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. ...
Beer Wars: Craft Brewers Are Using This Strategy to Compete
While the traditional pale lager has not disappeared from breweries or grocery store shelves, commercial-style beer no longer dominates the industry. Through innovation, narrower margins, and changing American tastes, small-scale, tradition-inspired breweries have grown; in the first half of 2012, craft beer sales represented 6 percent of all beer sold in the United States.
After a long period of dormancy, the craft beer brewing tradition has reasserted itself. Prohibition devastated the local and regional brewery business, which up until that point had been thriving. Once prohibition was lifted in 1933, the Great Depression and the Second World War prevented small, independent breweries, which had previously characterized the American brewing landscape, from taking root. Instead, the breweries that had begun to crop up after the 18th Amendment was repealed were consolidated. Now, the four largest beer companies, Anheuser-Busch InBev (NYSE:BUD), SABMiller (SBMRY.PK), Heineken (HINKY.PK), and Carlsberg, command a 55 percent share of the global market, according the consultancy Marakon.
But as the Wall Street Journal reported on October 1, commercial brewers “face a consumer-led backlash in favor of niche craft beers and microbrewers,” and industry executives fear that the beer business will become like the wine industry, dominated by local producers.
When the 1970s came to a close, there were only 44 brewing companies in the United States, and at the time industry experts predicted that the number would decrease to 5. But craft brewing intervened. According to the Brewers Association, the “renaissance of American craft brewing” came in 1976, with the founding of The New Albion Brewery in Sonoma, California. While its doors were open for only six years, hundreds of home-brewers took inspiration and started breweries of their own in the early 1980s.
Despite the difficult market conditions these small brewers faced entering an industry dominated by brands like Budweiser and Coors (NYSE:TAP), the number of craft breweries in the United States has grown significantly. In 1980, there were only 8 craft brewers, by 1994 there 537, and today’s figure is close to 2,000. Sales of craft beer have grown proportionately as well. In the first half of 2012, craft beer sales rose 12 percent, compared to 13 percent in 2011.
To be considered craft brewer, a company must meet several criteria: the brewery must be small, independent, and traditional. Specifically, this means that the company must brew less than 6 million barrels of beer per year, less than 25 percent of the company can be owned by an alcoholic beverage industry member, and its flagship beer must be an all malt brew or 50 percent of the total volume the company brews must be malt.
These determinants, which are essential to the tradition of craft beer brewing, have made competition with larger, commercial beer companies difficult. However, the breweries’ small size is not only an essential characteristic, it is the factor that has allowed for craft beer to compete successfully against commercial-sized operations.
California is home to more breweries and produces more craft beer than any other state in the U.S., according to statistics provided by the California Craft Brewers Association, a non-profit trade association. When the craft industry reemerged in the 1980s, the movement was centered in the state, and now 1 in 5 bottles of craft beer made in the U.S. is brewed in California. According to the association, “California’s craft brewers have been the drivers of innovation in the beer industry,” because as small and often independently owned businesses, they have the ability to respond quickly to market demands and experiment with new techniques.
San Francisco’s Anchor Brewing Company is the nation’s oldest craft brewing company; founded in 1896, the brewery has long been at the forefront of innovation. “Anchor started it all,” said David Edgar of the Institute of Brewing Studies in 1991. “It’s the granddaddy of the microbreweries.” To combat the difficult market conditions, Anchor pioneered a new brewing method. Rather than using ice, the company began its craft by producing steam beer, a process developed during the Gold Rush to save money.
Russian River Brewery, founded more than a century later, has become a leader in sustainable production. In 2010, the company installed a 110 kilowatt solar energy system that provides 70 to 80 percent of its energy needs. “Our success is the ability to innovate and quickly introduce products to respond to our consumers,” said Russian River’s co-founder Natalie Cilurzo regarding the brewery’s business strategy. And the company has innovated; the list of beers scrawled across a dusty chalkboard at the company’s brewpub lists colorfully named brews ranging from Damnation to Salvation.
The company’s stance is not an unusual one in this industry. Fort Collins, Colorado-based New Belgium Brewing Company, known for its Fat Tire beer brand, pioneered the abbey-style Belgian ales of which American beer drinkers have become fond. Now, instead of expanding further, the company is scaling back its operations, hoping to delve deeper into the brewing process.
Despite New Belgium’s size, the company remains focused on aggressively managing costs in order remain competitive with the commercial brewers. For example, to keep distribution costs in check, the company only sends out and receives full truck loads to maximize fuel efficiency. “We also allow and encourage pooled loads from our distribution center so small distributors will team up and put up to 5 distributors on one truck which will drop at each location as it heads across the country,” said Mason Lathrop, the company’s Order Management Liaison, by e-mail.
However, as the executive director of the California Craft Brewers Association Tom McCormick said, “craft beer by its very nature is produced, somewhat humorously, very inefficiently.” The primary inefficiency, he noted, is that of labor. According to a joint study between the association and the Goldman School of Public Policy at The University of California, Berkeley, for every one hundred barrels of beer produced in the state, one job is created.
But the breweries make up for labor costs by being very “innovative and nimble,” said McCormick. Even though the companies’ margins are much narrower, costs do not translate to the consumer. For a six-pack of beer at Bay Area drugstore, the price difference between a commercial domestic beer, such as Budweiser, and a craft beer is approximately $1.50 for certain brands, although it can be more. Rather than charge more expensive prices, craft brewers cut back on marketing. While commercial companies spend a large percentage of revenue on advertising, he said, craft breweries rely on communities to promote their products at the grassroots level.
The strategy has paid off. As the Wall Street Journal reported, big brewers must now respond to the success of the craft breweries in order to minimize their loss of market share. The publication highlighted several options: commercial brewers can buy craft breweries, as AB InBev did with Shock Top, or they can develop variations of their mainstream beers as the company has tried to do with Bud Light Platinum.
Regardless of the method chosen, “In the future, major brewers may need to support a portfolio of up to 35 brands in the U.S., compared with 15 now, reckons one senior industry executive,” according to the Journal. Furthermore, both options will entail additional marketing and distribution costs that will negatively affect operating margins.
15 Ноя. 2012