Dmitry Nekrasov’s Philosophy — on the Past, Present and Future of Ukrainian Brewing IndustryA meeting with Dmitry Nekrasov always turns into a training course: “Introduction to brewing business“. We are talking to a clever “playing trainer“ a person that can be called a godfather of the Ukrainian craft. He has a dozen of successful projects to his name. Dmitry told us about craft beer in Ukraine, on market cycles, on specifity of operating in retail and HoReCa, on union of Ukrainian brewers and certainly, how a brewery of his own, First Dnipro Brewery is doing.
The market of import beer in Russia: review and databasesThe market of import beer is rapidly growing and changing. But while in the past years it was growing due to brands variety, in 2019 major and affordable brands from TOP-10 were developing actively. It seems that the fact of a brand origin from far abroad counties, even if it is not well known but has moderate price and good distribution provides for million liters of sales in the territory of Russia. Among distributors AB InBev Efes was far behind, yet the role of Baltika and suppliers of the second row got more important. The boom of German brands was followed by stagnation of import from other traditional regions (and Belarus) instead the supplies from Mexico, Lithuania and Asian countries grew considerably.
Russia: Positions of Brewing CompaniesThe 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 brandsIn 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 2019During 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.
The trend of complication of Russian beer market is going on and in several directions at the same time. The range has got wider, the import and small segments are growing, namely craft beer, alcohol-free beer and special flavor beer. At the same time, all ex-mega brands and light lagers by Russian brewers are experiencing a decline of their shares. AB InBev Efes, Heineken, MBC and Pivzavod Trekhsosenskiy have exceeded the market, Carlsberg was developing slower than the market and Ochakovo as well as some other mid-sized breweries have been cutting down their volumes. To a big extent brewers’ performance was connected to their ability to reach agreement with networks, sacrifice their margin and enter new markets. Craft brewers are facing a serious danger of producers’ registration introduction – de facto licensing. ...
Bid for Foster’s may need a top-up
SABMiller's bid puts an enterprise value (market value plus net debt) of $10.4 billion on Foster's. That's 12.7 times earnings before interest and tax of $887 million that Foster's announced yesterday, and when it releases its formal defence, Fosters will produce comparisons with other beer industry takeovers that make that look a bit light.
The key comparison is Kirin of Japan's takeover of Lion Nathan in 2009. The EBIT-to-enterprise value multiple in that case was 15.2 times, which, all other things being equal, points to about $5.95 a share for Foster's.
Advertisement: Story continues below Foster's will point to overseas deals that were more expensive too, but SABMiller can cite other takeovers that were cheaper and argue that, on other profit-to-enterprise-value measures, it is pretty much matching the price Kirin paid for Lion. It will also point out that Kirin bought a company that was gaining market share, while it is bidding for one that has been losing it.
Foster's said volumes slid by 5.2 per cent during the year and by 6 per cent for beer, in line with the beer market overall, in a year that Pollaers said was the toughest since the recession years of the early 1990s.
That means beer market share was stable, overall, although Pollaers argues that market share is no longer the prime number. He says the group will not subsidise beer sales and actually allowed the group's bottle-shop beer market share to fall slightly in the June half after withholding supplies temporarily from outlets that were either discounting too heavily, or threatening to.
Foster's shares were sitting at the bid price before the result and closed 9? or 1.8 per cent higher at $4.99 yesterday. The market rose by 2.2 per cent, so investors are hunting for a bump, but also agreeing with Pollaers that there's a lot of renovation work to come. The steady beer market share, for example, flatters the local brands because it includes Foster's star imported beer, Corona, which grew volumes by 15 per cent in the imported beer segment that accounts for 9 per cent of the Australian beer market.
Hedge funds - which want a bid to sell into - still control between 10 and 15 per cent of the brewer's shares; retail shareholders - who have in the main been on the share register for years - control another 20 to 25 per cent and about three-quarters of the group is owned by institutions.
Pollaers has contacted most of the institutions and is getting no feedback that $4.90 should be embraced.
That will change if SABMiller sweetens the bid to give Foster's shareholders an up-front piece of the renovation gain that Pollaers is promising to deliver over the next few years - a gain that it will also capture if it takes control: about $5.50 looks right to me.
WHEN the brouhaha over BlueScope Steel's decision to halve steel production at Port Kembla and quit steel exporting at a cost of about $500 million and 1000 jobs has subsided, BlueScope will probably be re-rated by the market.
Closure was inevitable given that exports were costing the company $250 million a year after the soaring Australian dollar and record coking coal and iron ore prices pushed its production costs from just within the top quartile of world steel producers to the bottom of the third quartile - but the retreat is being done in a way that gives BlueScope options.
Steel production will halve to 2.6 million tonnes a year with the closure of one of the group's two Port Kembla blast furnaces, but only one of BlueScope's four Kembla coke ovens will be closing down. Coke that is produced and not consumed by the remaining blast furnace can be profitably exported and, if the price of coal and iron ore eases and the Australian dollar also falls, BlueScope can resume exporting by firing up the shuttered blast furnace and directing coke production towards it.
The closure of one of the coke ovens means the previous production of 5.2 million tonnes would not be attained, but a return to production of about 4.2 million tonnes a year is possible.
When the current restructuring is complete expect BlueScope to be in the market for coking coal and iron ore reserves of its own. It fought for but lost its Illawarra coal reserves when it was spun out of BHP a decade ago and has been looking at coal and iron takeovers ever since. It knows it erred in not moving before the commodity price boom took off and will fix the mistake if the boom cools.
24 Авг. 2011