Coca-Cola, PepsiCo battle over Russian juice market

Coca-Cola, PepsiCo battle over Russian juice market

The Coca-Cola Co is reported to have tabled a bid to purchase a stake in Russian juice producer Nidan Juice. What is drawing the US drinks giant to this market and what can it expect from its investment there? just-drinks draws from the latest report from Euromonitor International to deliver you 'just the facts'.

1) Consolidation and acquisitions in the Russian market have been predicted for some time. Competition is fierce between the two giants Coca-Cola and PepsiCo in Russia. When Coca-Cola acquired large Russian fruit/vegetable juice manufacturer Multon ZAO in 2006, PepsiCo decided not to rest on its laurels. As a result, it decided to buy the largest Russian fruit/vegetable juice manufacturer Lebedyansky OAO for US$1.4bn in August 2008. In a moment, PepsiCo overcame its major rival and became the number one company in fruit/vegetable juice in Russia. As a result, Coke's potential move on Nidan is no surprise.

2) Fruit/vegetable juice, bottled water, carbonates - all these major sectors have demonstrated rapid development recently and are close to or have reached maturity. Despite the fact that soft drinks consumption per capita is lower in Russia than in developed countries, these three sectors will see relatively low off-trade volume CAGRs in the near term, Euromonitor says. However, such young sectors as RTD tea and functional drinks will keep performing.

3) The Russian consumer market has been in crisis in the last year. The Consumer Confidence Index hit -20% during the fourth quarter of 2008, according to official statistics. It was at the lowest rate since 2000.

4) The times when Russian consumers trusted only imported products are now gone; during the 1990s, even local manufacturers were forced to sell their soft drinks under foreign names. However, consumption patterns have changed in Russia and people are now happy to buy products with traditional Russian names, such as Dobry, Moya Semya, Nikola and Svyatoy Istochnik.

5) Moreover, the popularity of national Russian drinks is rapidly rising in the country. The most popular national drink is kvas from the other non-cola carbonates category. This drink is brewed from fermented rye bread. It is followed by juice drink mors that is made from forest berries, usually cranberry or cowberry. There are also such national drinks as kissel and compote.

6) The creation of successful national drinks brands in Russia can provide a good springboard to enter the soft drinks market of neighbouring countries. Consumption patterns in CIS countries have many common features. Kvas, mors and other traditional Russian drinks are also popular in such countries as Belarus and Ukraine.

7) The Moscow soft drinks market is the largest and the most developed in Russia. It recorded 4% total volume growth and 12% current value growth in 2008. Growth rates in this city were a little bit lower than in Russia on the whole, as the market in the capital city is more saturated.

8) Lebedyansky OAO is the largest fruit/vegetable juice producer in Russia and one of the biggest fruit/vegetable juice producers in the world. The company was purchased by the major international company PepsiCo in 2008.

9) Coke's potential target Nidan Soki is a key player in the Russian fruit/vegetable juice sector. The company's successful results attracted the attention of major international investors in the form of UK investment fund Lion Capital LLP, which purchased 75% of Nidan Soki OAO shares in 2007.

10) Nidan manufactures its brands at two plants in Moscow Region and Novosibirsk. Its total production capacity exceeds 600 million litres per year. The company's brands are widely available not only in Russia, but also in neighbouring CIS countries. What is more, Nidan Soki exports its products to Mongolia.

For more information on Euromonitor International's Fruit/Vegetable Juice in Russia report, click here