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. ...
Beer market of Ukraine 2010
In 2010 the Ukrainian beer market has stabilized but the recession changed the sale structure of the leading producers notably. The market has become more polarized and dynamic, we saw new economy and premium brands. The leaders’ reaction to the trends were different which yielded different results, and in general small breweries showed a good sale increase.
Independent manufacturersThe market analysis
In 2009 the Ukrainian beer market condition changed from stagnation to decline due to the economic recession. By our estimation based on the trade balance data, the market declined by 7% to 267.7 mln. dal. The first half of 2010 saw the beginning of stabilization tendency – the trade balance fell only by 2.4% compared to 2009. By the end of 2010 one can expect retaining of the volumes and even a minor growth of the market due to the steadily hot weather in July and August.
The dynamics of the retail beer prices increase against the pre-crisis period has slightly slowed down, but still remained high. Thus, in spite of the negative natural indices of 2009, the Ukrainian beer market by value has grown by about 6% to 18.1 bln. hrn. The stabilization of the sales in the first part of 2010 meant market increase by value by about 15% to 10.6 bln. hrn.
In 2009 because of the slump of hrivna the beer market in dollars decreased by 30% approximately to $2.3 bln. The six-months market dynamics in the USA dollars depends on the yardstick as the interbank hrivna course in 2009 differed from the official one considerably. Thus, accounts based on NBU course show beer market growth by 11% in the fisrt half of 2010 and if we take the interbank course the market growth is 15% to $1.33% bln.
Under the condition of hrivna stability the beer market increase in dollars in the second half of 2010 will continue exceeding the increase in hrivnas, which is connected to the slump of the national currency in August-November 2009 and its subsequent restoration. By the end of 2010 Ukrainian beer market can reach $3 bln., which will be still less than in 2008.
In 2009 the retail beer price grew by 13%, which was approximately at the level with the inflation rate of 12.3%, but exceeded the groceries retail prices rate (10.9%). All components in the structure of the retail price for beer have increased. The most significant among them was the raise of the excise rate component, which amounted to 47% of the total volume of the average price. Besides, by our estimations the producers' price markup has grown considerably (+…%), at the same time the cost value of beer production was not growing so fast (+…%). The net distributors' and retailers' price markup has practically remained the same (+…%). VAT has grown in proportion to the retail price i.e. by 13%.
About 10% of beer produced in Ukraine is exported and nearly 80% of this is claimed by Obolon ltd. In 2009 the beer export shrank by 3,2% to 34 million dal because of exports to Belarus and Moldova reduction. Russia, being the major consumer of the inexpensive production, even somewhat increased its purchases. But the first half of 2010 shows a negative dynamics, mostly due to decrease of export to Russia. However, both the increase and decrease were caused not by the market processes but by stock building by Russian distributors at the threshold of the excise raise. The same factor is likely to lead to even lower final showings on beer export in 2009.
The import of beer into Ukraine is comparatively small, i.e. 1% of the market by volume and about 2% by value. Besides, more than half of supplies from abroad is claimed by Russian brands, for the most part by company Efes. In 2009 against the background of the premium segment reduction the import went down by 24% to 1.45 mln. dal. However the first half of 2010 saw an unexpected growth of supplies almost in all the directions. The import rose by 33% to about 1 mln. dal. One can see that beer consumers with high income seek new preferences. But in our view, the import growth is kept down by inadequate positioning, thus in retail medium price brands "Stariy Melnik" and "Nevskoye" are more expensive than the licensed "Miller".
Significant changes in the development of price segments could be seen during the year. It is now possible to talk about polarization of the beer market, as in the first half of 2010 the shares of cheap and expensive brands grew. This change took place, accordingly, at the account of mainstream segment, which includes the mass brands of the leading companies. However, we can say that the economy segment has stabilized after an upsurge, and the premium segment has seen growth tendency. Hereafter the redistribution of shares is viewed taking into consideration only competitive positions and new brands launching. But in the context of market polarization Ukrainian consumers' higher initiative is evident; their choices have become more rational and definite.
In the regional section the growth of the economy segment has taken place at the account of the mainstream one practically all over Ukraine. It was less obvious in … where the mainstream has secured its positions and comparatively high market share. The redistribution of beer sales in …, where the low price share is traditionally high, was not significant either. It is interesting to note that these two cities had the highest growth in the premium segment which had lower share growth in …, …, and …. The highest increase of the economy segment could be seen in …, …, … and ….
In absolute indices the changes in the shares of the segments mean considerable, nearly …% growth of economy sorts sales and retaining the premium sorts sales at the same level. At the same time the mainstream lost about …%.
The package segment has also seen some market polarization. The sales share of beer in 2-liter PET bottle has grown, as the consumer can economize on buying beer in a bigger package. The beer demand has become less impulsive, for example the beer drinkers buy stock of beer in supermarkets more often.
The liter bottle saw reduction of its share due to the cheaper offer. At the beginning of the season, the brewing companies attracted consumers to their brands by extravolumes of PET package - 1.2, 1.25 liters at the old price. These volume-restricted production-runs have taken up some of the sales of beer in 1-liter bottle. As the bonus package allows to keep the price positioning of brands unchanged, it is obvious that it will be widely used by the biggest companies till they regain their production volumes. Thus this segment which accounts for practically all of the segment "others" can be considered a part of 1-liter PET.
Besides, 1-liter PET in the traditional distribution channels had to compete with the "live" (unpasteurized regional) beer of the same volume package in specialized retail outlets (this format has not been taken into consideration in the data on the diagram).
The market share of the glass bottle and can of 0.5 liter has went down a little, which can be associated with the rationalization of consumption, banning of drinking beer in the streets and competition with the specialized retail. Moreover the market share of glass bottle of 0.33 liter has also reduced. The can of 0.33 liter in which beer "Obolon Premium" was once exclusively introduces, has practically disappeared from the turnover.
The regional picture of market segmentation according to the package was obviously determined by the changes in segmentation by price. The share of PET of the volume 1.2-1.25 l increased abruptly in all key markets as consumers from all over Ukraine responded gladly to the offer of the leading manufacturers to economize. The share of PET of 2 l also increased everywhere but the most abrupt increase was recorded in … and …, and bottled beer sales underwent the greatest reduction in these cities. The share of canned beer market reduced everywhere, to a lesser degree in … and …, to a greater degree in …, … and ….
Future trends of the Ukrainian beer market will mainly depend on the general level of public wealth and beer affordability. The market can experience negative influence by the prospective malt price growth and unexpectable steps by the Government which can raise the taxes against the background of budget deficit. The latest excise raise from 0.6 to 0.74 hrn./l took place in July, 1, 2010 and now the excise share comprises approximately 10% of the beer retail price. The branch can also face the risks of supplementary measures introduction for the market regulation, such as prohibition to sell beer at night, licensing of trade, administration of minimal trading floor-space, et cetera.
Considering the income reduction, Ukrainians did not only begin to drink less beer but switched to its inexpensive sorts actively. The companies could not ignore this trend and moved the marketing focus to the inexpensive brands. That is why business competition in the economy segment perceptibly increased and it underwent considerable changes.
The 2009 breakthrough is by all means "Ziebert" beer. It is necessary to point out that the name itself was known to many Ukrainian consumers and was associated with niche and not cheap sorts of "Ziebert Collection" which were practically not advertised and could not make a claim for a notable market share. The recession probably made the marketing specialists of the company find a rational use for the young brand. Though Obolon company already had economy "Desant" in its portfolio, but the stake was placed not on this sort. Ukrainian consumers were offered the cheapest beer among the mass sorts. The brand launching in March, 2009 took place with the minimal marketing budget and was set virtually without advertising. The stake was placed on the advanced distribution system, price and curiosity of Ukrainian beer lovers. TV broadcast promos were released only when "Ziebert" began providing significant sales result and the success of the project "German quality - Ukrainian price" became obvious.
The brand quickly won a sizable market share in all Ukrainian regions. "Ziebert" is more popular in …, … and … where its share grew from zero to …% in the first half year of 2010, but for instance in … and … its popularity is not as significant, the market share comprises …% so far. Approximately …% of "Ziebert" sales belong to PET package.
Brand "Desant" which faded into the background receded from its position, though it belongs to a growing segment. In spite of the advertising support "Desant" sales are significant only in … region where its market share comprises about …%.
It is necessary to mention that our data on economy segment of the beer market can considerably vary from other estimations. The top price limit in our case is 7 hrn./l and exceeds the average price for a litre of beer "Lvovskoe" allowing to add it to other affordable brands. If we attributed "Lvovskoe" to mainstream segment or distinguished the lower mainstream segment, the shares distribution would change greatly.
As "Ziebert" beer of "Obolon" company, brand "Lvovskoe" (including subbrand "1715") began winning the popularity among Ukrainian consumers with the beginning of the economic recession, though it was known previously. And it also became the key one in terms of market share growth of Carlsberg Group allowing the company to compensate the fall of "Slavutich" beer sales over and above. Here it is necessary to emphasize the important peculiarity of "Lvovskoe" - it costs higher than the most of economy brands but considerably less than the main brands of mainstream segment. Besides, in positioning of "Lvovskoe" the attention was obviously not called to the price. Quite active television advertising accentuated Ukrainian authentity which allowed to create an attractive combination of traditional character and cost effectiveness. Moreover, the national theme was actively used in positioning of "Obolon" beer, that is why the advertisement of "Lvovskoe" can be considered as an attack on the mass and more expensive brand of the competitor.
Geographically the market share growth of "Lvovskoe" was recorded … except the …, in … the brand popularity reduced. However, it can be considered a normal process in this case because here "Lvovskoe" …, during the first half of 2009 it comprised about …% which conditions the high share of the … as well.
In the retail shelf controlled by Carlsberg Group, "Lvovskoe" apparently moved "Arsenal" brand, the cheaper beer of the company aside. Besides, the "male" brand has not received such a great support recently as during the previous years, and business competition in the economy segment increased. As a result, "Arsenal" share reduced in …, in the … and … Ukraine.
Both economy brands of AB InBev company slightly reduced their market share. This reduction is easily explained by the competitors activation in economy beer segment. For instance, a slight decrease in beer "Rogan" weight is to some degree connected with the rather high price, it is only a little lower than "Lvovskoe" brand which has already gained popularity. "Rogan" sales were supported by rather active advertising and in absolute expression they apparently did not reduce. Reduction in market weight of "Yantar" brand occurred not at the nationwide level but in connection with a bust in the … region where its market share is still high - about …%.
The price of "Sarmat" beer as well as "Lvovskoe" beer corresponds to the intersection of economy and mainstream segments. By all means, with the devolution of "Sarmat" to SABMiller such price positioning became quite logical. But earlier "Sarmat" obviously belonged to the economy beer sorts, that is why the increase in cost during the period when it was restrained by other manufacturers certainly influenced its market positions. And it is peculiar that (as in case with …) an abrupt reduction in brand sales took place in the … region (to a lesser degree in … region). Nevertheless, today the market share of "Sarmat" beer in … comprises about 15%. In other Ukrainian regions the brand positions normalized after a prolonged recession.
The mass segment of the beer market became the victim of buying activity reduction. All of the key brands of the leading manufacturers, "Chernigovskoe", "Obolon" and "Slavutich" stood the loss. During the first half of 2009 these three brands provided almost …% of sales in the city on-trade retail, but during the corresponding period in 2010 less than …%.
"Chernigovskoe" positions were to some extent affected virtually in all regions, most of all in …, …, … and …. A slight market share growth of "Chernigovskoe" was recorded in …. But if we look objectively, "Chernigovskoe" brand turned out to be the most stable among the leading three brands of Ukrainian mainstream and even strengthened its leading positions, showing the least reduction in natural terms of sales. Not the least important, the soft landing took place due to the powerful advertising campaign which did not stop even in the low season.The sponsorship of the football national team played an important role - "Chernigovskoe" was the official beer of the World Championship FIFA-2010 in Ukraine. Anti-recessionary innovation which was suggested for the first time by AB InBev to the Ukrainian market and then actively used should also be noted. To support the brand sales it was bottled into 1.2 l package but sold at the price of 1l package. Besides, the company used cost-effective multipacks more actively than their competitors.
Marketing support of "Obolon" was active at the beginning of high season of sales. From April, 1 to May, 15 the company carried the large-scale campaign "15 Million Bottles of Prize Beer". Nevertheless, among mass beer sorts the brand "Obolon" faced greater losses considering the market shares differences. Positions in … and … underwent an abrupt deterioration, a significant decrease was recorded in … and …. On the other hand, the brand market share increased in the … and … regions of Ukraine.
The negative results of "Obolon" in addition to the objective mainstream segment decrease were probably affected by the reduction in shelf space which was occupied by new cheap brand of the company. The significant reduction in market share of "Obolon" beer was apparently also caused by the popularity growth of "Lvovskoe" and agressive advertising on the part of main competitor - "Chernigovskoe" beer. At least there were no price prerequisites for the brand position changes, its average retail price was ...
Like its competitive brand about … of "Obolon" beer is bottled into PET package. But the key sort "Svetloe" (Light) takes up a slightly lesser share, about …% of sales. Up to …% of sales belong to different beermixes which continue to forge ahead in their niche in spite of competitors' launchings. Yet about …% of volume is achieved by the company's specialty, sort "Zhivoe" ("Live") launched in September, 2009 during the period of unpasteurized beer popularity. This is the first similar launching among national Ukrainian brands. Sales growth potential of "Obolon Zhivoe" is rather high, by the end of the year its share on Ukrainian market can amount to about …%.
The key brand of Carlsberg Group, beer "Slavutich" underwent the deepest market weight reduction both in relative and absolute expressions. The deterioration of brand "Slavutich" positions could easily be connected with advancing average price increase in regard to brands "Chernigovskoe" and "Obolon" during the second half of 2009. Previously the brand price was also growing but "taking competitors into consideration". Thus, "Slavutich" became more premium but lost volume and market share in many of the country's regions. The brand positions deteriorated particularly perceptibly in …, …, …. It was stable in the western regions of the country where the market share of "Slavutich" is not as high.
Specific price field, mainstream and premium segments intersection (beer at the price of 9-11 hrn./l) became the most attractive though the most competitive from the point of view of the consumers' growing interest. The brands of small Ukrainian manufacturers which are gaining popularity, brands "Staropramen" and "Holsten" are situated here. If we consider premium segment separately, we see that it did not undergo significant changes from the point of view of sales volume according to the half year results, on the other hand there were notable changes in their structure.
In particular "Tuborg" and "Baltika", the two very popular premium brands of Carlsberg Group, demonstrated differently directed dynamics of the market share. As a result of long and steady growth "Baltika" occupied the first place in the premium segment of Ukrainian market and, correspondingly, in the company's portfolio. Ukrainian nomenclature of "Baltika" was supplemented by sort "# 7 Eksportnoye" which won the popularity very quickly and from the beginning of the year increased the market share from zero to …%. Sort "#0 Bezalkogolnoye" received more premium form of glass bottle, today it is the obvious leader in non-alcoholic beer segment which occupies more than …% of the market.
In general the brand "Baltika" strengthened its positions … regions of Ukraine, but generally the positive dynamics was achieved thanks to …, … and … regions. But in our opinion "Baltika" sales were promoted by the transition from mainstream to premium segment of the consumers who lately began to choose beer of higher quality but are not ready to pay much more. Extremely active advertising targeted at the people who consider themselves prosperous and the fact that the niche of Russian beer manufactured in Ukraine was occupied only by "Baltika" also played its role.
At the same time the share of "Tuborg" brand reduced in … which can be explained by a rather high price and a reduction in expenses by young Ukrainian consumers. Also, probably due to savings and expenses curtailment for night clubs, image constituents of the brand positioning (drive, club and beer for parties) reduced its significance for the brand target group. At least, market share reduction also took place in a similar by positioning youth brand "Hike" of "Obolon" in spite of the notably lower cost.
Premium brands of AB InBev company also demonstrated differently directed dynamics of sales which can be associated with their price. In particular the dynamically growing brand "Staropramen" could not occupy the first place in the premium segment only because of the leading growth of "Baltika". Low retail price of "Staropramen" allows to consider this brand as the most affordable license beer which secured its sales growth along with the active promotion. Massive support of the brand via television confirmed its image of the mild Czech beer. Besides, the scale of outdoor advertisement was significantly increased by the furnishment of HoReCa. The notable growth of the brand market share took place in …, … and … regions of the country.
For the most part so far "Staropramen" was the only widely presented and low-price brand from the traditionally beer country. For example, the price for German license beer "Beck's" is significantly higher and for a long time they have been selling this brand mechanically, not receiving any advertising support, and a very low-price for its segment brand "Holsten" of Carlsberg Group is gaining the popularity very slowly as yet.
Expensive license brands "Stella Artois" of AB InBev and Carlsberg had a … practically in all regions of Ukraine though they received advertising support. The reason of … is obvious: the ….
It is necessary to accentuate two premium brands of SABMiller company which were launched in 2009. Their emergence disturbed the actual prevalence of the two premium segment leaders in their categories. Namely the brand "Zolotaya Bochka" can be considered as a potential competitor of "Baltika" which is at that on the winning side due to its price, being the most affordable brand in the premium segment. The brand "Velikopopovitskiy Kozel" invades the Czech monopoly of the beer "Staropramen" but is positioned as more premium. At the same time the price for "Velikopopovitskiy Kozel" corresponds to a rather narrow region of the segment where it is the only one which provokes competition to the brand ….
The changes in price segments and companies' branding activity resulted in a significant change of their competitive positions during the first half of 2010.
AB InBev оremained the absolute leader but in the first half of 2010 it reduced its market share by volume. The company's report reveals a reduction in beer sales by 6.2% regarding the first half year of 2009, that is to a greater degree than market reduction.
Last year in spite of the abrupt recession in the field the balanced brand portfolio allowed Ukrainian subdivision of AB InBev to gain high operative revenue. According to the results of 2009 it increased by …% up to … bln. hrn. and the net return increased from … up to … mln. hrn. Conservative policy in regard to new brands launching was compensated by a powerful advertising campaign of existing key brands, "Chernigovskoe" in the first instance. However, the evident reduction in the consumers' interest to mainstream and high mediainflation made AB InBev take more dynamic action and expand the product range. So far this means adding new flavours to existing brands (flavoured sorts of "Chernigovskoe" and a very promising launching of the black sort of "Staropramen"). The company will most probably meet the low season by an increase in the offer of its products in the low-price packages and multipacks.
Carlsberg Group continued to increase its market weight and that gave it even greater advantage against its nearest competitors by the sales structure. The companies' brands are positioned in such a way that their price is slightly shifted higher regarding competitive brands in each of the beer market segments.
In spite of the general consumers recession Carlsberg Group managed not only to improve the natural value but to increase brand marginality. In 2009 joint operative revenue of the two enterprises increased by …% up to … bln. hrn. The company's net profit at the rate of … mln. hrn. replaced net loss in … mln. hrn.
Financial results of Carlsberg Group should also be discussed separately as in 2010 both enterprises (and three factories) of the company were merged. Operating revenue of PC "Slavutich", which consolidates the indices of Zaporozhye and Kiev branches, increased by …% up to … bln. hrn. and net profit comprised … mln. hrn. against the net loss of … mln. hrn. in 2008. Operating revenue of JSC "Lvovskaya Pivovarnia" increased by …% and comprised … mln. hrn. and the net profit comprised … mln. hrn. against the net loss of … mln. hrn. in 2008.
It is necessary to mention some more facts included in the Ukrainian report of the company. The significant volume of investments for the building up of capacity PC "Slavutich" which in spite of the economic instability comprised … mln. hrn. in 2009 is highly illustrative. Namely 19 CCT, new equipment for the brewhouse, et cetera were bought. The report also mentions the growth of export constituent in the general sales amount which comprised …% in 2009. The main supply directions are Russia and Moldova.
In terms of present marketing activity the development of "Lvovskoe" line is the strategic area of Carlsberg Group. To our opinion subbrand "Lvovskoe Zhivoe" as well as the brand itself is a direct attack on the competitor from the more expensive segment ("Obolon Zhivoe") and can give the company a notable market share growth in the economy segment. Holsten brand development will evidently become the second direction, it again receives the active advertising support and can be attractive to the wide audience's taste due to its affordable price and attribution to premium segment. Marketing support of "Baltika" will hardly decrease. There is a good probability that Ukrainian portfolio will be replenished with its subbrands or new license brands known in Russia.
Obolon ltd market share has become stable during the 6 months of 2010 and slightly has increased by volume but it was achieved due to the decrease in marginality and, correspondingly, due to a decline of share by value. Marginality decline was caused by the fact that the economic constituent of the companies' brand portfolio became heavier, it allowed to partially compensate the sales in average price segment. This process became more evident with the development of "Ziebert" brand and sales decline of "Obolon". But today, with unpasteurized beer "Zhigulyovskoe" launching, the expansion to economy segment can be called the company's strategy.
Alexey Bezugliy, the company's marketing specialist, commented on this event in such a way: "Considering the latest consumer trends we decided to repeat the previous experience and to renew "Zhigulyovskoe" beer produced by Obolon ltd. We kept the classical 1980-s design. We used a certain hindsight as everyone remembers the popularity of "Zhigulyovskoe". According to our plan by the end of the year the new beer will have occupied 0.5% of the market but it is not unlikely that actual results will exceed our expectations".
Operating revenue of Obolon ltd in 2009 decreased by …% to … bln. hrn. On the other hand as opposed to 2008 when net loss comprised … mln. hr. … mln. hrn. The positive results were evidently received due to the capital investment project completion and the transition to economy regime.
The key influence on the production and financial indices of Obolon ltd., besides the positions on the domestic market is exerted by export volume. In 2009 …% of the overall volume of the produced beer was supplied overseas which makes the company dependent on the external market. Russian direction remains the priority which demonstrated a notable supply decline (see above) in the first half of 2010 and by the results of the year will probably decrease more. Volume restoration is possible in 2011. Relatively minor beer export to Belarus will probably decrease due to the administrative barriers and license production development.
SABMiller finally managed to stop the delayed decline in the second half of 2009 and to begin gradual restoration of its position on the market. But it is not quite proper to compare Sarmat ltd. positions before and after the purchase, if only from the point of view of strategy and the revision of brand portfolio which took place. Economy segment is not anymore the priority for SABMiller which evidently would like, as by analogy with Russian subdivision, to get a firm foothold in the Ukrainian premium segment. That is why the market share growth is evidently not the main goal of the company. The course line toward premium segment has already been confirmed by the finance indicators of enterprise activity. In spite of the very significant market share decline in 2009, according to the company's press-release, Sarmat ltd. increased its operating revenue by …%, that is with the operating revenue volume of … mln. hrn. in 2008, it comprised … mln. hrn. in 2009. The press-release also mentioned a threefold decrease in losses, up to … mln. hrn.
Inherited brand "Sarmat", became more premium and sorts "Zhigulyovskoe" and "Dobriy Shubin" distanced themselves from the main line of the company. But the portfolio formation with the two licensed brands launching is not yet accomplished. The company has a possibility to experimentalize by offering Ukrainian customers the brands which have already gained popularity in Russia. "Zolotaya Bochka" and "Velkopopovicky Kozel" emerged on the market in such manner. This policy is implemented for "Miller" brand, and from June, 2010 "Sarmat ltd" began to import "Zolotaya Bochka Razlivnoe" beer from Russia.
As Sarmat ltd. technical director John Catcart informed: "Manufacturing facilities of Donetsk enterprise allow to increase beer production volume significantly. That is why at the present time brewing masters of "Sarmat ltd" are preparing a number of surprises which as we hope will give some spice to the low season for beer lovers. Foamy drink connoisseurs will receive two new brands, one in the economy segment and the other in premium segment, which will be bottled in Donetsk brewery. It is expected that Ukraine will also meet an import brand which is among the most popular brands in the world portfolio of the holding company SABMiller". It is probably the brand Pilsner Urquell (or, which is less probably, brand Grolsch).
In either case the growth potential of SABMiller brands is contained in the present very low level of retail coverage. Numeral distribution of company's products comprises at present about …%, meanwhile competitors' one comprises more than …%. For the most part, SABMiller brands are decently introduced in …, they can also be found in …, but geographical expansion … has just begun. SABMiller investments to the sales auxiliary and television advertising which quantity has significantly increased should accelerate the market share growth.
The data on production by PC "Persha Pryvatna Brovarnya" ("PPB") and its partner in contractual beer bottling, the company "Ridna Marka" are not known to us. But judging by the market share growth the launching of beer by "PPB" brand could comprise up to … mln. dal in 2009. … mln. dal more were manufactured by other small enterprises. In such a way, the gross share of independent* manufacturers on the beer market virtually did not undergo any changes in 2009, comprising about …%. At that different enterprises demonstrate different development dynamics.
* Without regard to Obolon ltd.
"PPB" left the limits of its region long time ago and became the national manufacturer. In the first half of 2010 Lvov company continued to increase the sales dynamically though it moved from the fourth to the fifth position on Ukrainian market, due to SABMiller activization. The company's market share is growing following the numeral distribution which by the middle of the summer almost reached …% totally in the biggest Ukrainian cities. However, this figure stands for the particularly fragmented representation in retail trade and irregular regional sales distribution.
It stands to reason that "PPB" share is high in …, comprising about …% of the market. But in the eastern direction in 2009 significant volume of production was directed only to Kiev and Kharkov. There was a significant sales increase in these cities in 2010, but the main thing is the beginning of the expansion to … and … regions of Ukraine where "PPB" growth potential is very high.
It is necessary to note here that "PPB" brands in … fit well into the narrow price frame of the mainstream segment leaders and even cost cheaper than, for instance, AB InBev products, but in … and … regions of Ukraine logistics expenses and well-won by the unusual flavour claim for the premium increase the price for the beer to more than average level. That is why the purchase of one of the existing enterprises beyond the western region could significantly improve the company's position.
In spite of the relatively high price … of "PPB" products is sold in PET. By our estimate about …% of sales are provided by different sorts of homonymous brand of the company and about …% more by the brand "Stare Misto". The rest of sales belong to the most expensive brands, "Avtorskoye" and Galitskaya Korona".
Another enterprise of the western region JSC "Brovar" (Ternopol region) was also successfully developing. According to the results of 2009 the company's operating revenue increased by …% up to … mln. hrn. and the net return by …% up to … mln. hrn. By our estimate in 2009 its manufacturing increased by about …% up to … mln. dal and continues to grow. According to the results of the first half of 2010 "Brovar" managed to slightly increase the market share in … (about …%) and to increase sales volume on the biggest market outlets, in … and …. Besides, the company's brands appeared or widened the distribution in some Ukrainian regions where they were not previously represented. High logistics expenses and irregularity of key brands condition their relatively high price in remote regions and, correspondingly, their attribution to the premium segment. While in … 0.5 l bottle of beer "Mikulinskoye" costs on the average … hrn., in Kiev it costs about … hrn.
Unlike manufacturers in the western Ukraine, Simferopol JSC "Krym" decreased the volume of beer production in 2009. The decline was …, to … mln. dal. Nevertheless, according to the report the company's operating revenue increased by …% to … mln. hrn. and the net profit by …% to … mln. hrn. It was possibly caused by an extremely diversified production (the complex produces beer, water, non-alcoholic drinks) and advance in price. Actually the company's share on the beer market became stable and a gradual production renewal became possible. Products of the JSC "Krym" are practically not represented beyond its region, that is why the dynamics of its sales are in many ways determined by the number of tourists. By the way, the number of tourists coming to the Crimea increased in 2010.
Many of the manufacturers with a lesser range of activity could not cope with the recession and they made their negative contribution to the indices of 2009. But if to consider those who could survive in the whole, it is possible to talk about a distinct trend of sales growth and the renewal of small manufacturers production. The products of regional independent companies form the main part of "live" beer range in the specialized beer shops. The prohibition to drink beer in public places induced the further growth of small cafes selling beer and, correspondingly, growth of regional players' output.
According to our approximate estimation in the first half of 2010 "PPB", "Brovar", "Krym" and other regional independent companies increased the total beer production almost by … fold and took away …% of the market from the large manufacturers.
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