GLOBAL: BRIC markets offer brewers chances to make hay - research

Beer appears to be the alcoholic drink of choice in the developing BRIC markets, according to a series of recent reports.

Beverage industry analyst Canadean said yesterday (29 August) that beer consumption in Brazil, Russia, India and China is currently outpacing that of alcoholic drinks overall. Between 2002 and 2007, the analyst noted, total beer consumption across the four countries has increased by almost 50%.

The potential for brewers in the four countries is "huge", the analyst noted, with China and India tipped to become the leading global suppliers of manufactured goods, and Brazil and Russia expected to assume a similar status in raw materials. "With this natural fit, there is every reason to expect that the BRIC countries will become strong future trading partners," Canadean said. "Although a formal alliance has yet to be forged, political co-operation between the nations is already increasing."

Brazil accounts for around 40% of all beer consumed in South America. Last year, volumes rose by almost 8%. Leading players such as market leader InBev, Heineken, Carlsberg and Mexico's Femsa Group all have a presence and their investment has hastened the modernisation of breweries. Looking forward, competitive pricing, marketing and packaging innovations are likely to be key drivers and consumption is expected to increase by around 4% during 2007.

In Russia, the healthy economy, increasing incomes and warm weather were responsible for Beer's exceptionally strong 2006 performance. Consumption grew by 12%, with Baltic Beverage Holdings remaining the leading player. The new larger 250cl and 500cl PET bottles introduced by the leading brewers have helped to drive sales in the discount beer sector, particularly in those regional markets traditionally dominated by affordable local offerings. In the short-term, growth of between 3% and 5% per annum is predicted. Already dominated by the six leading brewers, the market should consolidate further as the acquisition of the smaller players continues.

As an economic force, India is believed to hold the potential to grow faster than any other BRIC country over the next 30 to 50 years. The sub-continent's beer market has been equally dynamic, growing by almost 90% since the turn of the century. International brands, however, have made little impression in India. The only real success story has been Foster's whose Indian operation was acquired by SABMiller a year ago.

China remains the world's largest beer market both in terms of production and consumption. The leading brewers are viewing China as a key growth market, with InBev, Anheuser-Busch, Carlsberg and Suntory having already invested heavily in the country. Despite the strong potential, more than half of China's 500 breweries are unprofitable. Although there are around 1,500 brands, low retail prices and high transportation costs have imposed geographical restrictions. As a result, only Tsingtao, Yanjing and Snow are really sold nationally. With the 2008 Olympics looming, China's beer market should withstand the expected price increases to grow by more than 9% over the next two years.