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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.

InBev-Miller Deal Signals Tougher Merger Scrutiny In China

The Chinese government used a pair of distinguishing factors in approving Anheuser-Busch In-Bev's takeover of SABMiller PLC last month that warrant close scrutiny by multinational companies seeking to merge or acquire companies there, practitioners said.

For the first time, the Ministry of Commerce (MOFCOM) distinguished between mass-market and premium brands, and defined the geographic market to be anything smaller than China itself when conditionally approving a merger.

“If a merger or an acquisition triggers the threshold of merger filing in China, the parties should pay particular attention to the definition of relevant market, e.g. whether the proposed relevant product market should be sub-segmented as high-end and mass-market; and whether the relevant geographic market is regional taking into account the distribution area and the transportation cost of the relevant product,” Kate Peng, a partner and antitrust specialist at King & Wood Mallesons in Beijing, told Bloomberg BNA in an e-mail.

Refined Market Analysis

MOFCOM defined the relevant product market as beer, but segmented the market into “mass brands” and “mid-to-high-end” brands based on price, defining the line between them as 75 cents (RMB 5 yuan) per 500 milliliters, according to an Aug. 8 Jones Day client alert.

MOFCOM also determined that competition among breweries usually takes place at a provincial level within China, the first time one of its published merger decisions defined the market narrower than the national level, the Jones Day client alert said.

In a phone interview, Zhang Yizhe, a partner with Jones Day in Beijing said the decision was likely to set a precedent, particularly for consumer items.

“It could happen to other products, as well,”
Zhang said. “It makes sense from a certain perspective because under the antitrust law, products need to be considered as substitutable by consumers to be included in a single relevant market.”

An example might be mobile phones, Zhang said, with some consumers tending to purchase high-end ones and unwilling to consider low-end as a substitute. “The question is how large that group of consumer is,” she said. “If a sufficiently large number of consumers see high-end and low-end products as substitutes, they arguably should be included into a single relevant market.”

Province Markets Tapped

In its written decision, MOFCOM cited the ease of transportation as a consideration in setting the geographical market.

“As both AB InBev and SABMiller are active in the production and sales of beer in China, MOFCOM focused its assessment on the 24 provinces where the parties have horizontal overlaps,” it said in its July 29 decision. “Meanwhile, with the further improvement of the infrastructure, the transportation has become more convenient and the geographic scope where beer is sold tends to be expanded. This is especially true for premium/super-premium beer.”

The decision took note of China's highly concentrated beer market, where the top five brands consume 80 percent of the market, Jones Day said. Snow Breweries and AB InBev are the biggest and third-biggest players and have a combined share of 41 percent in mass brands and 52 percent in premium brands.

As a condition of the merger, InBev had to divest SBA Miller's 49 percent stake in Snow Breweries, which was done even before the formal merger filing.

“The combined entity would have substantial market shares in both product segments in many individual Chinese provinces, in some with combined market shares of more than 70 percent,” Jones Day noted.

More Scrutiny?

Going forward, foreign brands may be implicated in reviews that look at more segmentation, Jones Day said.

“For most products, foreign companies tend to offer higher quality and better service at higher prices, while most domestic Chinese competitors offer commodity or generic products and have to compete on price,” the firm said. “The beer decision thus may lead to narrower ‘high-end’ market definitions in which foreign suppliers are attributed higher market shares than in the overall product category.”

Companies, of course, do their own analysis and sometimes segment the market and take proactive steps before filings to improve their chances of regulatory approval for mergers, said Michael Gu, a merger and antitrust specialist and partner at Beijing's AnJie law firm.

MOFCOM has considered market segments in the past, he said — just not in cases where mergers were approved with conditions.

For that reason, “We would think it is quite normal and reasonable for MOFCOM to subdivide the relevant market in SABMiller/AB InBev case,” he told Bloomberg BNA in an Aug. 16 e-mail.

Outbound Investment

China has been on an overseas buying spree in the past couple of years, as its own economy slows from the breakneck growth of just a few years ago. Some analysts said the MOFCOM decision could affect outbound investment.

“As the decision on Anheuser-Busch In-Bev/SABMiller was published, it will serve as a reference for MOFCOM's merger review in the future,” Peng told Bloomberg BNA. “Moreover, the overseas antitrust authorities will also take it as a reference to some extent, when reviewing Chinese firms' merger or acquisition of companies overseas.”

18 Авг. 2016



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