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. ...
The beer market of Russia: from transnational to national. «Journal.Beer 3-2015»
Russian beer market is becoming ever more difficult to operate on for the major international companies. On the one hand, they turned out to be the most dependent on the forex fluctuations, that is, ruble devaluation has sharply decreased their revenues. On the other hand, the mass beer brands that used to secure steady sales are currently difficult to fit into the narrowing market space, while brands by independent companies are gaining popularity. Falling volumes of production and revenues force companies to close breweries optimizing capacity utilization, to raise prices and consequently, lose consumers, and to focus on premium and international beer segments where their positions are still strong. While in 2014 these processes led to market premialization, by the end of the year the sales growth of inexpensive beer by independent producers started exerting such a strong influence on the market, that its polarization resumed again.
- The results of the first half of 2015
- Where does beer flow?
- Modern trade
- Specialized retail
- Trends on Russian beer market
- Where do the market leaders move?
- Carlsberg Group
- Efes Breweries International
- AB InBev
The results of the first half of 2015
The first half of 2015 saw the prolongation of negative tendencies nearly in the same scales as in 2014. Steady factors, connected to narrowing consumers' group, such as trend of the general reduction of alcohol consumption and beer popularity as a drink, are still in force. In autumn 2014, the market faced the problem of consumers' economizing due to lower real income and higher prices for foods. The cold spring of 2015 also did not favor sales of brewers.
According to operational data by Rosstat, beer production in the first half of 2015 fell by 7% to 39.5 mln hl (by the end of 2014, the reduction stood at 8.9%).However, this minor improvement of dynamics results not so much from market reasons as from peculiarities of stocks management. Thus, till 2014, brewers strove to overstock the warehouses of their distributors by the New year in order to pay excises before the rate rise. However, at the end of 2014, for the first time in 6 years, it was decided not to raise excises for beer, and brewers did not expand output volumes, as they used to do earlier. Accordingly, early in 2015, the output volumes decline was also not so evident as in the previous years.
Beer export from Russia was going down approximately at level with the production. While in 2014 it reduced only slightly, in the first half of 2015, the reduction totaled …%, to … mln. hl. A considerable decline took place in the first quarter of 2015, resulting from cutbacks in supplies to the major trading partners, i.e. Belarus, Kazakhstan as well as sharp fall of export to Ukraine. However, in the second quarter, the neutral dynamics was restored, as the on-gong cutbacks of supplies to Belarus was offset by export growth to Kazakhstan and Ukraine (apparently, due to deliveries between subdivisions of transnational companies).
In the first half of 2015, the beer import fell by …%, to … mln. hl, mainly resulting from almost complete suspension of supplies from Ukraine starting from the third quarter of 2014. The absence of Ukrainian production was to some extent offset by supplies from Kazakhstan. Beer import from far abroad countries (mainly from Western Europe) was sharply cut in the first quarter of 2015, as dramatic ruble devaluation took place. Besides, Czech beer import was influenced by the local launch of a major brand, namely, Krusovice. But in general, the second quarter of 2015 saw a trend of restoration of supplies from far abroad countries.
The beer market in the first half of 2015 fell by …% to … mln hl, if we rely on the official volumes of beer output, the trade balance result and our assessments of distributors' stocks. Thus, the beer market downslide outpaced the rates of 2014, when it went … % down *.
* As new data on production dynamics have been obtained, the assessment of year 2014 results given in issue №1-2015 of "Beer business" was revised
According to Rosstat publication, by June 2015, beer producers raised selling prices considerably, as compared to 2014. This rise was carried out in several stages, the first peak was attained in February 2015, the second, even higher wave of price increase began in April and continues till now. In the first place the price rise was conditioned by international companies' intention to compensate the fall of currency revenues, according to brewers' reports. In June 2015, the average price growth amounted to …%, to … rubles for deciliter, as compared to June 2014.
Having these data, we can calculate the revenue volume of brewers. In the first half of 2015, it virtually grew by …%, to … bn. ruble. But if we account the excessive volumes delivered to distributors at the end of 2014 for the next year, the revenue growth of brewers will total …% to … bln ruble.
Because of the ruble devaluation brewers sales faced sharp reduction in dollar expression. In the first half year, uncorrected revenue fell by …%, to $... bln, while corrected revenue saw a …% decline to $... bn.
Early in 2015, despite the excise rate still standing at 18 ruble per liter, retail beer prices started growing dramatically due to higher producers' selling prices. However, the dynamics of retail prices was lagging behind, having amounted …%, to … ruble per liter in June 2015.
Accordingly, the beer market in value terms was also behind the brewers' revenues. Under our estimate, it shrank by …% to … bln ruble *, as the price rise did not have time to offset the decline of natural volumes, especially at the year start. In dollars the decline is estimated at …%, to $... bln in the first six months of 2015.
* One should note that the market volume in money terms is a conventional value, as about 10% of beer is sold in HoReCa establishments and 12% is sold in specialized beer retail, where the price monitoring is not made and trade margin can vary.
Where does beer flow?
According to the reports of brewing companies, retail sales have been changing their form for many years. Even before the ban on beer sale in kiosks in 2012-2013, the beer sales were forced out of this channel of impulse purchases and flew mostly to supermarkets. And as the ban came to the complete force, …% of beer consumers that bought beer in kiosks switched to supermarkets, according to a survey carried out by Sberbank СIB in March-May 2013. Nearly the same share growth of the modern trade is demonstrated by data of retail monitoring, cited by brewing companies.
The ban led to share levelling of the modern and traditional retail in beer sales in 2013. Through the next years, the pace of reallocation of consumers slowed down, it was determined by the formed trend, that is, the share of mini/super/hypermarkets in beer sales considerably exceeds the share of the traditional convenience stores, especially due to their lower number. Modern retail beer sales in volume terms changed from steep growth in 2013 to slower growth rates and practically zero dynamics in 2014-15. Beer sales in traditional shops are still falling through all this time.
If we compare monitoring data on retail with realization estimates on other sales channels, we will see that the modern retail had the best performance. In the first place this is because the mass brands of packed beer were bought mostly by the same customers both in kiosks and supermarkets. However, the immediate (after the ban) and subsequent weight gain of supermarkets will be not as considerable as stated above, as the shares of on-trade and specialized retail have grown too.
As for on-trade, the share growth was rather conditioned by the general reduction of beer market coupled with relative stability of beer consumption as an affordable alcohol drink in HoReCa. Besides, a number of retail outlets selling beer, were reorganized into public catering establishments and continue their work. We will speak of specialized retail below.
Considering the growing share of the modern trade, the leading beer producers assert the priority of this sale channel and strive to expand their presence in it. Naturally, in the first place it concerns the struggle for the major Moscow market and Central region, as well as the markets of the biggest regional centers. In particular, …, … and …, that have been historically well represented in Central Russia, found themselves under the pressure from … and … .
We should note that though major companies traditionally lead the modern retail, the sale growth of independent companies is for the most part explained by their penetration into networks. Tomskoe pivo, Zavod Trekhsosenskiy, Buket Chuvashii+Bulgarpivo, Barnaulskiy Pivzavod as well as a dozen of other regional companies managed not only to occupy some space on supermarket shelves, but also successfully compete with the market leaders. Under the market players' estimation, through the last three years their share in the modern retail has grown by several points and stands at nearly …%.
In the retail networks nearly one third of sales by regional businesses is accounted by "people's" brand Zhigulevskoe, yet the popularity of their own brands which have become alternatives in the economy and mainstream segments, is growing. The main consumers are lovers of regional "Russian" beer and those who used to buy beer in specialized retail, and then found the favorite brand in a supermarket.
Trade networks form the leading sales channel of import beer, both from near and far abroad countries. Yet, its share in the total sales volume of supermarkets does not exceed …%.
Shops of keg beer first appeared in the Siberian market in 2005-2006, and after 2008, they started spreading rapidly in large regional centers. The number of outlets selling "live" beer practically doubled every two years, according to organization census by 2GIS. Specialized retail development was triggered by the ban on beer sales in non-stationary outlets (kiosks) in 2012-2013, which virtually wiped out or made bootlegged this channel of distribution.
As early as in 2013, specialized retail had features of saturation; many entrepreneurs were ready to sell their business or closed after summer season. A decline in draft beer trade has been forecasted for several years. However, in 2015 the number of beer shops has considerably grown again.
While early in 2014, the data base included more than … outlets, this number grew to more than … by August 2015. Certainly, they deal in small retail trade, but its scale can be assessed by such example: under the data from Moscow trade and services department, the capital numbers nearly …kiosks And according to 2GIS, … beer shops are operating in Moscow.
The growth of specialized retail in 2014-2015 can not be explained only by including to the data base those shops that could have been overlooked by 2GIS or by sales seasonality effect on our opinion. Basing on the data for 2015, we can say that the main growth drivers were business development of new networks, expansion in little-developed regions and popularity growth of expensive craft beer.
Under our rough estimation, which relies on assumed turnover of outlets, registered by 2GIS and the sales dynamics of independent companies, in the first half of 2015, the share of draft beer shops grew to 12% of its total sales volume.
In specialized beer outlets one can normally find brands by regional producers. Under our rough estimation, only one third of beer shops sales is accounted by major companies' beer, and these are also mainly their regional brands. At the same time, many independent businesses focus on producing beer in kegs and beer shops became the key channel of distribution for them.
A new trend is formed by the rapid growth of shops that specialize in selling draft and packed craft beer by Russian and import brewers, especially in Moscow and Saint Petersburg. Some shops try to enrich their product range by non-standard brands, including those produced by enthusiastic brewers. That is why, there is a chance that specialized retail can switch from rather blurred and already outdated concept of "live" beer to equally ambiguous but fresh image of craft beer.
The main danger for specialized retail is still harbored in the possibility of legislative restriction of beer trade. In particular, this concerns the ban to sell alcoholic production in objects, located in non-residential premises of block of flats as well as other initiatives of the regional authorities.
Trends on Russian beer market
The premium market segment was rapidly increasing through 2014 because international companies refocused on marginal brands. The outrunning price growth for inexpensive and mainstream beer became one of the reasons for the price boarders blurring. The recession processes have not influenced consumers' incomes yet and premium brands are becoming ever more affordable. As a result, their sales volume in the segment of the packed beer by the end of 2014, increased by …, according to our estimation. Instead, the sales of both middle-priced and economy brands of the big companies slumped by nearly …%.
The premialization process would have probably continued even despite the economic situation worsening, if independent producers had not started to rapidly increase their presence in trade networks of big cities, while keeping the leading positions in the specialized beer retail. A lot of comparatively inexpensive regional brands started to exert serious pressure on both economy and middle-priced brands by transnational companies, in the view of their price rises.
Thus, due to the rapid sales growth of inexpensive beer by regional producers, the economy segment of the beer market has started increasing again and the premialization trend of the beer market was again displaced by its polarization.
We should note that the growing consumer rationalism does not only mean the choice of the cheapest product. Likewise, we cannot explain the sales growth of the regional brewers only by price competition as international companies also have discount beer in their portfolios and the share of private label, though … by the end of 2014, is as yet only …% of the market.
We would rather say that the "old" mass brands are rapidly losing their popularity because of the same "empty" taste and the steady blurring of their images in the conditions of limited advertisement. The returning of ads to the nighttime TV broadcasting is not likely to make any considerable difference, let alone brewers' current lack of promotional activity.
At the same time consumers are developing trust for the local producers, who practically have no promotion, but offer "fair and clear" beer with its specific taste. Beer is perceived as a regional, not a mass product; but while in the USA this trend was overridden by craft brewers, in Russia medium breweries profited from it.
Besides, the growth of the national self- consciousness is to a large extent connected with searching for historic roots, which resulted in higher popularity of nostalgic brands. In these areas the major companies do not have a particular priority.
Another trend of 2014 that fully developed in 2015 was lessening of beer package volumes. Usual for consumers packages of 0.5, 1.5 and 2.5 l have been actively displaced by formats 0.47, 1.42 and 2.37 l that currently account for a … of beer sales. This barely perceptible for consumers volume contraction was away to mitigate the growth of selling prices.
Where do the market leaders move?
According to the data of the regional statistics, the problematic area for Carlsberg Group is moving from the Siberia and Ural to Central region, or rather, its periphery.
Thus, the results of 2014 show a sharp decline of the company production in Krasnoyarsk Territory (nearly …%) and Chelyabinsk region (…%). A considerable downslide was observed as early as in 2013, and then it was speeding up until 2015, when the company closed the breweries in those regions.
In the Siberia Carlsberg Group has to compete not so much with international companies as with a lot of regional companies of various scales, which have managed to expand their production over this period, despite the general market reduction. Using their traditional channel of distribution, that is, the developed regional network of beer shops, they also succeeded in retail sales of packed beer. While in 2011 the share of independent brewers in the total volume of beer production in the Siberia ran at roughly …%, currently, it has reached …% under our estimation.
In the Ural region Carlsberg Group experienced deterioration of its positions due to market leaders' activity, … in the first place. Baltika initially dominated in this region, and as yet, despite the brewery shutdown still goes at the head of the competitors.
In the first half of 2015, the regional data by Rosstat show a slump of production at three breweries of the company in Central region, though the results of 2014 demonstrated their relative stability. Thus, over the first half of 2015, the net volumes of Carlsberg Group output in Central region shrank by nearly …%. Judging by the regional statistics data, the small Voronezh brewery decreased its output by …%, Tula brewery decreased its production by …%, and Yaroslavl brewery - saw a …% decline.
However, the company has probably improved its positions on major Moscow beer market, as the head enterprise in Saint Petersburg, which is the key beer supplier to the capital, on the contrary, for the first time in many years, increased the output volumes. These data also confirm the growth of company's market share in the retail network in Central region.
The main reason for Carlsberg Group downslide is rapid position deterioration of major middle-priced brands, in the first place, subbrands Baltika #3 and Baltika Cooler. Their positioning has been suffering for a long time, because of the on-going trend to the market polarization, which is also supported by the company, as it focuses on more marginal brands. Under our estimate, subbrand Baltika #3 does not belong to the key one in the company's portfolio and does not lead the market any more.
Other middle-priced brands of the company performed better. Brand …, belonging to the TOP-3 was also losing its weight, though this process was slower than the pace of the branch reduction. Strong beer Baltika #9 increased its natural volumes and enforced its positions in the strong beer segment competing with other brands. But this growth was unable to compensate for the sales decline of the umbrella brand.
Good stability in the new conditions was also demonstrated by big marginal subbrands Baltika #7 Exportnoe, and Baltika Razlivnoe. They made their contribution in retaining the natural volumes of Carlsberg Group and had their positive effect on the price mix in Russia. Under our estimation, over 2014, Baltika #7 Exportnoe became the key beer brand in the company portfolio and the major brand on Russian beer market, and the subbrand Baltika Razlivnoe proved to be one of most dynamically growing sorts on the market among the big brands.
Major license brands by company Tuborg and … experienced their share reduction in the segment. Sales and the market share of beer … were more or less stable. Particularly strong competition pressure is exerted on key brand Tuborg, which is no longer the unconditional leader on the market of expensive beer. Though the company tries to support Tuborg by youth events and launching new sorts (Boilermaker by Tuborg in 2015), the brand's problems are apparently connected to falling loyalty of young consumers to any beer brands.
The trend of forcing out federal economic brands by regional and nostalgic beer, influenced Carlsberg Group in full. The general growth of prices for beer is constantly decreasing their competitiveness, the brands' force in the cheap segment is reducing, and the consumers' loyalty is determined by beer price.
Reasonably priced brands by Carlsberg Group can be divided into to groups. The first group encompasses federal sorts Bolshaya Kruzhka, Zhigulevskoe, and Arsenalnoe. The second group includes nearly ten of strong regional brands with rather lower volumes, but summed up their volume is comparable to federal brands.
According to data from the market players, Carlsberg Group has lately managed to increase the market share of …, yet at the same time … has moved to the shadow having dropped the sales volume. … is gradually ousted to the periphery of the economy segment.
Instead, regional brands in general were rather stable, as their sales were shrinking twice slower than the market, in the first place due to the development of major brand … . The novelty of the company also made a considerable contribution. Beer Gorkovskoe is rapidly gaining popularity, combining low price with nostalgic taste and design. If the company tries to retain volumes due to profitability, this brand has good perspectives at the national level.
Efes Breweries International
Russian subdivision of Efes company managed to break away from the on-going market share fall and to finish 2014 much more successfully than other leaders, having cut its sales by …%. Such a good volume dynamics resulted from company's success in the first half of 2014. But after the market share growth a certain rollback took place. In the first half of 2015, the company's sales were already falling at the level with the branch, which, however, did not stop the company to enforce its position №2, and the marker share at a higher level, as the competitors were developing not better than the market.
In 2013, Efes brought its Rostov subsidiary operation to an end, and at the beginning of 2014, the company closed its brewery in Moscow. Judging by the regional statistics data for 2014 about a half of the lost volumes was reallocated to other subsidiaries.
Taking into consideration the powerful brewery in Kaluga, the decision concerning closure of Moscow brewery looked optimal in the view of the branch reduction. According to the data from the market players Efes in 2014, not only retained its positions in key Central region, but also considerably forced its competitors out of the region. This process continued in 2015.
The situation was different in the South of Russia, where the brewery closure was apparently connected to considerable deterioration of Efes positions. However, the significance of this region for the company was and still is not high.
The biggest company's sales reduction in 2014, if we consider it in absolute volumes, is in the first place connected to Volga region. The second by size market in Russia is very significant for Efes, where its positions are traditionally high.
In 2014, inexpensive mass brands provided for the stability of the company's market share and good performance in the natural sales volumes. The key brands, namely, … and .. experienced a moderate decline, while … beer by Efes in accordance to the general market tendencies fully offset their volumes. We should note that the average retail price of economy brands by Efes is higher than the average retail price in the lowest economy segment due to focusing on the federal brands rather than on regional ones. That is why the fluctuations of their share in the total sales volume do not influence the price mix as much as in case with their competitors.
According to our estimation the cutbacks of 2014 occurred in the first place because of Russian brands … and …, which, like other brands in the mainstream segment, are finding it ever more difficult to retain the popularity they used to enjoy before the merge of Efes and SABMiller.
This retail downfall was partially compensated by international brands, the portfolio share of which has increased considerably. Velkopopovicky Kozel has taken the lead in license segment sales, having retained its stability when Tuborg fell down. The sales are also increasing thanks to rather active advertising support. According to TNS Russia, in the second quarter of 2015, Velkopopovicky Kozel accounted for …% of commercials and …% of beer advertisement coverage.
There was a considerable growth of sales and market share of premium … and …, as well as Efes brand which is balancing between the medium price and premium segments...
In the first half of 2015, the upward trend of premium brands' market share was still observed, that is why we can speak of the positive price mix. The downfall has gained in momentum, but it is the sales of economy brands that are showing bad performance, while the middle-priced brands are stable. These changes were driven by the activity of Efes in the modern formats of the retail trade and intensification of the company's presence in … .
In 2014, the sales volumes of Heineken were behind the average in the branch, having shrunk by …% and the company's market share remained at practically the same level. In the first half of 2015, the distance became a little bigger, as the sales decreased by approximately …% according to our calculations. The downfall speedup started first in 2014, in the second half of the year, which created the high base effect, as a result the company's market share in the first six months of 2015 experienced a sharp decline.
The biggest contribution to Heineken sales is made by Volga region, thus the company is highly dependent on this region which gives about a … of the company sales. Comparatively low income of the population resulted in the heightened sensibility of the local market to the economic problems. Accordingly, Heineken felt the negative consequences more acutely than other producers.
Judging by the regional statistics data, by the end of 2014, one can speak of a 10% output decline at the key brewery of the company, namely, "Volga" in Nizhniy Novgorod. Besides, under our estimation, a considerable reduction took place in Saint Petersburg and the Far East.
In the first half of 2015, there apparently was the second wave of the production cutback in Volga region, but this time, at subsidiary Shikhan, located in Bashkortostan republic, while at brewery Volga the output fell by nearly …%. The brewery in Kaliningrad saw a …% beer output reduction under Rosstat statistics.
The share of economy brands in Heineken portfolio is still high against other branch leaders. However, the sales downslide has led to the price mix improvement, as one could expect. In tune with the general market tendencies, in 2014-2015, Heineken loss of the natural volumes was mainly associated with the abrupt sales fall of economy brands in the traditional and modern format of the retail trade. In our opinion, this fall could have been even more dramatic, if not for Heineken's well-timed focusing on development of many regional brands.
Regional brands Shikhan, Okskoe, Stepan Razin and others compete in the first place with production by independent medium producers, where the company's breweries are operating. Zhigulevskoe by Heineken has also won a big popularity among regional consumers. These brands are successfully traded in specialized draft beer shops. Besides, due to focusing on regional brands the company managed to keep the developed network of operating breweries, unlike its competitors, who have to close a lot of their plants.
Yet, at food stores, where mainly federal brands are sold, according to the market players' data, nearly …% of Heineken sales in the economy segments is accounted by cheap regional brands. The remaining …% consists of Tri Medvedya sales, which is one of the company's major brands. In summer 2015, the company went on enlarging its portfolio of economy regional brands, having started production of "Japanese" rice beer Okome at Amur and Khabarovsk subsidiaries.
In the mainstream segment of the beer market the bulk of sales of Heineken is formed by strong beer Okhota. This brand, like most of major middle-priced brands in Russia, experienced negative influence of the market premialization in 2014. But starting from the second half of 2014, even stronger pressure on Okhota sales was exerted by sharply intensified competition, in the segment of strong beer, though the brand still has the leading positions. Besides, according to the market players' data, there was a considerable reduction of …, with its plentiful sorts conflicting the narrowing shelf spaces.
Instead, the company succeeded in developing its premium brands, in the first place by the portfolio enrichment. The bulk of the company's sales is currently accounted by two equal (by volume) brands, namely, … and …. In our opinion, … sales remain stable against the background of the market decline and the segment growth, while Heineken sales went on growing.
Year 2014 saw a most important event, that is, the start of license production of beer Krusovice. This Czech brand is well-known to Russian consumers, as before launch on Russian market, it kept unrivaled leadership in the import segment. In 2009, every … beer liter of sold import beer was Krusovice. The dynamic brand growth allows assuming that by the end of 2015, beer Krusovice will … the three with … beer and … . The very active brand promotion on TV is also contributing to this. According to TNS Russia, in the second quarter of 2015, …% of the total beer advertising coverage was taken by Krusovice.
Further important event of 2014 turned out to be the production launch of three regional kvass brands at four Heineken breweries. At the plant in Kaliningrad output of kvass Ostmark was launched, Shikhan - in Bashkiria and Rusich in Irkutsk. The geography of kvass sales is as yet limited to the neighboring regions. All of the three brands are already present in Heineken portfolio and are used for output of local beer sorts. The entrance to kvass category will allow the company to load the productive capacities. Though analytics note that profitability of kvass sales is twice lower than that of beer.
Russian subdivision of AB InBev proved to be the least stable under the pressure of problems transnational companies faced, if we judge by the market share changes. Under our estimation, in the first half of 2015 the sales of AB InBev fell by …%. These reduction rates approximately coincide with the dynamics of 2014, when the company moved from the third to the forth position in the market leaders' list.
One of the key problems of AB InBev was fiercer struggle for the shelf space in supermarkets, where the company's positions were traditionally strong. In particular, big influence was exerted by Carlsberg Group that focused on this distribution channel. From the point of view of geography, this process affected AB InBev positions in Central region, where the main beer volume is sold via the trade networks.
Against the background of the fast reduction of the output volumes, last year saw further cutbacks of operating AB InBev breweries. In March 2014, the brewery in Perm was closed, and in November one more was closed in Angarsk, Irkutsk region. Accordingly, in these regions, there was a considerable production decline, by the end of 2014, as well as in Chuvash republic, where the plant was closed as early as in summer 2013. At the remaining subsidiaries, that undertook a part of deliveries, there was reduction of various scales, though most of them experienced downslides.
Basing on the regional statistics by Rosstat, in 2014, the brewery in Ivanovo saw a …% production decline, and in the first half of 2015, the rates of this decline …, which can be explained by falling positions of AB InBev in Central region. The output at Omsk subsidiary was shrinking roughly at the level with the branch decline, although the brewery undertook the deliveries of Angarsk subsidiary. In 2014, the brewery in Mordovia increased its output volumes by …%, which however was not enough to compensate for the lost volumes in Chuvashia, besides, in the first half of 2015, the output volume was cut by approximately …%. Volga subsidiary experienced a …% decline in 2014 and a …% growth in the first half of 2015.
As we can see, the Siberia has also turned out to be a problematic region for AB InBev. The reasons were stated above - the local producers are forcing transnational producers out of the market. Instead, in the neighboring Ural region AB InBev has somewhat strengthened its positions, according to market players.
As for the sales dynamics by the price segments, 2014 was the most difficult for economy brands, that were experiencing pressure from the regional producers. The company reacted to the sales decline in autumn 2014, when sort Tolstiak Zhivoe appeared in the retail. The label on the new sort reminded of the old popular advertisement featuring actor Alexander Semachev and supported the passing fashion for "live" beer. The subbrand really "revived" the sales of Tolstiak and changed the direction of the trend of its market share fall. Under our estimation Tolstiak Zhivoe already accounts for a … of the total brand sales. And the reduction of sales in the economy segment has slowed down.
Beer Klinskoe, supported by sales in big PET as well as Sibirskaia Korona, thanks to its original advertisement provided for relative stability in the middle-priced segment in 2014. But already at the year end, the company faced dramatic decline. Ukrainian mass brand Chernigovskoe partially compensated for the sales fall: its market share approached …% in the segment of the packed beer.
Fierce competition in the network retail and in Central region had adverse effects on the sales of marginal sorts by AB InBev. Here the dynamics of the company's brands was uneven. On the one hand, the sales figures were driven by beer Bud that virtually reached the market scales of … and …. However, the positions of "old" and relatively inexpensive brands were vacillating which had a negative effect on the company's market share in the premium segment.
Instead, AB InBev did well in selling import beer, in the first place due to contracting for distribution of the popular German brands Franziskaner and Spaten. After Heineken started contract production of Krusovice, beer Spaten became the biggest import brand in Russia, having a …% share in the segment.
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2Checkout.com Inc. (Ohio, USA) is a payment facilitator for goods and services provided by Pivnoe Delo.
1 Окт. 2015