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. ...
Malaysia. Brewers may need to be innovative
The new excise duties regime that was announced in March may eventually cause these companies to rethink their strategies to target a lower net alcohol content in their drinks, said industry observers.
What’s notable is that Carlsberg Brewery Malaysia Bhd’s managing director Henrik J. Andersen concedes in its post-AGM press conference that the latest hikes in excise duties is now pushing beer towards the edge of what is still considered as affordable in the country.
“We had to increase our end prices to the consumer after the excise duty hikes were announced. But we did not pass on the full (excise) tax to the consumer and the reason was because we wanted to ensure that beer remains affordable in Malaysia. Affordability remains an issue here,” Andersen pointed out.
“On average we passed on roughly two thirds of the recent excise tax increase. I do believe the Government is aware of the current spending power of Malaysian consumers and we continue to be in a dialog with the Government to try to avoid further tax increases,” he said.
He added that there was no immediate plans to change its strategy but the new structure may open up some opportunities eventually around lower alcoholic content products.
Andersen also said that excise duties in Malaysia were now considered the highest in the world, based on affordability levels; and second-highest after Norway based on absolute levels.
Perhaps the reason why industry players are still speaking up after all these years is because the net disposable income levels have not really caught up with the excise duty increases.
The Malaysian Institute of Economic Research’s (Mier) consumer sentiment index (CSI) is also still hovering at its record low of 72.9 in the first quarter of 2015, that is still below threshold level of confidence.
Commenting on the MIER figures, Andersen noted that when the CSI was below 100, it also implied a consumer depression while a figure above 100 meant more optimistic consumers.
“When compared with the rest of the countries in South-East Asia, all countries in the region have a CSI figure of above 100, typically ranging between 110 and 120.
“Thus, consumers in Malaysia are not very optimistic and are feeling the pain of price and tax increases that has taken place,” he said.
To recap, the new excise duties that were announced about a month or so ago saw beers with higher alcohol content being charged more in excise duties.
The new structure will now take into account the alcohol content to determine duties that are paid.
It has to be noted that the new structure seemingly targets the majority of industry sales in Malaysia or “mainstream beer” which has a 5% alcohol content such as the popular brands that are readily available in the shops.
These mainstream beers had seen a net hike of about 10% with the latest round of excise duty increase, reports said.
Guinness Anchor Bhd (GAB), which will soon be known as Heineken Malaysia Bhd, said in a statement after the excise increase that the price adjustment would vary for different products based on the alcohol content.
“We expect the average consumer price increase for our key brands to be in the range of 2% to 5%. For certain brands like Guinness Draught, Anchor, we have adjusted the prices downward as a result of a marginal drop in excise duties on these brands,” said GAB.
In more technical terms, the latest excise duty announcement sees duties for beer being replaced to RM175 per 100% volume per litre from the existing duty structure of RM7.40 per litre, while the 15% ad valorem (according to value) tax has been removed.
Asked at the press conference on the impact of the excise hikes that have just been announced thus far, Andersen said that it was still too early to gauge its impact on the industry.
While the latest increase was done only after a pause of 10 years since the last increase in Budget 2006, it also has to be noted that the excise duties were hiked for three straight consecutive years before the 10-year pause in Budget 2004, Budget 2005 and Budget 2006.
Experience from other countries also show that pursuing continual hikes in excise duties may eventually cause a reverse in total net amount of excise duties collected as a whole, contrary to its intended effect of adding to Government’s coffers.
Carlsberg, which owns about 25% associate stakes in Sri Lanka-based Lion Brewery (Ceylon) PLC, said that such phenomenon happened in that country when the government there announced the excise duty increase.
“We were a bit setback at the end of last year as the government there announced two very big excise tax increases and we have seen volume dropping after that but we have also seen some volume starting to come back,” he said.
“In fact, what has happened after these two tax increases is that their total tax revenue declined.
“And this is not uncommon as we see this in a lot of countries in that increasing the tax rate does not necessarily mean the government will collect more taxes,” he added.
Carlsberg’s latest annual report 2015 shows that it paid RM683mil (or 41% of its financial year 2015 revenue) in excise duties for products brewed and sold in Malaysia and Singapore.
25 Апр. 2016