Focus – The Beer Landscape in Russia
just-drinks is on its way to Russia
Later this week, Carlsberg is hosting a Capital Markets Day in St Petersburg, Russia. Ahead of the day of presentations, trade visits and a brewery tour, here's a look at the lay of the land in Russia's beer market.
After years of unbridled growth, the Russia beer category has gone through a tumultuous time of late. In January 2010, the Government introduced a 200% excise duty increase on beer (up from RUB6 per litre to RUB9). Smaller increases have been implemented in 2011 (RUB1 to RUB10) and in 2012 (RUB2 to RUB12). For 2013 and 2014, two RUB3 increases - to RUB15 and RUB18 – are planned. The jump in 2010 brought taxation in Russia into the EU band range. The other increases have moved Russia upward in this range, but still not at the high end.
In the second quarter of 2012, the Russian beer market returned to growth, +3% year-on-year. Volumes peaked in 2008 at almost 120m hectolitres (80 litres per capita). The downturn started in 2009, and in 2011 was at its lowest level since 2003, at 63 litres per capita.
The drop in volumes has had an effect on capacity in the country. Nomura estimates that overall capacity utilisation is at around 70% for the industry. “We would expect industry consolidation moves to lead to further brewery closures, which should reduce industry capacity,” the analysts said earlier this month. Of the international brewers, Efes is using the least of its capacity – around 50% - while A-B InBev is the most efficient, at 84% of capacity.
Russian beer volumes are coming back into growth after three years of decline and the regulatory outlook is looking increasingly sanguine – Nomura, 16 August.
Carlsberg's market share in Q2 2012 was 37.9%, down from 39% year-on-year. Heineken is almost back to pre-2010 level, at 12.8%. The SABMiller/Efes combination is benefiting from portfolio integration and cost synergies. Anheuser-Busch InBev is losing share as it steps away from discount/economy beer.
Russia accounts for around 40% of Carlsberg's group profits.
Russian market share in Q2
- Carlsberg (Baltika) – 37.3%
- Anheuser-Busch InBev – 15.0%
- Heineken – 12.8%
- Efes – 10.3%
- SABMiller – 5.9%
- Others – 18.7%
Russian market mix in Q2
- Discount/lower mainstream – 48%
- Mainstream – 27%
- Premium – 17%
- Super premium – 8%
Discounting in Russia slowed markedly in Q2.
A marketing ban for beer came into effect in Russia in July, resulting in the end of all beer advertising in television, radio and outdoor media. Brewers must also display health warning labels about alcoholic misuse, with the labels required to occupy 20% of consumer packaging.
Also in July, the commission for alcohol regulation was dissolved, suggesting that regulation has stabilised. At the time, Deputy Prime Minister Arkady Dvorkovich said: “The Government commission was set up to draft regulatory documents for this sector. All of them have been drawn up and the adoption procedures are nearly over.”
From January next year, beer sales from so-called 'non-stationary outlets', such as kiosks/pavilions/open-air markets will be banned. Also, the consumption of alcohol in public spaces will be outlawed.
Although the country's authorities have mooted a ban of PET, industry observers believe opposition to this from stakeholders outside the beer category means that such a move is unlikely.
Two brewers have moved the heads of their UK units to Russia in recent months. In December, Isaac Sheps made the move to Baltika for Carlsberg, while Stuart MacFarlane headed in the same direction for Anheuser-Busch InBev in July last year.
The prospects for Russia's beer market are widely considered to be stable. After the likes of pre-duty hike sell-ins, heatwaves, disappointing summers and regulatory pressures, 2012 has so far proved much calmer than recent years. The expected rises in real wages and, thus, disposable income bode well for the future.
just-drinks will provide full coverage of Carlsberg's Capital Markets Day in Russia on Thursday (13 September).
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