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3-2019

Russia: Positions of Brewing Companies

The review contains an analysis of interim performance of brewers in the first half of 2019. There are rather dynamic changes behind a modest industry growth. Baltika is again experiencing a stage of volumes and market share slid due to competition with AB InBev Efes. Because of the price competition and presence expansion in the modern trade company #2. has come close to the leading position. At the same time sales of Heineken Russia have continued growing which makes the premium part of the portfolio heavier. The market premiumization trend had been also confirmed by import brands. MBC and Zavod Trekhsosenskiy have been the most successful among federal market players. The market share of independent regional brewers and Ochakovo have continued falling as they are being squeezed out by the market leaders at their competitive fields.

Ukrainian beer market 2019: companies and brands

In 2019 beer production and market have been still fluctuating about zero point. However, the past season was successful for brewers judging by the sales profitability. The price mix has improved due to rapid general market premiumization, as well as its particular aspect, the growth of import beer sales. By the season end AB InBev Efes improved its positions considerably. It turned out that consumers had not forgot Efes brands that had to leave the market, but started to recover rapidly. Against the stagnating market that meant sales decline of other companies, in the first place Carlsberg Group that most of all beneficiated from Efes exiting the market. PPB turned out to be stable to branding activity of its competitor and Obolon kept the same volumes and at the moment it is the absolute leader of the economy segment. The share growth of independent producers took place thanks to leading craft breweries, that so far do not have a big market weight, but they are rapidly gaining it.

Brewing industry in Kazakhstan 2019

During the first half of 2019, the majority of Kazakh brewers made their contribution into positive dynamics. Yet it was companies of the lower division, not the two transnational leaders that raised their production and sales. The shares of draft beer and aluminum can which is rapidly squeezing glass bottle out of the market, have been growing. The price segmentation has remained stable despite the substantial rise of retail prices and fluctuations of brand market shares, while the borders between segments have become blurred. The main events in the industry have been: the announced revision of the beer excise policy, launch of BeerKhan brand in the strong beer segment, and most important – purchasing assets of Shymkentbeer by Arasan.

India. United Breweries’ profitability may remain under pressure

The country's largestbeer sellerUnited Breweries (UBL) has reported a stellar operating performance in the last few quarters. It was able to clock doubledigit revenue growth in each of the last six quarters despite increasing competition in the domestic beer market from recently-launched international brands. The company has undertaken capacity expansion which will help it to address the growing beer consumption in the country. However, profitability may remain under pressure owing to volatile raw material costs and intense competition.

BUSINESS

With its flagship brandKingfisher, UBL accounts for over 52% of the domestic beer market of 20 crore cases annually. Traditionally, Indian beer consumers have a higher preference for strong beer, but a taste for mild varieties is gradually developing. UBL has expanded its key brand in both segments. According to analyst reports, for UBL, both strong and mild beer segments are growing at above industry average rates. UBL clocked a three-fold increase in strong beer volumes in the last four years, with a 27% increased. Its mild beer segment grew nearly two times faster than the industry growth rate, according to a recent brokerage report.

FINANCIALS

UBL's revenue grew at a compounded annual growth rate of over 25% in the five years ended March 2011. The company was also able to improve its profit margins during the period. This is reflected in a relatively faster compounded growth of 27% in operating profit and 38% jump in net profit during the said period. In FY11, the company's net profit shot up by 73.2%, helped by a 41% growth in sales at Rs 2,788 crore. Its operating margin (before accounting for depreciation) expanded by nearly 200 basis points to 12.9%.

GROWTH DRIVERS AND CONCERNS

Beer consumption forms less than one-fourth of the total organised alcohol beverages market in India. Hence, UBL may have limited scope for overall growth. However, on the positive side, the beer market has been growing in double digits over the last few years. The latest ruling by the Maharashtra government to restrict consumption of spirits to consumers above 25 years of age may impact the growth of this segment.

It includes vodka (which is growing at the fastest clip among other alcohol drinks), whisky ( a healthy double-digit growth), and rum (stable demand pattern). Such a move, if adopted by other states in the country (apart from Delhi, which also has similar restrictions on consumption of spirits) may result in higher consumption of mild beer. UBL has chalked out plans to increase brewing capacity from the FY10 level of 388 million litres. It has announced plans to add nearly 20 million litres of capacity according to data from CMIE's Prowess. The company has initiated expansion at its Karnataka brewery to add 10 million litres. The company plans to spend over `300 crore for expansion. The capacity additions will help UBL to tap more opportunities in the Indian market.

UBL faces steep competition from foreign brands. This may lead to higher advertising expenditure in the future thereby impacting margins. To counter competition, UBL has partnered with Netherlandsbased Heineken to distribute beer in India under the Heineken brand.

VALUATIONS

UBL is one of the few large liquor companies to grow at a faster pace than peers and to remain profitable over the years. It currently trades at a P/E of 73 which appears to be on the higher side. The stock price has doubled in the last one year and a further increase looks limited since the current valuations more than compensate for the company's future growth potential. Investors may reduce their exposure to the counter and consider fresh buying only at lower levels.

25 Июл. 2011

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