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 global outlooks of the legal market of cannabis are excellent. It is possible to simultaneously imagine dry law repeal and craft brewing boom but not in one but in several consumer categories. For alcohol is contained in liquids and cannabis derivatives can be in three physical forms.The value of legal market of cannabis and its products can reach 10% of the world beer market in five years, and in 2030-2040 even reach the same scope provided the current rates of legalization and development of market infrastructure remain at the same level. Cannabinoids are actively integrating into the food industry from chewing gum to beverages deforming the pharmaceutical and alcohol markets, they influence the trends of healthy lifestyle and beauty. ...
Review of Russian Beer Market: Research of Euromonitor International
According to preliminary data of the company “Euromonitor International”, the beer market in Russia decreased by 8% in 2015, reaching the figure of 8.2 billion liters. The difficult situation in the country’s economy continued negatively affecting the consumer purchasing power, prompting consumers to choose cheaper goods, to reduce purchase frequency, or to refuse the purchase altogether. The problematic situation in the domestic beer market can also be confirmed by the fact that over the past two years ten large breweries were closed down in Russia, including two brewing plants belonging to the beer market leader – “Pivovarennaya Kompaniya “Baltika” (Baltika Breweries)” LLC (Saint-Petersburg).
In 2015, for the first time in many years, the excise tax on beer remained unchanged. However, the significant weakening of the ruble, which took place during 2015, served as a counterweight to the relative tax ‘relief’ – it did not leave the beer industry unaffected and had an impact on the average beer price increase, despite beer of local production making up for the largest part of the market.
Activity in the legislative process also played a significant role in the past year, in particular the ongoing discussions on prohibition of PET containers. In the summer of 2014 the Russian State Duma passed a bill in the first reading on phasing out retail sale of alcohol in PET bottles, which mainly involves sales of beer in big plastic bottles. In the original version of the bill, the prohibition of sales was to come into effect in January 2015 for alcoholic beverages with ethanol content over 6% in PET containers over 1.5 liters, in July 2015 for alcoholic beverages with alcohol content over 5% in plastic bottles larger than 1 liter, and at the beginning of 2016 for products with alcohol content over 4% in bottles over 0.5 liters. However, in early 2015 the law did not enter into force, and in April of the same year the government voiced the idea of limiting the bottling of alcoholic beverages in PET containers larger than 1.5 liters starting with July 2016, followed by a gradual reduction of the permitted volume to 0.5 liters. Consensus on solving said issue has still not been found, but regardless, the ongoing activity serves as a signal for producers that sooner or later PET containers will no longer be used for alcoholic beverage bottling.
A strong reaction among the players of the beer market in 2015 was also caused by a bill on introducing the Unified State Automated Information System (EGAIS) on January 1, 2016. Small breweries, producing beer in volumes less than 300 thousand decaliters per year, were especially heavily affected by the matter, since according to the bill such breweries will be exempt from the obligation to implement the EGAIS in production, but will be required to introduce it for storage and distribution of the product. While for major beer producers the costs of implementing the EGAIS may not be very significant, when it comes to smaller breweries, with the company’s turnover being comparable to the expenses on implementation of the system, it will bring them to the edge of survival. Those changes could lead to the segment of small breweries, which specialize, among others, on craft brewing that is rapidly gaining popularity, being ruined on the stage of development. However, at the end of February 2016 the State Duma announced the preparation of a bill exempting small breweries from the obligation to join and implement the EGAIS.
As practice shows, in times of crisis consumer markets are prone to consolidate in favor of big market players. The tendency is caused by the fact that major players are more resistant to market changes due to usually high brand awareness as well as impressive working capital. Nevertheless, the situation in the Russian beer market is not as unambiguous; over the past few years the total share of the major market players was decreasing. While in 2012 the overall share of the leading four (“Baltika”, “Moscow Efes Brewery” CJSC, “United Heineken Breweries” LLC, and “Sun InBev” OJSC) almost reached 78% in physical terms, in 2015 the total share of these companies decreased to 72%.
While the share of international companies was decreasing, the share of regional breweries was growing along with an increase in the number of small breweries. While large international companies were forced to carry out restructuring, including closing down plants, regional beer plants were investing in upgrades and growth of production capacity. And while legislative initiatives at the federal level had a significant negative impact on the development of beer industry as a whole, local and regional authorities were contributing to the development of regional breweries. Said trend is explained by the fact that in difficult economic realities excise tax revenue becomes an important regional budget item and, therefore, the government’s interest. Another distinctive feature of regional players is that a significant share of beer sales is accounted for by the bottling segment and mainly moves through specialized beer retail. Particular attention should be paid to the fact that specialized beer retail, which has been demonstrating steady growth rates in the recent years, is expanding not only through increasing sales outlets, but also through broadening supply and aiming to form a unique assortment. It leads to regional players getting on the food shelves in their regions and beyond, due to specialized beer retail.
The positive dynamics of small breweries against the overall market decline are also due to the ongoing growth of interest in the craft beer segment. Development in the segment is confirmed by the fact that with the continuous and rapid decrease in the light beer (lager) segment, the segment of dark beer (craft beer often being classified as such) showed positive growth – even though insignificant, at 1% - in physical terms. Russian consumers have been getting increasingly sophisticated in the matter of beer choice in the recent years, and have been favoring craft alternatives over mainstream brands, the former having individuality and uniqueness. The average price of craft beer is normally higher than the price of beer of traditional, well-known brands, since craft brewing has a smaller scale and thus higher costs due to lacking economies of scale. However, even despite that more and more consumers are inclined to consume craft alternatives, thus emphasizing their taste individuality. The constantly growing interest towards craft beer came to us from the Western world, and with the constant market fall over the recent years, this trend, albeit not strongly expressed, has positive influence on the beer market dynamics.
The current crisis situation, along with increasing prices, decreasing disposable household incomes and a number of legislative initiatives addressed to the beer market, suggests an uncertain future and does not promise prospects too bright for the beer market. According to preliminary estimations of the company “Euromonitor International”, in 2015–2020 the compound annual growth rate in the beer market will amount to -1.5% in real terms.
The question of PET container ban for alcoholic beverage bottling is still open. However, the legislative activity around it indicates that in the near future the law will probably be passed, and that will not leave beer manufacturers unaffected, given the fact that at the moment almost 50% of the retail beer market is products in PET.
Regarding the Unified State Automated Information System, according to a number of sources it has already had numerous failures despite having recently been implemented. What gives some hope is the fact that the government announced an upcoming bill that would free small brewing companies from the obligation to implement the EGAIS. If said law comes into force, it will ease the work for the smaller players and will give them the opportunity to develop further.
As for regional breweries – both large and small – oriented to craft production, they will continue to develop and will partly negate the ongoing beer market decline. If regional authorities continue supporting local regional producers, which contribute to the budget through the excise tax, and smaller manufacturers are exempt from the additional costs associated with the EGAIS, it will create the opportunity to alleviate the overall negative outlook of the beer market.
18 мая. 2016