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. ...
Russia: results of 2011, forecast for 2012
According to current data of Rosstat in 2011 beer production in Russia was cut by 3.4% to 98.14 mln hl. The negative dynamics was observed from April to November 2011.
Beer supplies from abroad (including Belarus) went according to our estimates up by … % to … mln hl and the market share of import grew from … to … %. Furthermore, the volumes of supplies from Ukraine remained practically the same and amounted to … mln hl according to figures from Goskomstat of Ukraine. The import of Belarus beer under our estimate rose from … to … mln hl. Supplies from far-abroad countries grew at rapid leaps i.e. by about … % to … mln hl.
Export beer to allied Belarus amounted to … mln hl according to Belstat data which means … % decline compared to 2010. Besides, under our estimate export to other countries of near and far abroad countries which in 2011 received about … mln hl of beer which is … % less than in 2010. Accordingly, the total export volume under our estimate shrank by … % to … mln hl.
Basing on the official and estimated data, we can determine the final balance of trade, which went down by about … % to … mln hl. of beer. The estimated dynamics is notably lower than the numbers of research company Nielsen, conveying … % reduction according to brewers’ report.
We should note that when calculating the trade balance dynamics in 2009-2011, it was corrected taking into consideration the expected surplus beer volumes, which beer companies produce by the end of the year at the threshold of excise rise. Though there was no rapid tax growth at the beginning of 2010 and 2011 many producers again took this opportunity to economize. At least according to data of regional statistics … acting on Russian market increase the production at the year end.
In particular, under our estimate, in 2009 the surplus beer volume supplied by distributors for realization in 2010 equaled about … mln hl, in 2010/2011 it amounted to … mln hl and to … mln hl in 2011/2012. It is obvious that such dynamics of overproduction is connected to the excise growth rates, i.e. by 6 rub./l at the beginning of 2010, by 1 rub./l and beginning of 2011 and by 2 rub./l starting from January 2012. Accordingly, we can calculate the expected economic effect for Russian brewing companies. In 2009/2010 it reached about … bln rub., in 2010/2011 – … mln rub. and … mln rub. 2011/2012 ($…, $… and $… mln ).
Retail prices for beer grew by … % from December 2010 to December 2011 according to Rosstat. And the biggest constituent of the price growth was the traders’ margin, which increased by … %. The growth of the retail share can be the result of growing competition and “shelf position battles”. Average producers’ prices for beer (excluding VAT and excise) during the same period grew …, that is, by … %.
If we proceed from our estimation of the trade balance and Rosstat data on dynamics of retail prices for Russian and import beer, we can say that by value the market in 2011 grew by … % to … bln rub. At this point one should keep in mind that market volume in monetary terms is an imputed figure, as about … % of beer is sold in HoReCa establishments, where trade markup can vary but as a rule is much higher. Given the ruble rate was consolidating over 2011 as compared to 2010 calculated in dollars the market growth amounted to … % - to $… bln.
In spite of rather moderate rates of market growth by value there was … as reports of Carlsberg Group, Efes and SABMiller reports say. This tendency involves share growth of import beer and small enterprises. However the increase of … beer share against the background of natural indices fall led to dramatic share decline of … beer sales and … packages. Such redistribution stopped the tendency of beer market … existing previously.
In particular, if we proceed from the data given in Carlsberg Group reports and our market estimate, we can observe that there was a small sale growth of … beer (more than … rub./l.), a moderate sale decline in … segment (… -… rub./l.), stable volume of … beer (… -… rub./l.) and a sharp sale fall nearly … % of … and … beer sorts (… -… rub./l.). … beer became the main victim of … due to its … decline, moreover the decline took place in the high season.
In our opinion, the beer consumption decline by volume was preconditioned by a high base of 2010, when in many regions of Russia record breaking high temperature was registered. Market could also be affected by beer price rise, which from April till September 2011 had much faster rate than the foodstuffs inflation (or rather deflation).
In 2012 one can expect beer market stabilization or even a slight growth provided that the economy situation does not aggravate. Lower beer affordability due to excise rise has already resulted in smaller consumption volumes. Though the producers’ prices will be closely connected to the harvest and brewing barley quality.
In 2011 the weather did not stimulate demand for beer thus this factor most likely to have either neutral or positive dynamics on sale dynamics.
Moreover, in 2012 research companies foresee a 10 % vodka consumption decline due to 30% excise rise. Some of the strong drink consumers might opt for beer as there was substitution effect noted for these two drinks.
The measures of state regulation concerning beer which have been activated (for example ban for sale of beer stronger than 5% at night) are not likely to have any serious impact on the consumption in 2012. Two really serious bans, namely for retail alcohol sales at non-stationary outlets (kiosks, pavilions and stalls) and for retail beer sales of any strength at night will not come into effect before 1 January 2013.
Certainly, the total ban for PET package use for alcohol products can have distinctly negative impact on beer market due to lower affordability and smaller beer choice
(for example, for some regional enterprises PET is the major or the only package type). In our opinion, it will be hard for the authors of technical regulations to give any strong reason for such measures concerning beer. Perhaps in this case brewers’ arguments will be taken into consideration.
Company Carlsberg Group in 2011 considerably yielded its market positions. According to the report the company was not willing to compromise their ambitions and balance volume and value, so they focused mainly on profit growth. Though the price leadership of “Baltika” production led to considerable loss of the company’s market share. Besides the report mentions insufficient attention to the positions of economy brands (including lower mainstream) in the traditional trade formats against the background of competitors’ higher activity. Striving to retain the margin “Baltika” decided not to make any promotional price offers. Moreover according to the company’s info a positive “mix effect” of about 3% was attained due to focusing on mainstream, premium and superpremium brands.
However the … course taken in 2010 sometimes turned to … offers over 2011. At least the brand policy of the company reflects such tendency.
Thus, in 2010, … brands “Baltika Razlivnoye” and Old Bobby as well as … Zatecky Gus Cerny entered the market. In spite of the revenue and volume fall the company counted on the market structure improvement. The sales volumes in the first quarter of 2011 inspired more optimism and the company added “Baltika Razlivnoye Nefiltrovannoye” (unfiltered), Tuborg X Fresh and Tuborg Cold Shot to its range of … beer sorts. However, as early as in the second quarter the dynamics became negative and “Baltika” alongside with restyling of … Cooler and rebranding of … Carlsberg, paid attention to the … segment having launched “Don Svezheye Bochkovoye”. During the third quarter of 2011, when the decline on sales volumes continued, “Baltika” did not show any brand activity in … market segments but started bottling its … brands in new glass bottle. During the fourth quarter the attention was paid both to … and … brands.
According to the annual report the uncompromising price policy caused reduction of the company’s retail sales by … %. Under our estimation, in 2011 “Baltika” sales fell to … mln hl and the market share declined by … p.p. to … %.
The company did not publish the financial figures for 2011 in the report for the fourth quarter made complying with Russian standard of accounting. Though the final profit will hardly show “Baltika” performance, as it will be effected by surplus beer volumes stocked by distributors. These volumes improved the results of 4 quarter 2011 dramatically, but in the future they will lead to a considerable supplies decline. Thus, the results of the period from April till September (that is the high season) when the volume of revenue was … in 2010 are more indicative. … dynamics of revenue over this period can not be considered a good performance taking into consideration the producers’ price rise and sales decline.
The dynamics of sales of AB InBev in 2011 reflected Russian market tendencies. Superpremium brands of the company, namely, Bud, Hoegaarden and Stella Artois, showed good results in 2011 according to AB InBev report. The company claims the market share in monetary terms to have grown due to reinforcement of these brands’ positions.
Besides the report mentions the market share increase of its key mainstream brand “Klinskoe” thanks to its active promotion. Thus, February 2011 saw a massive advertising campaign called “Let’s switch to K”, after which there appeared new sorts of “ Klinskoe Fresh” and “Klinskoe Ultra Light”, and restyling of all package formats of the brand took place. At the same time under our estimation premium brand “Sibirskaya Korona” experienced sales fall. The same happened to economy and discount sorts though they are supported by the company on the federal and regional levels.
The federal statistics highlights a considerable deterioration of AB InBev positions in the … region. The biggest Russian subsidiary in … cut production by nearly … % to … mln hl and played the main role in the general fall of AB InBev beer production.
Generally, according to AB InBev report the company’s sales reduced by … % to … mln hl. And under our estimation the company’s market share shrank by … p.p to … %.
Company Heineken was the first to rise retail prices for its beer and suffered from it earlier than other producers. However the reduction of market share in 2010 looked not like a transient phenomenon but like a prolonged decline a new wave of which was caused by lack of flexibility and poor marketing activity. Perhaps, Russian division was working hard to cut expenses during the postcrisis period. The company reached the bottom in the 3 quarter of 2010, when Heineken had to temporally yield its third place to the dynamically growing company Efes.
The existing brand mix, according to Heineken presentation did not promote sales growing in 2011. Thus, obviously, it was the advancing price growing that created the basis for future fast regaining of the company’s positions. When other market players raised their prices too, Heineken share started growing dynamically. Probably market innovations had their effect.
Thus, federal sort “Ohota Zhigulyovskoye 1978” was launched into … market segment and supported by TV advertisement and regional sort “Shihan Temnoye”. There also appeared Zlaty Bazant Cerne and Zlaty Bazant Nealko and an attempt was made to breathe life into brand “Bochkarev” by launching sort “Bochkarev Zolotoye 1999”. Moreover, marketing support to the company’s superpremium brands Heineken and Amstel remained strong (due to new sort Amstel Premium Pilsener launching).
Broken down by geography factor the company’s production growth was almost fully provided for by … enterprise …, which supplies beer to the … region and … region of Russia.
Under our estimate, against the background of market decline Heineken managed to raise its sales by … % almost to … mln hl and the revenue of the company in 2011 according to Russian standard of accounting grew by … % and attained the level of 2009 that is … bln rub.
Company Efes (EBI) was the absolute leader of sales growth in 2010. Its consolidation was mainly caused by share increase of economy brands which formed the base of the company’s portfolio and were actively promoted by advertisement and innovations. In the conditions of economizing and market … consumers obtained a full value alternative to more expensive brands by competitors. However, even in the report with excellent results of 2010 the company warned the investors that in 2011 the continuation of rapid growth was not likely.
In 2010 Efes created a strong raw material base having fully provided itself with malt, which allowed the company to reduce the production cost. Though the overlapping of two negative factors, namely … and … made the retail price for Efes brands rise so high that the difference between its prices and those of competitors became no longer tangible.
The regional statistics allows to speak of … % production decline at … brewery of Efes and of a considerable decline at … brewery, which correspondently can indicate a serious deterioration of market positions the … region and … region of Russia.
Though Nielsen audit data show a stable market share of the company, under our estimation, based on the data of sales from EBI, the company reduced them almost by … % to … mln hl which led to market share reduction by … p.p. to … %.
Company SABMiller, on the contrary, got a modest sales growth, and correspondently, market share increase at the … of the … component of its portfolio. Though such dynamics runs counter to the revived market … tendency, it can be explained by the fact that till 2009 the company was practically not represented in the … segment. Though the operation start of … and active development of … market niches allowed SABMiller to make its portfolio more adequate to the current sale structure in Russia.
However even market … made its positive impact into development of the company which is still mainly geared to more … market niches than its competitors. According to SABMiller report for April-September 2011 in superpremium segment female brand Essa showed a good growth having been supported by launch of can version and marketing investments. In premium segment Velkopopovicky Kozel, which was promoted by marketing communications, went on growing. However because of the fiercer price competition, the sales of the company’s mass brand “Zolotaya Bochka” decreased in spite of its advertising support. To some extent this reduction could be offset by new inexpensive “quasi-Austrian” beer Zwei Meister launch.
Under our estimation the multi-directed dynamics in the segments resulted in general growth of SABMiller sales by about … % to … mln hl. Correspondently, the company’s market share grew by … p.p. to … %.
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