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. ...
Euromonitor: Carlsberg Needs to Find Growth Opportunities if it is to Retain its Global Position
Geographical bias hindering performance
Carlsberg has been struggling with falling beer consumption in its main markets in Eastern and Western Europe as the financial crisis has hit both regions' economies. Its sales have been further hit by regulatory measures in its key Russian market (200% duty increase in 2010, new legislation to prohibit beer sales from kiosks from 2013 and a ban on stores selling alcohol between 23.00-08.00hrs). In the nine months to September 2011, the company reported 4% growth in its net revenue thanks to a positive price/mix, but its operating profit declined by 12% due to higher input costs and marketing spend as it had to increase investment to maintain sales, primarily in Eastern Europe.
Due to weak performances in mature beer markets in Europe and North America in recent years, major brewers have made strong efforts to create a more balanced geographical footprint so as to be able to take advantage of volume growth in fast-growing emerging markets and value growth in high-value mature markets. Global leader A-B InBev has been taking advantage of its dominant position in Brazil and its growing presence in China, and in 2011 generated nearly half of its total beer volumes in Latin America and Asia Pacific. The global beer industry's second-ranked SABMiller, the least exposed to mature beer markets among the major brewers, has been enjoying solid volume growth thanks to its leading position in the Middle East and Africa and its strong presence in Latin America, while Carlsberg's closest competitor, Heineken, has also been benefiting from its increased footprint in emerging markets, and by 2011 43% of its total beer volume sales derived from Latin America, the Middle East and Africa and Asia Pacific. Carlsberg has also started working on its expansion in developing markets, particularly in Asia Pacific. In 2011, it increased its equity stake in Chongqing Brewery in China to 30%, acquired the remaining 50% share in Hue Brewery in Vietnam and agreed to set up a joint venture with Chongqing Brewery, although its global presence still remained heavily biased towards Eastern and Western Europe. According to Euromonitor International, the two regions accounted for 84% of the company's global volumes in 2011.
Rise of Chinese brewers
While companies face economic uncertainty and restricted consumer spending in Europe and North America, Chinese brewers have continued to capitalise on the robust growth in their domestic market. In 2011, China Resources, the leading Chinese brewer, registered 11% beer volume growth, increasing its global share to 5.4%, while Tsingtao Brewery and Beijing Yanjing Brewery also posted dynamic growth and secured their places among the top 10 global beer companies.
Source: Euromonitor International
Note: SABMiller 2011 share includes Foster's Group
As China is forecast to continue to drive global beer volume growth with an additional 13.9 billion litres (5% CAGR) over 2011-2016, local players are expected to continue to post strong results, and if Carlsberg is not able to improve its performance, it may well lose its fourth position in the coming years.
Need for further expansion to enhance growth prospects
According to Euromonitor International, Carlsberg's core Eastern and Western European markets offer limited growth prospects over 2011-2016, with predicted volume CAGRs of +1% and -1%, respectively. Hence, the company should switch its focus from volume to value generation and should push its high-margin brands, accompanied by strict cost management to improve its margins.
In order to enhance its growth prospects, Carlsberg should seek to further expand its coverage in fast-growing emerging markets. The company has already been working on strengthening its position in Asia Pacific, particularly in China, which will continue to enjoy the strongest beer volume growth over the forecast period. The company can benefit from its share in Chongqing Brewery and their newly set up joint venture, but it should also continue its expansion in the country, particularly in North/Northeast and East China, which are expected to see the strongest growth (9.2 billion litres) over 2011-2016. Moreover, it could push its premium brands to take advantage of the premiumisation trend as premium lager is forecast to outperform the wider beer market with a 15% volume CAGR, albeit from a low base. Its other markets in Asia Pacific, such as India and Vietnam, also offer strong growth potential, so the company should continue to invest in broadening its distribution in the region.
Furthermore, it should also look for opportunities to establish a footprint in the Middle East and Africa and Latin America, which are forecast to register volume CAGRs of 5% and 4%, respectively, over 2011-2016. The quickest way to enter would be through acquisitions but as these regions are highly consolidated, with one or two brewers dominating each market, the company's potential for inorganic growth is fairly limited. Carlsberg's sales are likely to remain focused on the niche but growing imported lager category, and the company should try to create partnerships with local brewers to boost its brands' international presence.
Carlsberg's ambition is to become the fastest growing global beer company, measured in terms of average organic growth in net sales and operating profit over a three-year period. However, the company has a great deal of work to do if it is to meet this ambitious target.
9 Фев. 2012