Early in 2008 there were expectations of beer market moderate growth while its development tendencies were quite positive but the year ended with decline and instability. The turning period for the whole Ukrainian economy “October-November” 2008 has changed the trends which had existed previously. We analyzed all the aspects of market development and companies’ competitive positions before and after the economy crisis onset.

Production and market dynamics
Companies and brands positions
The regional market situation
TV advertisement

Production and market dynamics

Last year the Ukrainian market as well as the Russian one showed virtually zero growth rates by volume. Under our estimation based on production and trade balance statistics, the market volume remained at the level of about 288 mln dal.
However the progressive consumer price growth which took place before crisis provided for a substantial beer market increase by value. On the one hand due to the resource price growth the self cost of beer also grew. On the other hand, the retail price dynamics was driven by active growth of prices for foodstuffs.
Thanks to concurring of price growth period and the beginning of the season, the growth rate under our estimation amounted to 21 % to 17.1 bln hrn. And due to the stability of the national currency before the crisis, the market grew to $ 3.34 bln. *

* the calculations were made on the basis of the official NBU rate.

Within the period from January till May 2009, the beer market under our rough estimation decreased by 9 %. The considerable difference of consumer beer price early in 2008 and 2009 provided for a growth by 42 % by value! However the substantial hrivna weakening, which happened in autumn-winter led to 7 % sale fall in dollars.

Data on production, investment activity and financial indicators of the Ukrainian companies are available in the article «Beer market of Ukraine 2008» in «Beer business» №2-2009

In autumn 2008 market shares of price segments were stabilized. In October-November mainstream and expensive market segments stopped growing*. Correspondently the economy segment, which had been persistently shrinking, stabilized, having taken about a quarter of the market.

* In our estimation superpremium segment does not correspond to the traditional method of price market division and does not include imported beer which accounts for 1% of the market.

Against the background of inexpensive beer segment stabilization, PET package segment started growing. These seemingly mutually exclusive trends were driven by mainstream beer in PET popularity growth. Probably beer-lovers can not deny themselves the popular brands in favor of the cheaper ones, but are willing to economize, buying more beer by one purchase.
Beer producers and retailing networks in their turn supported consumers’ rationality, keeping prices for beer in big PET packaging down. For example, within the period from October to February 2008 prices for virtually all the leading brands packed in 2-liter PET, were growing slower than in glass bottle.

Companies and brands positions

To make long story short, the competitive situation can be described in the following way: InBev company has taken the lead, having won its major competitor’s, CC «Obolon», share; Carlsberg company has somewhat improved its positions and «Sarmat» (SABMiller) has been gradually losing its market share.

Virtually none of the economy brands increased its market share. However, inexpensive brands «Rogan» and «Yantar» by InBev, as well as «Arsenal» by Carlsberg have been exhibiting a positive dynamics since October-November 2008.
As for InBev company we should note that their mass brand «Rogan» has increased its retail price. In spring 2008 on the average in Ukraine the prices for two economy brands were almost the same. But at the beginning of summer the retail price for beer «Yantar» rose sharply— it became … brand among the national ones in the segment. Price growth of «Yantar was followed by the promotion emphasizing «vacation» and «relaxed» brand image. But due to the crisis the price positioning of the two brands has changed. «Yantar» price has stopped growing and become … national economy brands (as well as …). At the same time «Rogan» price has been growing at exceeding rates and this brand has become … Prior to that the main advertisement object was a beer mug with «simply qualitative beer», but now the commercial features young people who can do anything for «Rogan».
Two inexpensive SABMiller brands «Sarmat» and «Dnipro» have been steadily decreasing their market share. Judging by the distinctly negative dynamics of «Dnipro» which is one of the cheapest at the Ukrainian market, …
However, by the season, the market share of «Sarmat» has … At that time, SABMiller has carried out rebranding of «Sarmat». Its price is still within the limits of economy segment, but the image has become more premium and is now targeted at freedom lovers. The new positioning is emphasized by the label (an eagle against the background of white sun) and the corresponding commercial.
«Desant», the economy brand by «Obolon» company, in the crisis period, lost a part of its market share which has stabilized afterwards. However «Obolon» positions in this segment are expected to improve. Early in March a democratic brand «Ziebert» was introduced, and the company announced their plans to win 1 % of the market thanks to this brand. Communication and promotion of the brand are based on the conception «German quality — Ukrainian price».

In the mass medium price segment the market shares of the key InBev brand «Chernigovskoye» as well as «Slavutich» and «Lvovskoye» (Carlsberg) have been growing. The InBev share growth with the parallel decreasing of «Obolon» сompany market share could be due to the price factor.
Here we should consider two related trends — … Prior to the economy instability, InBev company was slowly increasing its sale share of beer … but … market share loss was faster. The tendency was particularly distinct from … to … 2008. But InBev market share fluctuations in different market segments actually resulted in a … dynamics. The shares of the two major competitors were also quite robust, there were no substantial changes in the leaders’ positions.
November was the first difficult month for the Ukrainian economy, which certainly affected the consumer mood. …has become more popular. The share of InBev … has returned to the past level, …beer sales were comparatively good. In other words, …and …, owning almost the equal share in InBev portfolio twice showed bidirected dynamics. But this time InBev had better market share growth. A very similar situation is experienced by Carlsberg company, the only difference being …
The reduction of «Obolon» market share resulted from sales drop of …beer. The … beer share has remained rather stable, but … has not grown so much as it happened at the two other leading companies.

The situation development … corresponds to the dynamics of the … The three companies’ growth rates of retail prices for beer … have been virtually identical. In … the market share growth of beer … By that time Carlsberg and InBev companies had … To the contrary «Obolon» had been … The consumers who were willing … could have noticed it.
InBev made an impressive «anticrisis» move by launching its key brand in a non-standard for Ukrainian market package of 1.2 liters. Unlike the volume, the beer price has not grown. The marketing of the bigger package was supported with a promotion. This SKU was very fast in winning the market and had …% share by the end of … Though … the brand share in bonus package started falling, and amounted almost to zero in …
Carlsberg’s key brand «Slavutich» made a real breakthrough in 2007 and provided for the company market share growth. In 2008 it was rather stable. However Carlsberg has increased the market weight primarily thanks to the progressive growth of brand «Lvovskoye». Though this brand could not be called a regional one, it had held strong positions only in the western Ukraine. The numerical distribution started as yearly as in … but it gathered momentum with …
Position strengthening of «Lvovskoye» is no doubt driven by the active promotion. The brand commercial underlines the traditions of the national brewing. Also distinct price positioning has obviously made its impact. While «Slavutich» is the most expensive brand among the mass sorts, «Lvovskoye» price forms the lower border of mainstream segment.
One more producer with Lvov origin is strengthening its position in the national market. Company «Persha pryvatna brovarnya; dlya lyudey yak dlya sebe» («PPB») is marketing a wide range of beer brands with the average price within the limits of mainstream segment.
As we can see, Ukrainian consumer is loyal to the beer brands from the western regions of Ukraine, considering them to be more qualitative. This is confirmed by sales growth of «Lvovskoye» beer and many other «PPB» sorts in the eastern regions of Ukraine as well as by the growing popularity of various beer sorts «Mikulynske» (company «Brovar») and «Zakarpatske» (company «Novotekh»).
«PPB» is progressively increasing its presence in the regions of Ukraine. At the beginning of 2007 the national distribution amounted to …%, but in January of 2008 — to …% and to …% in January of 2009. Last year, the company reinforced its positions after the … Moreover the sales and market share grew both in …segments and …
The national distribution and the market share of «PPB» will probably grow as this year the company will be able to solve problems with logistics and overloading of capacities. In June this year, it became known about contract production of «PPB» brands on the basis of «Ridna marka» facilities (Zhitomir oblast). «PPB» beer filling allows to add the company’s workload by several dozens of per cent. Moreover beer is also filled at two line of Radomyshlinskaya brewery and mainly supplied to the east of Ukraine.

Though during the economy crisis, there was an insignificant decline of premium segment share, but on the whole it remained stable, i. e. decreasing together with the market.
Last year, the high season saw a real breakthrough of Staropramen by InBev. In the course of the crisis the trend of brand share active growth has changed into a more flat one, but it still continued gaining market weight. During this period Staropramen gained its shelf presence and the brand sales were supported by an active TV promotion. The commercials were humorous and had the entourage of the 19th century emphasizing the mild premium taste of the beer. Besides the price of Staropramen was quite democratic, (at the level with the …) and …

The most expensive market segment, to which we roughly attribute beer with a price higher than 6 hrn. for 0.5 liter, is represented by import (not included into the estimation) and several licensed brands by Ukrainian producers. A considerable share among them is possessed by brands … and … by InBev, … and … by Carlsberg Group and beer … by «Obolon».
The most significant event in the licensed market segment was Carlsberg’s loss. After the division of Scottish&Newcastle assets, the rights for the perspective brand Fosters were passed to Heineken company. Though the license agreements could be concluded for a long period of time, and Heineken company is virtually not presented on the territory of Ukraine, perhaps the company management decided to exclude this brand from its portfolio. However, the distribution of Fosters had been growing dynamically till … 2008 and in … it started falling dynamically.
Import, in spite of the general decline of purchasing power, has kept its positions. Moreover, a sharp increase of supplies in … 2009 leveled out previous negative dynamics. However the beer import still accounted for …% of beer sales by volume, and up to …% by value, that is why it does not have a substantial impact on the market.

The regional market situation

Retail monitoring has evidenced the … change in almost all Ukraine regions. And virtually everywhere there was a tendency of preference change from …
InBev and Carlsberg have substantially increased their share on the largest eastern markets, particularly in …, … and … It was this strengthening of the positions on the … that led to the positive market dynamics of the companies. It took place due to the share decrease of SABMiller which has not started heavy activity yet and of «Obolon» which has lost a part of its … share.

This year SABMiller intends to restore its market share and the national distribution which have been falling steadily by «Sarmat»’s previous owners. At least the company is taking consistent steps in this direction.
Thus, early in 2009, many SABMiller’s key brands such as Velkopopoveckiy Kozel, «Zolotaya bochka» and Miller imported from Russia appeared at many retail outlets, especially in the east of the country. In spring the premium Velkopopoveckiy Kozel, and «Zolotaya bochka» started being produced on «Sarmat» capacities. Commercials, supporting «Sarmat» and Velkopopoveckiy Kozel have appeared on the air. Early this summer SABMiller granted an interest free loan for $27.1 mln. to the Ukrainian subdivision. And in July «Sarmat» has chosen the trading partner — a large distributing company in FMCG-segment, which does not work with any other beer producers.

At Kiev beer market the major players’ shares … but have … Though after a certain market share decline in winter, … has increased its weight at the account of … … has yielded some of its market positions. Though the market share of the same-name brand in …has been decreasing as well as that of the other two market leaders, … beer has increased its weight almost correspondently.
In our opinion this can have a very easy explanation. Unlike most of the region, in Kiev … in … is the most rational option in mainstream segment. Possibly the lower price is connected to lower logistics cost of the company. Meanwhile the most expensive brand in … in this price segment, … had comparatively fluctuating market share growth dynamics.
Among brands in … at the capital market a good dynamics was demonstrated by … by Carlsberg and … by «Obolon». The sales of … brands have been falling dramatically, though in winter … share stabilized and started growing. The market share of … brands was rather stable for the exception of somewhat lower position of …
On the «small» south market … left behind … and during the crisis … also yielded its positions to … However by the season both of the companies have somewhat restored their positions. The success could have been more considerable but for the return of the new «old» regional market player on the resort market. PBK «Krym» has become an independent enterprise after the sale of the brewing assets by «Sarmat» group. «Krym» plays an important role in the economy segment of the local market and competes there rather successfully with inexpensive brands of InBev («Yantar» and «Rogan») and «Arsenal» by Carlsberg.
In western Ukraine positions of the major market players were … However, since the year start there has been a tendency of slow growth of the … and … company (after a certain decline). Comparatively small brewers «Persha pryvatna brovarnya» and «Brovar» are currently growing slowly, though till now they have been developing at the account of eastward expansion.
In winter, market share of … began descending slowly. First this tendency was connected to the progressive cutback of … beer sales, but since … market share of …beer has been also shrinking, in the first place, that of …
By the way, 2 l. package is not very popular in western Ukraine. But the sale share of beer in 1 l. package has almost reached the point of …% which is much higher than the average. It was 1 l. package that has gradually been squeezing out the glass bottle since the beginning of the economy unstability. Brand «Lvovskoye» is still the absolute leader in the segment and the market.

TV advertisement

We can say that InBev has been advertised …, Carlsberg has been widely presented …, «Obolon» has had ….
Thus, Carlsberg company virtually left the TV air in … 2008. At that time «Obolon» was …. However InBev company, in spite of the season end and the economy crisis in Ukraine has not practically cut its advertisement spending. Even in November when beer consumption usually slumps, the company ranked the sixth advertiser on the Ukrainian TV, having increased its WGRP* by 10 %.

*Relative number of viewers who saw the commercials equaled to 30-second. The estimation is based on GFK-Ukraine, Sphere-TV.

After the … break when there was very little TV advertisement, InBev returned to the air in … and managed to raise its WGRP in …. At the same time company Carlsberg, which had been a little behind InBev, increased its activity sharply. In … both of the companies retained WGRP at the same level. But what seems interesting is that in …increased its TV advertisement level and …, on the contrary, decreased. Meanwhile … was presented but fell behind the two companies considerably. In …, brewers traditionally rack up the advertisement volume, but the fastest growth of WGRP was achieved by …, which almost caught up with … by this indicator.

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