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3-2019

Russia: Positions of Brewing Companies

The 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 brands

In 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 2019

During 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.

Russia. Baltika summarized H1 results

Due to the challenging macro environment in H1 2016 the Russian beer market declined by an estimated 2-3% compared to the same period last year. Further decrease in purchasing power continue negatively affecting the market development, which is caused by volatility of the economic situation.

Baltika’s volume market share was 34.8% (source: Nielsen Retail Audit, Urban & Rural Russia), representing a sequential 140bp improvement compared to H2 2015 but a decline of 120bp year-on-year. The market share improvement vis-á-vis H2 2015 was mainly achieved in the Modern Trade channel.

Baltika shipments declined by only 2% in comparison to the same period last year, being positively impacted by destocking among wholesalers and distributors in Russia in 2015.

We saw good performance of Zhigulevskoye brand (+1.6% share growth*), Baltika 9, Carlsberg (+1.1% share growth*) and energy drink Flash Up. Baltika 0 continues to increase the amount of sales volumes, being the undisputable leader of non-alcoholic beer segment. Last year’s newcomers, Neon Beer, Seth & Riley's Garage and a series of regional launches of the company also showed growth in volumes. The "Baltika" brand is the undisputed leader in the market, the five brands of the company are in the top 10 brands in the Russian beer market. In addition, the variety of Baltika brands in every form of packaging (in a bottle, a can and a plastic bottle) hold primacy in sales throughout Russia.

In addition, in H1 2016 Baltika Breweries has increased its market share in the draught beer channel by 5 p.p.* compared to the same period last year and moved from the third place (by results of FY2015) to #1 position.

In the first half of the year, Baltika has continued to focus on the development of key brands and support sports for the purpose of its development and formation of high culture of cheering for sports. Thanks to the brand Baltika 3 - the partner of the KHL Championship - the main trophy of the KHL took a tour of fame, trophy visited 11 cities in Russia and Belarus. With the support of the official sponsor of UEFA EURO 2016 brand Baltika 7 held a large-scale campaign that opened the Russian fans 7 different sides of the main event of the season. In addition, Baltika continues the partnership with the Russian Olympic Committee and was a partner of the "House of fans of the Russian Olympic team," in Rio de Janeiro, Baltika 0 started federal advertising company in support of the Russian team "We can do everything!".

Company brands traditionally actively support major summer events. So, Neon Beer brand became a partner of the SENSATION festival (Moscow) and the festival of electronic music and contemporary art PRESENT PERFECT (St. Petersburg) and Holsten brand for the third time has supported the festival German traditions Das Fest (Moscow).

In the first half company’s export continued to demonstrate positive dynamics - volume growth of 9% compared to the last year. A significant contribution from sales in the Asia-Pacific region, in particular by increasing the volume in the Chinese market. There is an increase in sales in European countries, largely due to the expansion of the range and output in the largest national network - for example in Germany. Baltika continues to purposefully develop sales of non-alcoholic portfolio. Positive dynamics in the Middle East shows the range of malt beverages; the geography of export of kvass Khlebny Krai - established a regular supply of the traditional Russian drink in North America: the United States and Canada. It contributed significantly to almost double the growth of energy drink sales Flash Up in Central Asian countries. Continued opening of new markets - this year we began shipping in Côte d'Ivoire, Pakistan, Burkina Faso and Argentina - one of the largest and most complex markets in Latin America.

Jacek Pastuszka, president of Baltika, executive vice president of Carlsberg Group, Eastern Europe:
- The slowdown in the decrease of the Russian beer market is a good sign; however, talking about a sustainable trend is premature. The market still goes down. We have a very strong position in the Russian market and we are satisfied with our six months performance. We have integrated Carlsberg Group’s strategy SAIL'22 in our current and strategic plans, adding those specific for Baltika activities which will enable us to increase business efficiency and improve the dynamics of sales in the Russian market.

Financial results of the Carlsberg Group’s Eastern Europe region:

Carlsberg Group’s net revenue in Eastern Europe grew organically by 8%, driven by a solid price/mix of 8% and flat total volumes. Reported net revenue declined by 15% due to a significantly negative currency impact, as all currencies in the region devalued substantially.

Operating profit grew organically by 19% and operating margin improved by 100bp to 15.9%. The improvement was driven by Funding the Journey initiatives, delivering positive price/mix and strict cost control, and was also helped by easy comparables.

The Eastern European beer markets continue to be negatively impacted by the challenging macro environment, especially in Ukraine and Russia. Our volumes were flat for the six months as we saw a deterioration in Q2 of -3% compared to +6% in Q1, when the impact of last year’s destocking among wholesalers and distributors in Russia was more pronounced.

***

Baltika Breweries, a part of the Carlsberg Group, is one of the largest FMCG producers in Russia. Since 1996, the company has been ranked Number One in the Russian beer market. Baltika owns 8 breweries in Russia and enjoys an expanded brand portfolio. The Company forms a significant part of the Carlsberg Group and its Eastern European region including Azerbaijan, Belarus, Kazakhstan, Ukraine and Uzbekistan. Baltika Breweries is a top exporter of Russian beer: Baltika’s reach includes over 75 countries; the company accounts for over 50% of all Russian beer exports. In 2015, Baltika's products became available in Romania, India and New Zealand. Its brands have won over 670 Russian and international professional and consumer awards.

17 Авг. 2016

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