June Management Briefing - The BRICM Markets – Part I
BRICM Drinks Markets Generally Perform Well in Recession
The rise of the world’s large emerging markets, Brazil, Russia, India, China and Mexico - or BRICM to give them their popular acronym - has been especially significant for the drinks industry. With its array of international and local brands and a growing inquisitiveness of consumers worldwide towards foreign drinks, the drinks industry is a good fit for globalisation.
And, with the BRICM markets largely being more robust in the recession than the rich world - although Russia is an exception - drinks companies have kept a close eye on their tastes and demand.
China, as the world’s most populous country, is critical, of course: its population of 1.3bn is consuming more and more branded drinks, which has greatly benefited domestic manufacturers across the country. According to London-based research company Euromonitor International, the market size of alcoholic drinks in China reached 50bn litres in 2009, up 5.7% year-on-year, while soft drinks reached 55bn litres, up 10.5% from 2008.
Among alcoholic drinks, the market size of beer expanded to 43bn litres in 2009, up by 5.7% on 2008, with national brands Snow, Tsingtao and Yanjing leading the market with a combined share of 24.4%, according to Euromonitor. Snow, owned by Beijing-based China Resources Snow Breweries, sold 7.2m litres in 2009, coming in as market leader for the fifth consecutive year, according to the National Bureau of Statistics.
Among soft drinks, bottled water, fruit and vegetable juice and carbonated soft drinks (CSDs) dominated the market with shares of 32.9%, 22.7% and 20.3% respectively in 2009, Euromonitor found.
The Hangzhou-based Wahaha Group led the bottled water market in 2009 with a share of 14%, followed by Master Kong of Tingyi Holding Corp (based in the Cayman Islands) with 11.7%.
Last year, Coca-Cola’s Minute Maid brand enjoyed a share of 12.3% among fruit and vegetable juices, while its Sprite soft drink was the champion of carbonates with a market share of 25%.
Meanwhile, India’s domestic market is not much smaller. It is an unusual – but growing – market for soft and alcoholic beverages. A 2009 report from the All India Brewers’ Association stressed: “India is predominantly a hard spirits market and beer is a minority preference for those who consume beverage alcohol. Beer makes only 4% by revenue of the total alcoholic market.” The report noted that “96% of alcohol consumption is spirits,” although a nascent wine industry is now growing.
According to the Confederation of Indian Alcoholic Beverage Companies the market is growing at 12 to 15% and India remains the world’s largest whisky market, growing at between 25 and 30% every year. And it expects beer demand to grow too, forecasting annual per capita consumption to rise from 1 litre in 2010 to 5 litres in 2015.
Drinks (including alcoholic beverages) account for 14% of total food consumption expenditure in India, which stood at US$18bn in 2008, according to the national government’s Central Statistics Office.
The non-alcoholic branded beverages market is expanding particularly quickly and is adapting to changing consumer demands. According to the Federation of Indian Chambers of Commerce and Industry (FICCI), the country’s market for CSDs is now worth more than US$1.5bn annually, while demand for juice and juice-based drinks, which grew 25% per annum in recent years, now exceeds US$250m. The market has become more dynamic and is still evolving. “Indian consumers are getting more health-conscious and there is a trend towards more juices and natural products,” said Sameer Barde, assistant secretary general of FICCI. Pepsi, The Coca-Cola Co and Hello have reacted to this changing demand by launching fresh lime drinks. In the alcoholic beverages segment, every year 2m cases (nine litres each) of wine and 177m cases of spirits are sold every year in India.
In Brazil, soft drinks and beer are the most important segments. In 2009, Brazilians drank 92 litres of soft drinks per capita for a total 17.77bn litres, 11.61bn of which were CSDs, according to Euromonitor International. Sales of functional drinks (such as vitamin waters and sports drinks), juices and bottled water have been growing most rapidly in recent years, gaining 84.3%, 66.8% and 63.4% in sales volumes respectively between 2005 and 2009. This compares to 17.8% growth in sales volume for CSDs in the same period. Coca-Cola is the top soft drink purveyor in the country and boasts the top-selling soft drink, followed by Ambev’s Guaraná Antarctica.
As regards alcohol, only beer volume sales grew in Brazil between 2005 and 2009, gaining 32.9 % over the period (CAGR of 5.9%), while wine and spirits both declined 4.9% and 2.8% respectively. In 2009, 12.08bn litres of beer were consumed, compared with only 324.3m litres of wine, and 1.4bn litres of spirits.
Brazilians drink beer more than any other beverage, and consumed 63 litres per capita in 2009. The beer market is dominated by domestic brands Skol, Brahma and Antarctica (all of which are owned by Anheuse-Busch Inbev). The second-most popular alcohol in Brazil is the cane spirit cachaça; Brazilians consumed about 1.3bn litres of cachaça in 2009, making it the third-most consumed spirit in the world, according to ABRABE (the Brazilian beverages association).
In fellow Latin American giant Mexico, 40.35bn litres of soft drinks were consumed in 2009, according to Euromonitor. The top seller in this sector was bottled water at 25.15bn litres, followed by CSDs at 12.05bn litres. Although only 2.52bn litres of juices and fruit drinks were sold in 2009, this sector has been expanding faster than all other beverage segments in Mexico, growing 87.8% between 2004 and 2009, with a CAGR of 13.4%. In comparison, bottled water sales grew 53% (CAGR 8.9%) during this period, while CSDs only grew 8.1% (CAGR 1.6%).
Mexicans consumed 6.49bn litres of beer in 2009, up 18% from 2004, while only 66m litres of wine were consumed. However, although currently only a niche market, the wine sector has shown strong growth, with sales volumes increasing by 66% between 2004 and 2009. Spirits grew 16.5% over the same five-year period (CAGR 3.1%), and 204.3m litres were consumed in 2009. The most popular spirits are locally-produced brandy, Tequila and mezcal.
In Russia, for the drinks industry, 2009 was a forgettable year as GDP plummeted 8.5%, dragging spending power with it. According to dominant beer producer Carlsberg-owned Baltika Breweries’ latest annual report, Russian beer sales sank in 2008 (-0.4%) and 2009 (-10.3%), with per capita consumption falling from 77 litres to 69 litres. Yet this remains a robust market. Research group Euromonitor said wine drinking, at RUB289bn (US$9.2bn) in sales last year, is less than beer’s RUB664bn and spirits’ RUB517bn. It says juice and CSD sales slumped by -7.4% and -2.6% in 2009. For juices, 86.3% of the 2.7bn-litre market (the world’s third-largest after the US and Germany) is claimed by four players, with three (Lebedyansky 32.3%, Nidan 13.2% and Multon 20.3%) being owned by Pepsi, Coca-Cola and the UK’s Lion Capital LLP respectively – and with Wimm-Bill-Damm (20.5%) remaining Russian-owned along with smaller local outfits.
In alcohol markets, Russians have been turning away from spirits (i.e. vodka) for years, as the younger generation acquires Western-style tastes encouraged by the federal Government, which wishes to cut alcohol consumption in half by 2020. Vodka is still popular, with more than 100 brands available, but many are manufactured by big producers: Synergy, Tatspritprom, Rodnik, Cristall taking on the giant Russian Standard Vodka company that still has a 60% chunk of Russians drinking their brands, according to Russian drinks media reports.
This is part one of the six-part just-drinks' management briefing for June. For part two, click here.
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