Consolidating the progress
Market segmentation by price
Market segmentation by package
The positions of the leading companies

   AB InBev
Mergers and Acquisitions

Consolidating the progress

Since 2008 the dynamics of Ukrainian beer market have been extremely unstable. After a perceptible fall which had little effect on the results of 2008 and came out to the full in 2009 the market began to recover. As early as in 2010 there was a marked increase in the trade balance* comprising about …%.

* Hereinafter we will consider that trade balance data reflect beer market dynamics.

In view of the fact that the weather in 2010 was extremely hot and the country economy did not undergo any significant improvement, the results of 2011 did not offer any grounds to expect a repetition of last year’s growth rates. At the end of sales season of 2011 it is possible to state that the trade balance comparing to 2010 practically did not change. Such dynamics could be referred to as consolidation of the achieved results.

In figures this situation can be reflected as follows. According to our estimation, based on official statistics data for 11 months, beer production is going to decrease at year-end by …% to … mln dal. Beer export is going to fall by …% to … mln dal, and import is going to increase by …% to … mln dal. Thus, in 2011 beer market decreased by …% to … mln dal.

In money terms, for the account of fast beer price growth, which began last winter and persisted till July 2011, beer market increased by …% to … billion hryvnas. Since hryvna exchange rate in the period of 2010-2011 was rather stable, when converting to dollars the market growth comprised the same …%, to $… bln.*

* It is necessary to mention that 10-15% of beer is sold in HoReCa establishments, where trading margin may vary significantly but, as a rule, it is 1.5 fold higher. That is why market volume in money terms is a relative value.

Market segmentation by price

For the whole year 2010 there was a polarization effect on Ukrainian beer market by price segments. There was a distinct trend towards a decrease of mainstream due to inexpensive and expensive beer sorts share growth. In 2011 the shifts in sales structure were not so well-defined and it became possible to indicate certain stabilization. In the middle of summer, mainstream share even strengthened its positions.

Against the background of a relatively inert market dynamics the share fluctuations mean symmetrical fluctuations of natural values*. It is possible to suggest that there was a …% fall in the sales of mid-price brands following the results of 2011. Economy segment demonstrates moderate growth (…%). Premium brands gained in weight significantly (…%) and superpremium grew even faster (…%).

* Hereinafter market data on cities retail are given.

Retail beer price of all price segments began to grow steadily from … 2011 having a little decelerated its dynamics by the … Average retail prices for cheap beer stopped growing in … In the mainstream segment the average weighted price rise was the …, that is, about …%. At that the price dynamics for cheap beer and medium price was similar; one can say that the two segments are closely connected.

By the way, beginning from …, according to the data of Goskomstat, deflation has been observed on food market, that is why beer price growth could be noticeable to consumers. It is not improbable that this might lead to a decrease in economy segment share growth rate where beer demand is inherently more flexible. The fact that prices for mainstream segment beer showed even more suppressed dynamics can be explained by Ukrainian consumers’ rationalism which turned out to be stronger than their loyalty to the famous brands. Given the obvious price difference some beer lovers switched to less expensive sorts.

Prices for premium and superpremium beer sorts in summer somewhat slowed down its dynamics, however continuing its steady growth. Yet such a dynamics was also connected to distribution of brand sales inside the segment.

If we assess the average retail beer price in 2010 and 2011 not taking into account the price segmentation, its growth rate will reach …%.

Redistribution of beer sales in monetary terms progressed more actively than in liters, with an exception for the economic segments, which due to low beer cost grew not by … but by … p.p. Instead the mainstream segment by value saw its share … not by … but by … p.p. and expensive segments … as dynamically by value than by volume.

Market segmentation by package

The redistribution of beer segments by package in general was not for the benefit small size PET package. If we consider the bonus package of … and … liters to be variants of one liter PET, their sum losses were the most significant in absolute terms and amounted to …% in relative terms. This dynamics resulted from lower demand for promopackages on the part of producers, as the normal one liter PET taken alone fell by …%.

Besides, sales share of beer in … PET bottle has been growing for many years, as it is possible to economize by buying beer in large package. Obviously, the beer demand became less impulsive, for example, beer lovers started buying at supermarkets more often. By the end of 2011, the sales growth of t.. PET reached about …%, though it could not compensate for the losses of …

Bottle of … liter found itself among outsiders too. This glass volume was demanded during the period of economic upsurge and rapid beer market growth. Apparently, today the cost difference of beer volume has become too obvious to the rational Ukrainian buyer. This resulted in shrinking of this small segment by …% by the end of 2011.

Instead, by the yearend, half liter can raised its share by volume. This share growth took place in … 2010 and has been fluctuating at …% mark.

The positions of the leading companies

The situation concerning beer production by various companies can be shortly described the following way — independent producers with Ukrainian capital yield their positions, large international players keep their production volumes at the same level, and the companies targeted at the premium segment are increasing sales volumes.

AB InBev

By October 2011 company AB InBev retained the natural volumes of output practically at the same level — the growth amounted …% to … mln. dal. On the background of the neutral dynamics of Ukrainian beer market * this result can also be considered neutral.

* Over the nine months of 2011, like over the year, the beer market showed …% decline.

However, the sales structure changes of the company (or, better, absence of such) cannot be characterized unambiguously. On the one hand there was an insignificant fluctuation, that is, small decline of economy component of the portfolio and share growth of middle price sorts, namely, brand family “Chernigovskoye”. Against the background of AB InBev rivals, which were “slipping down” to economy segment due to sales fall in mainstream segment, this dynamics of the company looks not bad at all. On the other hand AB InBev company is obviously left behind in terms of dynamics of premium and mainstream beer sorts by competitors. As a result we get market share growth by volume of about … p.p. to …% and the same dynamics by value.

In particular, economy brands of the company in 2011 showed multidirectional dynamics. One can say that a part of sales of more expensive beer “…” was taken over to brand “…”, the retail price of which is much lower. Their price distance in 2011 was strictly observed.

It is interesting that the average retail prices of beer “…” and of its main competitor beer “…” over several years have been changing almost simultaneously but “…” has always been a little bit … . At that the family of non-filtered beer sorts “…” distanced itself from the main brand. “…” and “…” closely approached the upper border of mainstream and their price dynamics now corresponds to the changes in the … market segment.

The weakening of AB InBev positions in premium segments was conditioned by market share reduction of license … and …. But if the reduction of beer … has been in progress for a while, the dynamics of brand … is diverse as its market share reduced only by … and this reduction can be called stabilization after a long growth wave. The company was long trying to retain the comparatively low retail price of …, which is getting closer to the upper border of the mainstream segment. But by summer 2011 its price grew considerably — … became more premium, which was reflected in the sale dynamics.

Positions of leading companies in the main price segments


Carlsberg production rates were in general in tune with the dynamics of Ukrainian beer market. Over the nine months the company cut the production volume by …% to … mln dal.

At the same time the chosen branding strategy is still yielding its fruit. While in 2010 company Carlsberg was quite successful in economy and premium market segments, yielding positions in the mainstream, in 2011 at the expense of the mainstream, the expensive part of the brand portfolio went on gaining weight. The company’s economy brand sales stopped growing though did not go down. It is worth mentioning that over the years of sales decline of mainstream brands (namely sort family “…”) their natural volumes became quite modest and are now not very important for the company’s performance. The activity of all these tendencies is summed by the company’s market share, which by volume declined by … p.p. and by value, on the contrary, it grew by … p.p.

The neutral dynamics of sales of the company’s economy sorts resulted from the share reduction of “male” beer “…” and sale growth of “national” beer “…”. It is possible to connect redistribution in the portfolio with the shift of advertising focus. In the recent years “…” has received a powerful support in television coverage, unequalled to inexpensive brands. Moreover, the image of “…” beer corresponds more to mainstream than to inexpensive sorts and that evidently impresses consumers. “…” growth rate deceleration can be explained by an active growth of a competitive brand, namely “…” beer. “…” has been advertized far less actively recently. On the one hand it is under pressure from an affordable brand “…” produced by “…”, on the other hand from more expensive sorts “…” and “…”.

Premium brands of the company showed differently directed dynamics but, as a result, a steady sales growth of “…” compensated for the decrease in “…” over and above. It is possible to explain the decrease in youth brand sales by the fact that it has been on the market for quite a number of years now and despite the organization of many events and advertizing support, the expensive beer “…” faced the difficulty in maintaining the loyalty of drive lovers.

“…” sales increase can be explained by the fact that it became one of the company’s two key brands. Though it belongs to license segment, in practice “…” has become the top of diffused mainstream. As marketing focus of Carlsberg drifted from “…” to “…” and “…”, it is evident that “…” grows for the account of mid-price segment which the company has given to its business rivals and attacked from two sides.

In the superpremium market segment the company increased the sales of its title brand. “…” beer sales growth can be expected in years to come, against the background of the existing trend of consumers’ preferences and growing advertising support. The official sponsor status of FIFA World Cup which is taking place in Ukraine and Poland will definitely promote brand image strengthening and its further sales growth.


In 2011 the protracted downswing of company Obolon continued. The company is facing a fierce competition on Ukrainian market and experiences worsening situation of foreign markets. Over the first 9 months of 2011 the production of Obolon shrank by …% to … mln dal.

Under our estimation, Obolon underproducted about … mln dal of beer as a result of cutting supplies to Belarus after introduction of discriminating rules concerning beer import from Ukraine. But the sale decline in the inner market was responsible for …% (or … mln dal) of production downswing.

In terms of brand portfolio change, the company yielded to its competitors. The downswing took place at the expense of middle price component, namely sort family of beer “Obolon”. The deterioration of the key brand market positions by nearly …% was “amortized” by the positive dynamics of economy sorts, particularly brand “…”. On the whole, the company’s market share reduced by … p.p. to …% by volume and by … p.p. to …% by value.

In particular, beer “…” by Obolon became a new armor of the company and a new breakthrough. Being as such a Soviet brand “…” repeats dramatic development of beer “…”. In the beginning the retail price of “…” was so low that this beer could compete even with supermarkets’ own brands and regional brands. Obolon company again decided to make its consumers the best economic proposal. However, “…” shelf neighbor “…” apparently became a hostage in this situation as this …, after reaching the maximum of …%, its market share started falling rapidly proportionally to “…” brand. Though the general sales of Obolon in the economy segment went up, the company is apparently not satisfied with the current tendency, that is why in …. the price for “…” grew abruptly and became higher than that for “…” beer, which immediately led to stabilization of sales of these two brands.


Ukrainian subdivision of SABMiller developed much better than the national market. The production growth rates were really striking i.e. …% to … mln dal over 9 months 2011. One could say that SABMiller was returning the lost positions, as Donetsk enterprise used to produce not lesser amounts of beer, but there occurred quality changes during the company development.

So far, economy brands, in particular beer “Sarmat” account for the bulk of SABMiller sales. Nearly a … of the total realization volume is constituted by expensive brands which can be considered premium and superpremium segment. Besides, under our estimation, this ratio did not change comparing to 2010. Accordingly, the company’s market share by volume and by value grew …, having increased by nearly … p.p. to …%.

The company’s market share growth is primarily connected to retail coverage widening. In large cities of Ukraine numerical distribution of SABMiller brands grew over the year by … p.p. that is almost to …%. In small towns the company’s representativeness is much weaker but the development is progressing at even faster rates.

The company distribution broken down by separate brands reminds Carlsberg strategy, namely attack on mainstream segments from two sides, but more dynamically and in smaller scale. For example in 2011, economy brand “…” had the same market advance as brand “…”. One more not less dynamic SABMiller brand “…”, repeated the successful start of “…” which once formed the segment of Russian license beer. By the way, fast growing brands “…” and “…” belong to the same segment.

No doubt, the success of “…” was boosted by a … (on the border of mainstream and premium segments), by the promotional campaign on TV and by the development of “draft” beer sort. The other two license SABMiller brands, namely, mainstream “…” and premium “…” in 2011 did not make any substantial impact into the positive dynamics of the company development. Superpremium brand “…” imported from Russia demonstrated good sales with a … growth of numerical distribution and virtually full absence of promotion.

Mergers and Acquisitions

Presently, foreign investors show interest to Ukrainian breweries. In 2011 there were M&A deals, which though did not influence the captains of industry, but will probably have seriously impact on the competitive situation. At least there are three interesting ones:

1. Transfer of East European assets of SABMiller company to Efes company.

2. Purchase of Radomyshl brewery by company Oasis CIS and

3. Talks on acquisition of company “Persha Pryvatna Brovarnya”.

We should point out that SABMiller entry to Ukrainian market took place in 2008, and for these three years on the basis of Donetsk enterprise there has grown quite an active market player, successfully competing with the market leaders. Though it seemed that “Sarmat” had totally yielded its positions, new owners managed by means of investments and successful marketing decisions to won …% of Ukrainian market by 2011.

Lvov “Persha pryvatna brovarnya” not having foreign investments has grown since 2004 to the level of a national player by gradual augmenting of capacities and distribution development in eastern regions. In 2011 “PPB” is already controlling …% of Ukrainian market.

The examples of Miller Brands Ukraine and “PPB” justify that we can speak neither about “maturity” of Ukrainian market nor about consolidation and absolute domination of the leading three producers.

Why can market entry of such player as Efes influence the competitive situation on Ukrainian market? One can notice that the majority of international beer groups presented in Eastern Europe have operations in all continents and easily redistribute their investments according to markets dynamics and shareholders intentions. Compared to them, the area of Efes operational activity is rather limited. The international beer division of the company is focused on the markets of Russia, Kazakhstan and Georgia. Russian market certainly makes the biggest gain. To our mind it was the main reason why the company managed to oust their competitors in Russia and substantially increase its marketable weight over the last years. Company Efes invested in production, did not cut budgets of marketing and acted faster and more effectively than the market leaders. Turgul Agyrbash, former supervisor of Russian company division jokingly compared Efes to a shark among whales.

Affiliation, of SABMiller assets can give a new impetus to Efes development. Joining of Russian brands portfolios of the two companies seems quite successful, as Efes brands have good positions in the economy market segment while SABMiller inclines to premium. Thus the range of brands will become better balanced. On the other hand worsening of the conditions of absolutely overregulated Russian market is a powerful stimulus for Efes to expend to new regions.

Though the potential of Ukrainian market growth is much stronger, here SABMiller is exposed to worse conditions, due to weakly developed distribution network and comparatively small capacity of Donetsk brewery.

The company seems to have found the development strategy for the brands portfolio for the last three years. It is supposed that licensed brands will as possible develop distribution and market share while brand “Sarmat” presently securing the bulk of sales will pale into significance. Plus Efes company brands with developed positioning and known to Ukrainian consumer, could well fit into all the price categories of market segments and become a good supplement of Miller Brands Ukraine portfolio.

For example, in Russia Efes company proved itself as an effective brand builder in economy segment of the market with brands “Belyi Medved”, “Gold Mine” and “Green Beer”. It is quite possible that these brands with impressive positioning will be demanded by Ukrainian consumers of inexpensive beer too. The successful promotion of “Baltika” and “Zolotaya Bochka” allows to expect good potential for growth of innovation sorts of “Staryi Melnik”. “Efes Pilsner” can also make a contribution into the growing premium segment.

Here we should point out that though large import supplies of Efes brands to Ukrainian market started first in 2010, the company’s trade partners are rapidly expanding. While in summer 2010 net numerical distribution of Efes brands in city retail totaled …%, by middle 2011 it grew to …%. By that in 2010, half of all supplies of import beer made in Russia was already made by two brands of Efes company namely beer and “Belyi Medved” and “Staryi Melnik”. One can find them in supermarket and beer stands of big cities.

Thus, we can speak of initial stage of Ukrainian expansion of Efes. Logical continuation of this process would be transfer of rights for import of Efes brands by Miller Brands Ukraine and its distribution network usage for widening of retail coverage. Under our estimation, for two key Efes brands to win …% in 2012, their retail price has to be cut by at least …%, or market coverage has to grow at the former rates.

One more event which can seriously influence Ukrainian market is entry of company Oasis CIS, which together with German Oettinger bought brewery “Radomishl”.

Investment group Oasis CIS (Detroit Investments successor) is known for its successful projects in Russia and Belarus. “PIT”, “Syabar” and “Vladpivo” were quite successful companies and were purchased by world brewing giants on the growth wave of market share. Today Oasis CIS in Russia is focused on development of effective total beverages business, under name “Moskovskay Pivovarennaya Kompania”. According to business owners, “MPK” is a strategic project, which is being created not for sale and oriented to distant perspective.

Russian business model of “MPK” is grounded on many contracts with world producers of well known or specialized brands as well as on developing brands of its own. The company initially had a goal to supply the market with a wide range of mainstream beers (licensed brands) and premium (import brands) segments which would fill open niches. For example in order to use the production capacities “MPK” it produces beer “Oettinger”, a licensed beer sort with quite a democratic price and even bottled in PET. At that all “MPK” projects exclude expensive image advertising campaigns.

Late in 2011, Oleg Skripko, new director Radomishl enterprise expressed company plans for the future. During the next 1-1.5 years the combine is expected to launch annual production and selling in Ukraine 0.7 mln dal of beer “Oettinger”, and during 5 years the company plans to occupy 10% of Ukrainian market of beer, produced under license contract.

It would be logical to presume, that Russian experience will be used in Ukrainian market too. However in Russia Detroit Investments always uses its own distribution network. In Ukraine Oasis CIS would have to put much effort to develop distribution system. By midyear 2011 national numerical distribution of Radomishl combine amounted to …% in big cities and …% in towns, that is, the company is not able to effectively develop, using the existing selling system.

Here we should mention that the number of big and successful trade companies which are able to supply beer is limited. The leading producers have been long working with them under certain conditions which are to prevent competitors from expanding. It takes several years to grow a new generation of distributors, and a marketing division on Russian model will demand substantial investment. That is why plans of new management of the enterprise looked quite ambitious and require considerable investments.

However, soon there might happen an event which can improve startup conditions of Oasis CIS. “Kommersant” reports that the company has been negotiating the purchase of 66% of shares of independent Ukrainian manufacturer “Persha Pryvatna Brovarnya”. The companies have already become partners on the international market, Oasis received exclusive rights to distribute the brands of “PPB” in Russia, Kazakhstan and Belarus and “PPB” can distribute Oasis brands in Ukraine.

Besides, it is necessary to note the relations between “PPB” and Radomyshl brewery which was taken over. Zhitomir enterpise bottled “PPB” brands under contract, charging its capacity and assisting its Lvov partner to improve logistics in the east of Ukraine. By the way, that is why “Radomyshl” takeover could become a weighty argument for a change of “PPB” joint owners.

“PPB” takeover will enable Oasis CIS to receive …% of Ukrainian market and, above all, to use the existing sales system of the company, which has embraced all the key regions of the country in the recent years. In particular, the level of “PPB” numeric distribution comprises today about …% (market leaders’ level is about …%). But, to our opinion, if “PPB” becomes a property of Oasis CIS, then the brand portfolio of the Lvov company will undergo a serious inspection. It is not likely that a new proprietor will support a huge number of small trade marks manufactured today by “PPB”.

Finally, one more M&A agreement is worth mentioning. At the end of 2011 it became known that antimonopoly committee of Ukraine allowed public corporation “Stavropolskiy pivovarenniy zavod” to purchase more than 50% share of “Emporium-P” (Poltava) ltd. “Emporium-P” owns 96.4% shares of joint-stock company “Firma “Poltavpivo”. The main owner of public corporation “Stavropolskiy pivovarenniy zavod” is Nikolay Kovalev, a businessman.

“Stavropolskiy pivovarenniy zavod” is one of the most prominent independent Russian breweries. Under our rough estimate, its output volumes amount to a little less than … mln. dal and its annual turnover equals to about $… mln. The company production is presented mainly in economy market segment, with key brands “Anton Grubi”, “Gubernskoye” and “Na BEERlin”. The company focuses on sales of “live” beer and development of keg direction. The main distribution regions are Southern and Caucasus federal districts of Russia.

The latest years were quite successful for Stavropol enterprise judging by growth rates of output volumes and revenues. Apparently, the enterprise owners sought for ways of further business development; however, in Russia due to growing competition and reinforcement of state regulation, investing into beer production is fraught with risk.

Under our estimate, the maximum beer production volume approx … mln dal was reached by joint-stock company “Firma “Poltavpivo” in 2006, then the production was gradually sliding down to … mln. dal in 2009. In 2010-2011 the enterprise somewhat improved its market positions. In domestic region, Poltava region, the company market share amounts to about …%, but its numerous brands can be found in retail in Kiev and eastern regions.

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