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. ...
Fitch affirms Distilleries Company of Sri Lanka at AAA
KEY RATING DRIVERS
Leading Alcohol Manufacturer: DIST continues to be the market leader in alcoholic beverage production in Sri Lanka due to its strong brands, which drive demand and access to retail points across the island. DIST’s product portfolio includes its mass-market Extra Special Arrack brand, which accounts for the majority of sales, and licensed international brands channelled through its subsidiary Periceyl (Pvt) Ltd. As of the latest published statistics, DIST accounted for around half of Sri Lanka’s total alcoholic beverage production and 72% of the country’s total arrack production.
Spirits to Regain Market Share: We expect the trend of drinkers switching to beer from hard liquor to reverse in 2016, as taxes on the alcohol content in strong beer have caught up with those on hard liquor (spirits) after increases in excise taxes in October and November 2015. Taxes on strong beer increased 70% while taxes on spirits increased 24% from October 2014 to November 2015. Arrack production declined 3% annually over 2011 to 2014, resulting in a smaller share in alcohol sales for arrack, DIST’s main product. However, Fitch expects sales of spirits to grow in the mid-single digits over the next three years, which will help the segment to regain lost market share.
Demand to Grow: We expect demand for alcohol in 2016 to rise as tax-led price increases are likely to be absorbed by rising disposable income. Disposable income is likely to rise, driven by higher per capita income along with the mid-single digit economic growth for Sri Lanka, and following the recent increase in public-sector pay, higher tax exemptions for private-sector employees and reduced essential-goods prices.
Resilient Operating Profile: Profitability remains healthy, which is reflected in the EBITDA margin continuing to be over 30% at 31.4% in the financial year ended 31 March 2015 (FY15). EBITDA margins are supported by DIST’s ability to pass on tax increases to the consumer.
Regulatory Risk: The industry is highly regulated, with a complete ban on advertising and licensing across the value chain acting as a barrier to entry. The industry is also characterised by high and frequent tax revisions, which put increasing pressure on industry players. This risk is partially mitigated by liquor’s contribution to government coffers, with Fitch estimating that liquor taxes will account for 5.1% of total government revenue in 2014. Successive governments have consistently used taxes on alcohol to boost revenue to bridge budget deficits.
Fitch’s key assumptions within our rating case for the issuer include:
– Revenue to grow by mid-single digits over the next three years
– Relatively stable EBITDAR margins driven by lower operating costs and the new bottling line
Negative: Future developments that may, individually or collectively, lead to a negative rating action include:
– Consolidated financial leverage (measured as adjusted net debt/EBITDAR excluding Melsta Regal Finance Ltd (MRF)) increasing to over 1.5x on a sustained basis. (end-March 2015: 0.9x)
– Consolidated funds flow from operations coverage of interest and fixed charges such as operating lease rentals, excluding MRF, weakening to below 4.0x, on a sustained basis. (end-March 2015: 6.7x)
– A structural change in the domestic alcoholic beverage industry that considerably weakens DIST’s competitive position
Positive: There is no scope for an upgrade since the company is at the highest rating on the Sri Lankan National Rating Scale.
At end-September 2015, the group (excluding its finance company subsidiary) had LKR2.3bn of cash and LKR12.5bn in unused facilities to meet LKR5.4bn of short-term debt. In addition, DIST has good access to bank funding because it is one of the larger corporates in Sri Lanka with a resilient cash flow.
26 Фев. 2016