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 giants struggle in China market chill
Last week, China Resources Beer announced plans to acquire SABMiller’s 49 per cent stake in China Resources Snow Breweries, a joint venture with the English beverage giant since 1994 that has grown to become China’s biggest brewing company.
The move comes after Anheuser-Busch InBev, the world’s largest brewer, confirmed an agreement late last year to acquire rival SABMiller for a record US$121 billion. Together, the brewers account for a third of the beer sold worldwide and half the industry’s profits.
With the deal undergoing antitrust scrutiny in the United States and likely to be reviewed around the globe, ABI has promised to scale back its market share by making divestments. It has already announced the sale of SABMiller’s majority stake in MillerCoors.
That’s the likely reason for CR Snow’s low sale price of US$1.6 billion – a 58 per cent discount, according to Jefferies. Analysts say the sale will prevent one major player from gaining a new advantage over the rest of the pack.
“Previously, some investors speculated that if ABI-SABMiller kept the 49 per cent shareholding in CR Snow, ABI and CR Snow together would have close to 40 per cent market share and could lead the industry in margin increase,” said Jefferies equity analyst Kevin Chee.
The advantages of scale and the search for growth have fuelled steady consolidation in China’s beer industry, boosting the market share of the top five brewers from 47 per cent in 2005 to 71 per cent in 2014, according to Macquarie Research.
Beer remains the country’s number one alcoholic beverage. With a massive population drinking more than the global average per capita – though considerably less than the thirsty folks in Germany, the US and Japan – China accounts for some 24 per cent of global beer consumption.
That should mean good times for brewers. But beer consumption has been on a steady decline since 2014, resulting in a 5.1 per cent drop in production last year. Analysts have laid the blame on just about everything: slowing economic growth, fewer dry and sunny days, improving health awareness, and the rising popularity of wine and baijiu.
“The big players used to be able to leverage their scale to grow their revenue and profits rapidly,” said Daiwa analyst Anson Chan. “But now that consumption growth in key categories has slowed, and because consumer tastes in terms of products and purchase methods are changing, the Goliaths face an uphill struggle to realise the kind of revenue momentum they have seen in the past five years.”
While some factors are in brewers’ favour – like the cost of imported barley, which stands around 10 per cent cheaper than a year ago – those might not last, and meanwhile, the soft demand environment is obstructing growth in the beverage’s average selling price.
Macquarie analysts point out that CR Snow, among all major domestic brands, has the lowest pricing in each segment, giving it the most upside potential with prices tight but consumer demand shifting toward premium product lines.
With CR Beer poised for a post-acquisition earnings boost and also enjoying recent success in capturing market share – it now holds 24 per cent, according to Daiwa. Analysts tip it to sustain its sales performance despite the downturn.
The prognosis is far less positive for the industry No 2 , Tsingtao, whose recent sales volumes have underperformed the market as its market share has stagnated. Already priced at the higher end of the range, the famous Chinese brand has little room to move.
“We believe Tsingtao will remain a victim of market-share losses to international brands in the premium beer segment in China in 2016,” said Daiwa’s Chan, also noting that the company’s acquisition activity had “ground to a halt”.
“Tsingtao formed a joint venture with [Japanese brewer] Suntory in 2013 to expand in eastern China,” Chan observed. “However, Suntory sold its stake in the JV to Tsingtao [in a deal announced last October] after years of loss-making, leaving Tsingtao with the losses to deal with.”
With foreign brewers getting cold feet and imported beers still accounting for less than 2 per cent of beer consumption, it’s the enemy rising from within that should worry China’s brewers the most. Among alcoholic beverages, baijiu’s volume share rose from 12 to 19 per cent between 2008 and 2014, as beer’s slid from 84 to 75 per cent.
9 Мар. 2016