just On Call - Heineken attacks Carlsberg tactics in Russia
- CFO attacks rivals for holding down prices
- Heineken still leaking market share
- Ups marketing spend to win back consumers
Heineken has leaked market share in Russia in 2010
Heineken's chief financial officer has launched a broadside against rival Carlsberg over its pricing strategy in Russia following a hike in beer excise tax in the country.
Heineken said today (27 October) that it continued to leak market share in Russia in the third quarter of 2010. It has suffered more than its multinational rivals from the Russian Government's decision earlier this year to triple beer duty.
While this is partly explained by Heineken's restructuring project in the country, the Netherlands-based brewer is unhappy at how its competitors reacted to the tax rise.
Heineken's CFO, Rene Hooft Graafland, said that "we burnt our fingers" by immediately raising prices to cover the tax rise when competitors did so more gradually. He singled out Carlsberg, which leads the market via its Baltika Breweries subsidiary, for particular criticism.
"We were heavily disappointed that the competition, and certainly the market leader, didn't put on the excise increase immediately to the consumer, because normally that's what you should do," Graafland told analysts during Heineken's third quarter results conference call today (27 October). "They have decided differently and that has, in market share terms, worked out quite well for them," he added.
Heineken, he said, has been forced to drop prices back down on some brands in order to stem a consumer shift to rival beers.
The firm said today that its beer volume sales in Russia "declined significantly" in the three months to the end of September. The firm did not detail its exact volume decline in Russia in its half-year report, but said that volumes fell more steeply than the market, which fell by 9%.
If Heineken's volume market share slips much further in Russia, it could lose its third-place ranking in the country to Anadolu Efes.
The brewer has been working to make its business in the country more profitable by cutting out SKUs and consolidating beer production. Graafland said that Heineken has increased marketing spend in the country and its beers are now "aligned" on pricing with competitors.
Volume sales of the Heineken brand in Russia rose in the third quarter and the firm's overall pace of decline slowed from the first half of the year.
Still, Graafland was cautious on the progress made. "Our volumes were still down in a substantial way whilst the market showed limited growth," he told analysts. "We have aligned our pricing, however that doesn't mean that automatically you regain lost market share, that is something you will have to do over time." He said that the brewer was focused on winning consumers back.
Don't go getting too excited about talk of improvements in mature beer markets....
In Denmark, this month, Pete Brown bore witness to the latest attempt by a multinational brewer to give its flagship beer a global identity. This well-worn road, however, is beset by perils and pitfal...
Carlsberg's new worldwide strapline highlights the lack of truly global beer brands in an extremely consolidated industry....
- CCA - Coca-Cola's Canary in the Mine
- Comment - Hybrid Spirits: Innovation or Laziness?
- just The Preview - Pernod Ricard's Q4 & FY
- just The Preview - Brown-Forman Q1
- Comment - The Race Downhill for Treasury
- Mast-Jägermeister targets UK off-trade boost
- Cognac FY sales slide as China troubles bite
- Brown-Forman unveils Jack Daniel's UK push
- Champagne will not regain lost ground until 2018
- Indian state moves towards alcohol ban