in the shops and reflect the character of Czech beer.
The main explanation for the negative dynamics of Krusovice market share is quite simple. in December 2010 the term of the contract, in accordance with which «Russian Tradition» was one of its exclusive distributors on the territory of Russia, ran off. Heineken did not prolong the agreement with the independent and ambitious company and delegated the rights of the brand supply to distributors of their own Russian subdivision. As a rule, brands do not get through the process of distributor change without consequences, all the more so, in this case, the matter in question is not just a change of logistics partner, but absolute delegation of control.
According to the latest official letter of the Federal Customs Service (dated July, 26 2011), only two companies, ... and ..., received the authority to import and distribute Krusovice on the territory of Russia.
In particular, the right for draft beer supply to HoReCa was transferred to the company ... which is a part of the group of companies ... (one of the largest Russian distributors of FMCG) and which, along with Russian Tradition, has been dealing with Krusovice supply for a long time, although to a lesser extent. Krusovice in cans and glass bottles is attended by another Heineken distributor, the company ... .
Let us remark here that in 2011 packed Krusovice sales did not show any recession. But draft beer sales reduced significantly (about twofold), if in 2010 draft beer accounted for ...% in supply structure, then from January till May 2011 it accounted for as little as ...%. But if we consider import Czech beer segment separately, we will see that the brand share has reduced from ... to ...%.
By all means, it is quite easy for the distributors of such a large company as Heineken to introduce a famous brand to the product range and to put it on the shelves of retail chains which predominantly sell packed import beer. Restyling, which was performed by the company could also give a boost to sales. However, the established relations with suppliers play a major role in HoReCa establishments and to our opinion, Krusovice, for instance, could partially be replaced by other sorts of the group of companies Russian Tradition.
Krusovice supply recession did not result in a decrease in the share of beer import from the Czech Republic, the sales redistributed in favor of other brands, including the range of second-class trademarks which hold relatively small market share. But in the first place, the leadership of Krusovice was won by its chief competitor, Budweiser Budvar
The brand of «Czech flag colors» is produced on state ownership enterprise Budweiser Budvar N.C. Its sales share in import far-abroad beer segment was gradually growing from 2008 and in the period from January to May 2011 it comprised ...%, that is, twofold less than the share of Krusovice. However, Russian consumer has been familiarized with Budvar for a long time and many people associate the image of Czech beer precisely with this brand. In Czech import beer segment the share of Budweiser Budvar comprises ...%.
In the middle 1990s the national Czech brand was in different periods of time imported by many trade companies. But in the early 2000’s the leadership among the suppliers of Budweiser Budvar to the 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 organized around Moscow Brewing Company (MBC), which received the right for exclusive distribution of the brand. Budweiser Budvar accounts for more than half of MBC sales in import beer segment.
Budweiser Budvar can be easily found in retail sales network. But in HoReCa segment it does not achieve such a dominant position, as Russian supply of the brand in kegs accounts for about one third of their total volume.
After the termination of Krusovice contract, Russian Tradition still had two own brands of Czech origin in its portfolio, Prazacka and Cernovar. The launching of these brands took place as far back as in 2005.
The fast growth of Prazacka market share continued till 2009 due to comprehensive distribution, low price, particularly attractive package and active promotion campaigns, performed by Russian Tradition. However, as early as in 2010 there was some reduction and stabilization of the market share at about the level of ...% in far-abroad import segment or at the level of ...% in Czech import beer segment.
Cernovar market share is growing quickly. According to the results of 2010 it comprised ...% in the far-abroad import segment or ...% among the brands, produced in the Czech Republic. Podkovane pivo (as they write in promotional materials) is notable for its classical design which emphasizes the brand origin and states its difference from other licensed or imported sorts of Czech origin. The advertising support of Cernovar is not as prominent as that of Prazacka, which explains its smaller market share and greater potential for its growth.
The bottling of Prazacka and Cernovar at various times was carried out by three Czech enterprises. As early as in 2010 the last batches of this beer, manufactured by a small enterprise Pivovar Platan were imported to Russia. This brewery was the first Czech partner of Russian Tradition, which contributed to the manufacturing of its private brands. But 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.
According to press reports, at the time of its purchase this well-equipped enterprise was not in its best financial condition due to the decrease in the manufacturing rate. The brewery was operating on ...% of power, having manufactured ... mln dal of beer in 2010. It is therefore supposed that the enterprise purchase could be a profitable investment for new Russian proprietors (former proprietors also were Russian citizens). ... mln krones (more than $... mln) were invested to the enterprise after the purchase. It is expected that in years to come Tradicni Pivovar v Rakovniku will manufacture not less than ... mln dal of beer a year.
Due to the fact that for the time being beer Prazacka is going to be sold also on the Czech market, its name was slightly corrected. Name Prazecka, adapted to Russian consumers was changed to the correct one, Prazacka («A female citizen of Prague»). The first import batches of the «corrected » beer were sent to Russia in March 2011.
Changes made to the design were also aimed at the support of the brand sales. The package renewal was obviously carried out due to the new packing equipment at Tradicni Pivovar v Rakovniku. In particular, Prazacka obtained more premium appearance by means of transition to metal foil and glass bottle label. At the end of 2011 it is expected that the brand image in HoReCa will be renewed on the account of new POS-materials.
It is quite logical that in 2011 the importation of worldfamous brand with a long history, beer Bakalar, manufactured by Tradicni Pivovar v Rakovniku increased practically from the scratch up to notable volume. At the end of April Russian Tradition declared the start of this brand deliveries to Russian regions, at that its recommended price at the first stage of market entrance is relatively low, ...-... roubles for a half litre bottle. As yet, Bakalar is only gaining market weight but with time it can come to the front in the portfolio of Russian Tradition.
Despite the presence of licensed analogue, Velkopopovicky Kozel has been showing a gradual increase in the sales from 2010. From January till May 2011 this brand share increased up to ...% in import far-abroad beer segment (or up to ...% in Czech beer segment). The positive dynamics was reached due to the efforts of the key distributor, the company Interportfolio (the main partner of importing company Pivtrans). The company, as well as larger business rivals has its own distribution system in Moscow and Russian regions and is well in with federal retail networks.
However, the increase in Velkopopovicky Kozel sales can be considered a recovery after the profound decline during the economic recession, if it is remembered that in 2008 this brand was the fifth one in import far-abroad beer segment with the market share of ...%.
The reduction in Velkopopovicky Kozel share was worsened by the fact that during some time (before being included in Interportfolio profile) the brand was not supplied to Russia at all. Trade company started to invest funds to Velkopopovicky Kozel distribution over again, this time after its import analogue practically ceased to exist on the market.
So far as we are aware, today Plzensky Prazdroj and Interportfolio are under the exclusive contracts for distribution of such brands as Velkopopovicky Kozel, Gambrinus and Pilsner Urquell. Moreover, Interportfolio completed an agreement with Budejovicky Mestansky Pivovar for the supply of Busweis Bohemia and Samson. This contract can be of particular importance for Czech manufacturers in connection with the growing independency of the main trading partner, Russian Tradition.
Therefore, today Gambrinus and Budweis Bohemia are sold by Interportfolio practically in its entirety. The increase in Gambrinus sales seems quite logical, considering that this beer is the leader on Czech market and must be well-known, at least, to tourists and beer-lovers. Budweis Bohemia by all means attracts the mass consumer by its relatively low price and beer connoisseurs by the membership in constantly conflicting among each other family of brands with the prefix Bud. Interportfolio is probably going to show dynamic activities in the promotion of this brand.
In 2011 the sales of Karlovec and Klaster increased abruptly. Despite a relatively small share in the total import volume, together these brands exerted noticeable influence on redistribution of import Czech beer market share. Karlovec beer is imported exclusively by ... (...). Klaster beer is imported by ... (...). To the best of our knowledge, these brands (as Prazecka and Cernovar) are predominantly manufactured for Russian trading partners, and obviously, they have the rights of the trademark. As is evident, the development of proprietory import brands and contract bottling has become somewhat characteristic of distributors, who want to protect their investments in brands.
In the structure of Czech beer import by sorts, as opposed to Russian beer market as a whole, dark beer segment is quite well-developed, as it accounts for about ...% of supply. On the other hand, lager sort resumes a dominant position in the segment of Czech beer with the share of ...%, in contrast to import from other far-abroad countries.
Czech import distribution by package is typical for beer import as a whole, kegs account for the best part of supply. However, due to the fall in draft Krusovice supply, glass bottles tended to be dominating in the structure of Czech import over the period from January till May 2011 and now it accounts for half of sales.
Beer from Germany
At the beginning of 90s German beer won its way into the hearts of Russian consumers. The new middle class consumers liked it so much that by the end of 90s German beer became the basis of official import, which by that time occupied a large market share. It is worthwhile to say that according to FAO UN data, in 2010 the volume of beer import in physical terms is fivefold less than the indices of 1996 and the cost of supply in money terms is less by ...%.
Soon, economic hardship and Russian brands development, especially that of licensed ones, resulted in German beer virtually leaving the market for a quite long period, from 1999 till 2004. But then, according to the trends, described in the reviewing part of the article, German brands started another expansion to Russian market, which was temporarily stopped by economic recession of 2008. However, today import from Germany is on the upgrade again, providing about one fourth part of far-abroad beer supply.
When analyzing the current structure of German beer sales, it is necessary to mention that in the middle 90s the basis of import in Russia was made up by extremely popular Holsten, which, by the way, was one of the first licensed brands. The other brands, supplied to the market, paled into insignificance when compared to the leader and, probably, fell to oblivion for the majority of consumers. That is why it is possible to note that the current German import beer segment was created practically from scratch, the active stage of its formation fell within 2004-2006 and current leading brands structure is conditioned by the export activity of certain manufacturers and by Russian distributors choice.
Diversity of sorts and German beer market fragmentation were also reflected in the structure of Russian sales. In 2010 six leading brands (Paulaner, Spaten, Erdinger, Franziskaner, Krombacher, Liebenweiss) accounted for almost ... of German beer supply to Russia. This is the main difference between German and Czech beer, where two leading brands (Krusovice and Budweiser Budvar) account for ... of sales. But, as in case with Czech beer, all the brands mentioned above are included in the portfolio of two leading distributors, the group of companies Russian Tradition and MBC.
The group of companies Russian Tradition remains to be the leading supplier of German beer to Russian market, its share in German import beer segment being ...%, by the results of 2010. At that, the largest in Russia German import brand, wheat beer Paulaner accounts for the main sales volume of the company (...%). Its leading positions were a logical development of Russian Tradition exclusive relation with one of the world’s largest export oriented companies, Paulaner Brauerei & Co.
By 2007 Paulaner had the third place in the list of leading import brands, in 2008 it came up to the largest volume of sales, about ... mln litres and in recession 2009 the import of Paulaner was decreasing at a lower dynamics than the supply from far-abroad countries on the whole, due to this its share in the segment reached almost ...%. However, despite rather high-performance activity in brand promotion, according to the results of 2010 (and over the period from January till May 2011) the growing business competition on the part of other import sorts resulted in a reduction in Paulaner market weight.
Lager barley beer Krombacher accounts for one fifth of German supply, carried out by Russian Tradition. This brand is also imported on the basis of exclusive contract with the company Krombacher Brauerei Bernhard Schadeberg & Co. On the whole, its market dynamics are similar to that of Paulaner. After reaching its maximum share against the background of the reducing far-abroad import in 2009 (...%), by 2010 its share in the total supply volume reduced (to ...%) with a trend towards further decline.
As well as in Czech beer segment, Russian Tradition, along with famous international brands, promotes its own brands of German origin on the market. Wheat beer Liebenweiss (as translated from German «favourite beer») and barley beer Grotwerg (the name is similar to a common German surname Grotberg) is bottled under the contract by the company Memminger Brauerei. These brands share on the market and in supply structure of Russian Tradition is not very large but is quite steady. At that, the significance of Liebenweiss is slightly higher than in compliance with the general trend towards wheat beer dominating in the structure of German import.
In 2010 and over the accounting period of 2011 Russian Tradition even if keeps its leadership in German import segment but gradually concedes its market share to the proximal business rival, Moscow Brewing Company.
MBC portfolio includes the brands, occupying the second, the third and the fourth places in German import supply volume, barley beer Spaten, Erdinger and also wheat beer Franziskaner. Two brands Spaten и Franziskaner are bottled by the enterprise Spaten-Franziskaner-Brau, which has been a part of AB InBev since 2004. Spaten-Franziskaner-Brau is a leader in terms of export volume to Russian market among German breweries and occupies the third place among farabroad manufacturers.
Spaten is the largest brand among the whole range of German lager beer. Since the market appearance its share has been growing steadily, moreover, the sales of Spaten did not reduce even in the recession year of 2009. By 2010 the brand market share in import beer segment grew up to ...% and following the results of 2011 it is not improbable that Spaten might move Paulaner down and become the third in the list of leaders from far-abroad countries.
In 2008 sales volume of Franziskaner was quite large, having reached about ... mln litres, but over the recent years its supply has been gradually reducing, along with the market share. However, the beginning of 2011 holds out hope for the recovery of Russian positions of the brand and its market share growth up to ...%.
Let us remark here that although MBC is the largest importer of Spaten and Franziskaner, but de facto it imports these brands not under exclusive contract. The best part of supply falls within other enterprises, for instance, Interbeer imports about ...% of Spaten. The fact that Spaten and Franziskaner do not have any single Russian proprietor might with time influence the dynamics of their development. Experience has shown that market positions of the brands, which belong to international groups depend on the decision of their proprietors concerning the trading companies rights to import and distribute their trademarks.
Erdinger is exclusively imported by MBC with the exception of the supplies, provided by brokerage and logistics company Euro-Komplekt, which are also obviously directed by MBC. Supply volume of non-alcoholic Erdinger is unknown to us; this brand has become rather popular and is, probably, a leader among import non-alcoholic sorts. Sales dynamics of alcoholic sorts (dark and lager ones) have been unstable recently but their market share on the average comprises ...% in far-abroad import segment and ...% in German beer segment.
Weihenstephan (barley and wheat sorts) and wheat Schneider Weisse are well-known for the consumers of import beer. Both trademarks comprise the basis of German brands portfolio of the company Draft Express (Syntex, trading company Stabilnost), which supplies them under exclusive contract. In 2011 other exclusive import brands of the company, Kulmbacher and Monchshof started to gain market weight, this allowed Draft Express to fix its share of ...% in the total German beer supply volume.
Germany is an absolute leader in classical wheat beer segment. All Russian consumers of «weiss» beer know this and all large distributors of German beer always include wheat sorts in their portfolio. It is quite possible that German wheat beer dominates not only the import segment but the beer market as a whole, as Russian manufacturers hardly produce it at all. Correspondingly, wheat beer accounts for almost half of supply in the structure of beer import from Germany. The second half is constituted mainly by traditional lager beer.
German beer segmentation by package is typical for import as a whole. Draft beer accounts for about ...% and glass bottles account for about the same amount.
Beer from Belgium
Belgian beer brands with the exception of license brands were little known to Russian consumers till 2004. In spite of the deep historical traditions unchallenged creativity of Belgian brewers this country is not associated with old beer traditions. Besides we should note the comparatively high price of Belgian brands, which makes them niche products even among import brands despite the great price/originality/ quality ratio.
The structure of Belgian import is best represented this way: two major brands imported from Belgian division of AB InBev to its Russian division (beer Hoegaarden and Leffe), a well known barley and wheat unfiltered sort Blanche de Bruxelles as well as a host of different and normally original sorts with comparatively small sale volumes.
The main part of Belgian beer import (in 2010 exactly half of its volume) is comprised by the world known brands of group AB InBev namely Hoegaarden and Leffe. It is noteworthy that the company imports only draught beer and packed beer is probably produced under a license at Russian capacities. Accordingly we can project the dynamics of import supplies on their position in the on-trade segment.
Unfiltered beer Hoegaarden with coriander and rind is quite an unusual product by company AB InBev, which is oriented at the mass segment of Russian market. One could note that Hoegaarden import reached its peak in 2008 and the brand share in the total volume of import beer supplies came up to its maximum of ...% in 2009 as its volume decreased slower than the falling import from far-abroad countries. That was also the year when Hoegaarden ranked the fifth in the list of leaders from far-abroad. However as early as in 2010 there started a decline of supplies which grew faster in January-May of 2011.
Traditional Belgian brand Leffe is also a part of international assortment range of AB InBev, but in Russia it has lesser market share than Hoegaarden and is less intensively imported. Unlike its compatriot draught Leffe experienced not a decline but a rise of supplies in 2010, although there was a certain decrease in January-May of 2011.
After a decline of sales and market share in 2009 light unfiltered beer Blanche de Bruxelles is gaining its popularity back. This brand by Brasserie Lefebvre has already won the hearts of consumers despite quite a high retail price. Today the market share of this brand in the import beer segment comprises about ...%.
Development of Blanche de Bruxelles was stimulated by entry into the portfolio of a major Russian distributor Pivgorod-S (Pivdom subdivision) which had almost the same volumes of import supplies in January-May 2011 as AB InBev. Fast consolidation of the trade company in the segment of Belgian beer was also connected to new contracts for brands supplies of brewery S.A. John Martin N.V. Fruit draught beer Timmermans, dark beer Bourgogne Des Flandres and a whole range of less well-known brands with modest market share are now enjoying a dynamic growth.
We should also note that sales growth of Blanche de Bruxelles was much induced by a direct contract between Brasserie Lefebvre and company Interportfolio, which specializes in supplies of import brands. This year Interportfolio signed a contract with Brasserie Lefebvre for distribution of beer Belgian Kriek, which resulted in dynamic growth of the brand market share.
Not long ago MBC entered the segment of Belgian beer and exclusively supplies beer Blanche des Nieges and Grimbergen. Though the market share of the brands is still very small, being a part of major distributor’s portfolio makes good sales dynamics quite possible.
Most of Belgian beer sorts cannot be classified by traditional (non-Belgian) criteria or can enter several traditional categories. For example there can be a specialized beer (with fruit), unfiltered, with wheat malt, and additional fermentation in the bottle. Thus we cite fragmented data without showing any diagrams.
• In 2010 unfiltered wheat beer like Belgian White accounted for 56% of supplies, and for ...% in January-May in 2011. The dynamics of this segment was drawn by the Hoegaarden draught beer import reduction and import growth of brand Blanche de Bruxelles.
• In 2010 cherry lambics like Kriek comprised 18% of supplies and this figure changed to ...% in January-May 2011. The growth of this sort share was mainly connected to Timmermans Kriek Lambic import increase.
The rest of sorts overlap with the previously mentioned ones or have small shares.
Unlike the import from far abroad most of Belgian beer is delivered in the form of draught beer. In 2010 keg beer accounted for at least ...% of supplies, which evidences of bar and restaurant style of Belgian beer consumption. In January- May 2011 despite the import decline of draught beer by AB InBev the share of keg in the total volume amounted to at least ...%.
Beer from Finland
Finnish beer has been well-known to Russian consumer for a long time, though its import volumes have never been very big. The biggest quantity of beer from Finland, almost ... mln. liters, was imported in 1996. In 2010 the supplies reached the level of 2008 and totaled ... mln. liters.
The import structure is quite simple and consolidated, the main suppliers are three major Finnish producers, namely Hartwall Ltd., Sinebrychoff AB and Olvi Plc. who are represented on Russian market with only seven brands.
2/3 of Finnish beer are comprised by two brands i.e. Lapin Kulta and Karjala, by the way, these two brands are market leaders in Finland as well. They are produced by company Hartwall Ltd which has been a part of Heineken since 2008.
Brand Lapin Kulta is quite well known to lovers of import classic beer in Russia. However its sales and share in the supplies volume from far abroad decreased in 2010. This tendency can be explained by the wish of Russian consumers to widen their experience of Finnish beer. For example the positions of beer Karjala (Karelia) in the segments of import and Finnish beer on the contrary got stronger over the recent years. The overlapping of differently directed trends resulted in quite a stable share of company Hartwall Ltd.
Brands Karhu and Koff by company Sinebrychoff AB (Carlsberg Group) project their Finnish popularity on Russian import. However their supplies reached the volumes of 2010 as early as in the year of recession 2009, which led to market share reduction against the background of import growth from far abroad.
The share of independent Finnish group Olvi Plc. is not big, but it is growing gradually. The bulk of its Russian sales is comprised by the same name brand and the rest — by beer Sandels.
Import beer is often sold at duty free shops but as a rule the share of this trade channel is quite modest comparing to others. However Finnish beer is an exception to this rule. A substantial if not the biggest part of its sales in 2010 took place at duty free shops situated at the borders of Russia and Finland. At least three major beer importers Kapo Duty Free (Vyborg) Istor- Karelia (Karelia) and Tsvetochnoye (Vyborg) sell their products at duty free shops. At that, all main importers of Finnish beer are situated in northwest region of Russia, where GP-Company (Saint Petersburg) joins the above mentioned companies.
However January-May 2011 evidenced a substantial change of importer shares due to sudden raise of company Pivgorod-S (division of federal distributor of Pivdom beer), which increased volumes of beer Lapin Kulta purchases. Probably brand membership in the portfolio of such a big distributor can do much good both to its supplies and to popularity of Finnish beer in Russia.
As Finnish beer is realized mainly through duty free shops and retail networks unlike other European countries, its import is almost fully presented by packed beer, the share of keg in the structure of supplies is less than ...%.
The structure of beer import by sorts is also quite homogeneous. More than ...% of sales is formed by traditional light eurolagers. Although one can find dark sorts of brands Koff and Sandels, they have not yet won popularity.
Beer from UK
Natural volumes of sales of English beer in Russia are relatively small as compared to other countries of far abroad. However by value import supplies are quite comparable to Belgium and Finland. Besides, one is bound to notice the fast growing interest of Russian consumers to English beer – in 2010 its import by volume grew by ...%. This took place against the background of rather high retail price of English beer even for the import segment.
Beer import from Great Britain is characterized by big variety of brands namely ... denominations and their range is increasing with the lapse of time. Most of beer sorts are imported in small consignments and they are little known even to import beer lovers. Moreover English brands are mainly represented by unusual sorts (for example stouts or top fermentation beer), which are not known to mass consumer. However they are apparently gaining more and more fans.
The leader of English import is company Heineken, which is solely represented by Newcastle Brown Ale, belonging to the group of «brown ales» as its name suggests. Perhaps, this is the only English brand which has quite a long export history and can be called well-known to many lovers of import beer. It started being supplied to Russia as early as in 2003 when Newcastle Brown Ale belonged to the portfolio of company Scottish and Newcastle. The brand entry to Russian market during the second wave of import growth looked quite logical at the background of its successful world expansion.
Several companies distribute Newcastle Brown Ale. The major among them is Pivgorod-S (division Pivdom) and Moscow Brewing Company The share of brands from far abroad has been rather stable for several years, and amounted to about ...%.
Over the recent years Pivdom has been dynamically increasing volumes of import from Great Britain, the range of brands has also been intensively expanding which allowed the company to strengthen the leader’s positions in the segment of English beer. At that, the portfolio of Pivdom company includes ... English brands with various supply volumes, beside Newcastle Brown Ale which form the bulk of the company sales. In particular, one should mention the consolidating positions of stouts of two sorts, namely, Scottish Stout and Mccallum’s Stout by Belhaven Brewery Company Ltd. Pivdom which is the main importer of this brewery production.
Over the accounting period there has been an evident growth of the share of company Wells & Youngs Brewing Co Ltd, which is already claiming first positions in the list of importer producers from England. This success probably resulted from the contract with MPK, which exclusively deals with the distribution of the company brands. The Russian range of Wells & Youngs Brewing consists of five brands, among which «military» classic ale Bombardier as well as two stouts Bowman Stout and Double Chocolate Stout with fast growing market share are mostly supplied.
The second biggest brand from England by sales volume is semidark beer London Pride. This beer as well as such brands as London Porter and Organic Honey Dew are bottled at Fuller Smith & Turner Plc. All of them are exclusively supplied by company Draught Express which is a major trader of import beer. Besides the distributor’s portfolio includes dynamically growing brand Marston’s Oyster Stout by Marston’s Brewery.
As we can see English beer imported to Russia is mostly dark. The classic lagers and pale ales account for only a fifth of all sales volume. The rest of color palette is made up of color hues from semidark to stouts. Besides, stouts account for about a quarter of all beer import from Great Britain.
In addition English beer is rather draught than packed. Beer in kegs comprises ...% in the import structure. Accordingly most of beer from Great Britain is drunk in restaurants where its price is too high to be affordable for most consumers. Besides, the share of light sorts in the structure of draught beer sales is smaller than the average, that is, about ...%.
Guinnes and Grolsch
Several European countries are presented on Russian market by only one big brand which accounts for more than half of import as well as by a range of brands with small supply volumes. In particular Ireland with beer Guinness and Netherlands with beer Grolsch belong to such countries.
Sort Guinness Foreign Extra Stout has been known to Russian consumer since early 90-ies which is itself a good precondition for successful development. The brand popularity also benefited from original promotional campaigns of world scale which were welcomed in Russia too. 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. License production of the brand in Russia was a logical step by Diageo Ireland.
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 which was still imported from Ireland in kegs 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.
The recession year 2009 did not cause any cuts of draught Guinness supplies and the biggest brand market share was attained in 2010. Then its share amounted to ...% of supplies from Ireland.
One should notice the present popularity decline of brand Guinness which can be observed recently. While in 2009 according to OMI poll, Guinness ranked the eighth in the list of «Favorite brands of Russians» in the category «beer» having ...% share, in 2010 it went down to the fifteenth place with a share of ...% (having accompanied brands Holsten and Hoegaarden). Though «love and loyalty» to the brand, which were assessed by OMI can badly demonstrate its market positions.
We are also bound to notice a fast sales growth of draught semidark beer Kilkenny, which started in 2011. It is quite possible that by the end of the season there will be two major Irish import brands.
Beer Grolsch has been imported to Russia for a long period of time by various companies. The brand import reached its peak in 2008, having won ...% of the market. That was also the year when company Grolsche Bierbrouwerij B.V was purchased by SABMiller which started license brand production in 2009. The further decreased of Grolsch import looked quite predictable especially at the background of the recession. However, in 2010 import supplies of the brand suddenly started increasing and this growth is still going on. Like previously Grolsch is imported to Russia by a lot of companies, more than half of import is accounted by Russian division of the brand owner. In addition, in contrast to for instance Guinness or Hoegaarden import, Grolsch is supplied to Russia mainly in glass bottle.
Beer from the countries of Asia region is presented in Russia by three countries, namely Japan, China and South Korea. In 2010 Japan accounted for almost half of supplies from these countries, that is, for ... mln. liters. However, over 5 months of 2011, import volumes from Japan and China were almost equal. One should also note the growing import from South Korea, now having a share of ...% in the total import volume from Asian region.
The unchallenged leader among Asian producers is company Asahi Breweries Ltd., which has only one beer brand in Russia, namely Asahi Super Dry. This beer import has several peculiarities. Its license analogue is produced in Russia at the capacities of Baltika – the corresponding agreement was signed up to 2012. However Baltika got the rights for exclusive distribution of Asahi Super Dry only in European part of Russia and CIS. All volume of the official brand import to Asian part of the country is provided by one distributor, Khabarovsk entrepreneur Andrey Altunin.
The share of Asahi Super Dry in the total volume of import beer supplies is rather stable and amounts to ...%, that is, its sales reflect the common dynamics of import segment. After the crisis period of 2008-2009, against the background of positions fall experienced by a row of European import brands, Asahi Super Dry shot from the 9th to 5th position in the list of leaders.
In 2010 the supplies of Chinese beer Tsingtao grew dramatically, having won ...% of import market. In 2011 the import volumes increased in tune with the average import dynamics, and the brand share stabilized. Almost all beer Tsingtao is supplied to Russia by Magadan company Onkol Product. One can assume that the bulk of brand sales is made in Eastern regions of Russia, though it is available at many Chinese restaurants.
One more Chinese brand with growing popularity is beer Harbin by Harbin Brewing Co., Ltd. Though in 2009 its sales shrank, the market share remained the same at the level of ...% in the import beer segment. In 2010 the supplies of Harbin almost doubled, which promoted its share growth up to ...%. And in the new season the positions of the «oldest in China» beer brand are growing stronger. In all, three companies deal with Harbin import to Russia. The bulk of its supplies is provided by trade and production enterprise Argo-1, besides, company Pegas-Trade accounts for a significant volume. In addition, unknown volumes of beer Harbin are imported to Russia by tourists.
Economic recession did not slow down the growth of sales and market share of South Korea beer Hite, although its supplies somewhat declined in comparatively favorable 2010. There was again a dynamic growth over five months of 2011. Accordingly, the brand share in the import from far abroad fluctuated with big amplitude but in average it amounts to ...%. The brand is produced at the capacities of the same named company Hite Brewery Co. Ltd. It is characterized by a distinctly “western” design of the package not bearing any associations with Korea. The main distributor of Hite is company Eastern Commercial Center, located in Vladivostok. Although the principal activity of this company is not beer distribution but coffee import from Asian countries.
Beer supplies from Asia are quite homogeneous, judging both by traditional sorts classification and by the variety of package. Almost all import from the countries of this region is presented by light packed beer. Beer in kegs and dark sorts are sometimes delivered to Russia but in very small volumes.
Киликия — ЗАО «Ереванское Пиво». Main traders: Киликиа, Планета. Volumes: 733 800 / 340 289
Zipfer — Brau Union Osterreich AG. Main traders: Пивгород-С, Элитвода ру, Да-Линк. Volumes: 518 621 / 209 903
Hoegaarden — Inbev Belgium NV/S.A. Main traders: AB InBev, Да-Линк. Volumes: 1 789 452 / 360 736
Tsingtao — Tsingtao Brewery Co. Ltd. Main traders: Онколь Продукт, Баста. Volumes: 1 001 306 / 405 849
Krusovice — Heineken Ceska Republika A.S. Main traders: Кросс Логистик, Пивгород-С, Интербир. Volumes: 10 216 509 / 3 469 297
Faxe — Royal Unibrew A/S. Main traders: МПК, Да-Линк. Volumes: 374 016 / 94 500
Saaremaa — AS A. Le Cog Tartu Olletehas. Main trader: Цветочное. Volumes: 147 549 / 28 513
Lapin Kulta — Hartwall Ltd. Main traders: Капо Дьюти Фри, Пивгород-С, Истор-Карелия. Volumes: 1 921 330 / 775 903
Paulaner — Paulaner Brauerei Gmbh. Main traders: Бирлэнд логистикс, Элитвода ру. Volumes: 2 952 574 / 1 090 102
Guinness — Diageo Ireland. Main traders: Heineken, Элитвода ру. Volumes: 1 508 710 / 534 600
Peroni Nastro Azzurro — S.P.A. Birra Peroni. Main trader: SABMiller. Volumes: 214 626 / 95 127
Asahi Super Dry — Asahi Breweries Ltd. Main trader: Алтунин ИП. Volumes: 1 919 287 / 826 522
Svyturys Extra — Svyturys-Utenos Alus. Main traders: Пивгород-С, Кенингбир Минус. Volumes: 412 963 / 124 096
Corona Extra — Cerveceria Modelo. Main traders: Carlsberg, Элитвода ру. Volumes: 1 378 792 / 93 757
Grolsch — Grolsche Bierbrouwerij B.V. Main traders: SABMiller, Да-Линк. Volumes: 858 029 / 504 152
Spendrups — Spendrups Bryggeri. Main trader: Драфт. Volumes: 165 593 / 48 542
Newcastle Brown Ale — Heineken UK. Main trader: Пивгород-С. Volumes: 654 439 / 260 801
Оболонь — ЗАО «Оболонь». Main traders: Лидер, Звезда, Стратег. Volumes: 195 416 352 / 71 096 440
Excluding brands from Belarus. The criterion of including brands in the list is membership in TOP-170 by import volume in Jan-May 2011. Brands from the list comprise 98% of beer import (excluding import from Belarus).
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The article materials were prepared using statistics of import supplies provided by and IA «Kominfo» (www.kominfo.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 «Komersant», «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.