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. ...
India. Bira reached out to us for funding: AB InBev’s Pedro Aidar
World’s largest brewer Anheuser-Busch InBev started operations in India in 2007 under a joint venture with Ravi Jaipuria of RJ Group. Nine years since, the company is gearing up for its solo journey after breaking up with Jaipuria in 2015.
Pedro Aidar, its newly named president for India and South Asia, wants to create a niche for the AB InBev brands such as Budweiser, Corona and Hoegaarden while he will look to capitalize on network and breweries of SABMiller to make Budweiser widely available. SABMiller and AB InBev are in final stages of a merger that will create a $100 billion company in October.
In an interview, Aidar spoke about the Budweiser business being unviable in India, the company’s vision to reduce alcohol content in its beverages and expectations from the Indian market. Edited excerpts:
What do you think of Bira?
Fantastic idea. You speak to young people like in Delhi—it’s all in their minds. It’s the one place where Bira really started well. When you look at their other two markets—in Bombay and Pune--not so much. But I think Ankur Jain was genius in his proposition. I think it’s a beautiful brand.
I think I am the wrong person for you to ask that because I love beer. If the beer is fresh and it is brewed with love, it is hardly a bad beer. The one thing that for me is very smart is if there is one taste that you see is very acceptable in India is wheat and what he sells most is his wheat brand. I think he was brilliant on this. He really got the right liquid.
I think Bira is facing issues on the supply and investment side. For a company like Bira which is a startup and has created a niche for itself, what is the advice that you have for them?
While starting any start-up in any market in the world, there is a combination of making sure that you understand your own idea. Because there are geniuses who have brilliant ideas but they don’t know how to convert that idea into a tangible business. So, make sure that as your venture grows, you understand what your business is. When you line up your investors, you understand that how are you going to grow from pure sales into a reason to believe that this business will be viable.
There are three stages--- the great insight, how that insight becomes a business, how that business will be viable. They don’t happen at the same time.
Would you put money into these companies, ideas, start-ups?
We are doing that. Actually, the way that we do this at the corporate level, we created a separate office. What they are doing is identifying startups all over the world and investing in them. It’s called ZX Ventures.
In India, we don’t have any examples as yet. I am still in-charge of Vietnam till December. In Vietnam, we are looking at things like this, but India not yet.
Do they plan to enter India?
The way it works is they are constantly monitoring things. So, if they bump into something--- or put it like this Bira is looking for funding. They actually did reach ZX ventures.
So, you are saying Bira did reach out to ZX ventures?
They did receive (a proposal for investment in Bira)...I can tell you that.
They asked me what do I think? But I said I love the idea but I am conflicted to make any comments to you on your end. On my end, I am already clocked. Back to the thing I was telling you about the advice, right now I can tell you that back to idea, business viability, Budweiser is not viable in India. Before I look into any other proposition, Budweiser must be viable in India. There is a reason I say that. Corona is imported. So, for my imported business, I have a viable business. For my local production, I still don’t have a viable business.
What are your expectations from this market?
So, the view of the market is same as before like the prospects in India when we look at economic prospects, the demographic prospects, culture of the place, it is a place that there is all set for a beer industry to be very prosperous and very successful. For us, it is a challenge and now things have changed with SABMiller and India stands very fortunate because when I was in China, I was working on expansion for Asia. And we knew that we need to do something more meaningful in India to have a more competitive position and basically I sign up coming to India before knowing that the SABMiller deal would ever be possible. So, now that this deal will be completed very soon is a blessing, knowing that the answer I didn’t have before on how to jump from 2-3% market share to more meaningful position. Now, I have the answer and also the fact that the portfolios of both the companies are very complementary.
In my view, it is a super exciting platform.
In terms of network, breweries, how are you going to integrate the operations?
There is one thing that comes to my mind upfront like the very fact that SABMiller have 10 proprietary facilities in India. I can cross-brew Budweiser because we have only two operating facilities--- one that we own and one that we have a tie-up. So, for example, my Budweiser is sold in Calcutta, which is shipped all the way from Hyderabad and in the same way the Budweiser in Delhi comes from Pune, the Budweiser in Haryana comes from Hyderabad. Now, SAB has a brewery 2 hours from here. Now, you can get a much fresher Budweiser. You don’t to transport the beer all the way around. So, that itself is a big opportunity. So, cross-brewing is something that is going to be explored from the beginning.
Your company has a vision of bringing down the alcohol content in beer over a period of time. Do you think that will work here?
Our commitment globally is to foster responsible consumption. I’ll give you an example—We have a fantastic event in July in Hyderabad called Tomorrowland United. There is the Tomorrowland festival in Belgium and we have four-five events around the world in which we do a massive party. It’s a live telecast from Belgium. Because it was live, the time-zone was really late night—early morning in India and we receive authorization from Telangana excise to have that party going. And the party was authorized to 4 am in the morning. Half-past midnight, I told them to stop selling beer because basically, people had more than they should have. The one thing that is unfortunate is that I don’t have Budweiser Non-Alcoholic in India because that’s what you do at that moment. You are in your party mode, there is other Budweiser for you, please continue to enjoy but no more alcohol for you.
And people stayed back?
Yes, people left at 4:30 in the morning.
Not that I want to reduce anything but there is a beverage for every occasion. For instance, I like sports. I don’t want to have alcohol with me. Although, if you think about who sponsors the marathon in Munich—Edinger alcohol free. Actually you know Gatorade—Gatorade is a category of beverages isotonics. The largest selling isotonic in Germany is Erdinger alcohol free. So, then the thing is if you are in a night club or if you are having a party, you want alcohol but if you are just enjoying the day, you want to remain active, you want the flavour, you want a natural beverage but not necessarily alcohol. So, this commitment that we have is to foster lower alcohol offerings so that you can enjoy your day in a more rounded manner as opposed to having a 4% offering or an 8-9%. It is not about lowering how much alcohol is in the same liquid as it is to ensure that you have a whole spectrum to choose from—what drink suits what time of the day.
It is very contradictory to what Indian market is. A majority of people here prefer extra strong beer!
I think we had the discussion back in the day. What for me is the set thing about India is unfortunately there are millions and millions of people who live very tough life in this country. And then it gets to the end of your day is the moment when you just want to get away from your reality and have a moment of escapism. You want something stronger to just knock me down and you can have an escape from your reality.
It’s not that people like strong alcohol. It’s probably they don’t like the reality they live in, they want an escape.
In this scenario, how do you see your products gaining popularity in India?
The good thing about India is that having 1.2 billion people when you think about the people more affluent—or probably 6-7% of the population, you are talking about 90 million people. If I want to sell lower alcohol beer, I need to understand who I am targeting, what occasion I am targeting. So, for sure, I am not going to sell beer in Safdarjung, 5’O clock in the afternoon when people are just stopping their motorbikes, looking to drink. It’s about understanding what consumer I am targeting, where I want to place my brands.
But, that will be niche.
I won’t say it is niche. It is very targeted. That’s how we would like to position it.
Also, primarily India is a whiskey market. What you are trying to do is completely new here. When do you see this turning out to be a big market for you?
I won’t say that Indians only like whiskey but whiskey is mostly what you got here. What I see as the opportunity is as I understand the consumer and things that people would like but they don’t have them available. Make them available. So, I won’t say that this is a whiskey market but for sure whiskey companies, India is their crown jewel but it is not because people only drink whiskey but probably because whiskey is the most offered beverage here.
What are the new products that you plan to bring to India?
When I just look at the potential that I have today with Budweiser, Corona and Hoegaarden and very soon hopefully the entire portfolio of SAB, I would say that for the moment, there is great ammunition to cater in this market.
Five years from now, what kind of market share, revenues do you aim in India?
I want to grow. But at the same time, I recognize I have very strong competitors here. So, I want to grow. I can give examples like in case of China, we started very small, today we have 19% market share. We have been able to grow between 1 and 1.5 share points and I consider that a very successful operation, to give you an example.
For me, what is very important if you look at the public filings available from SABMiller, you see that the company today is not profitable in India. So, before I get big ambitions in terms of expanding volumes, it must make sense for the shareholders that we grow a business that is profitable.
15 Сен. 2016