GENERAL MARKET CHARACTERISTICS
Beer is one of the most popular low-alcohol beverages both in Russia and abroad. Breweries offer a wide range of beer varieties for every taste and budget.
There are countless articles and studies conducted on the benefits and side effects of this beverage. There is an opinion that by-products of beer fermentation can do considerable harm to the human body – other people, on the contrary, believe that the beverage improves the immune system. Said polar statements are endless, although there is a general truth to consider: everything is okay in moderation.
Beer is produced through wort alcoholic fermentation (most often based on barley) with the use of brewer’s yeast, usually with hops added. Ethanol content in most beer varieties amounts to 3–6%, whereas strong beer normally contains from 8.6% to 14% alcohol.
Contrary to the widespread idea of Russia’s beer “alcoholization”, in terms of per capita beer consumption Russia is, in fact, not even among the top 30 countries. In terms of total consumption of beer, however, Russia is fifth, following China, the US, Brazil and Germany*. With its huge population, China occupies almost a quarter in the global beer market. The US accounts for 13%, Brazil occupies 6.8%, whereas Germany and Russia have the shares of 4.5% each.
DOMESTIC OUTPUT DYNAMICS AND MARKET STRUCTURE
According to the data for the recent years, production – and thus consumption – of beer in Russia have been on the gradual decline. Output was reaching its peak value in 2007, amounting to 1,147 million decaliters. Last year, domestic companies supplied 746 million decaliters of beer to the Russian market, which is slightly higher than the volume for 2016 (727 million decaliters). However, in the first quarter of 2018, a further decline in production occurred (-5.5%). Based on these data, one may expect that the trend formed will continue this year – beer output may drop to 708 million decaliters, which is 1.6 lower than the volume in 2007.
In a way, this process was affected by the so-called “anti-alcohol legislation” in Russia, which banned alcoholic beverage advertising in the media and in public places; limited alcohol sales during nighttime and alcohol consumption on the street; and tightened control over the ban on beer sales to minors.
The share of light filtered beer equals 95.5% of the total output volume. Other varieties occupy less than 5% of the market – among others, unfiltered beer and dark beer have the shares of 1.8 and 1.6% respectively. Let us focus on the difference between filtered and unfiltered beer. Unfiltered beer implies beer that is not filtered during the production process and is most often not subject to pasteurization and preservation. Even though this method lowers the beer's characteristics in terms of how long it can remain suitable for consumption (maximum 2 months), it leaves specific bacteria within the beverage untouched, which makes a difference in terms of taste. It should be noted that it is only in recent years that natural unfiltered beer began to gain particular popularity. Producing original unfiltered beer on an industrial scale is problematic, and therefore it is supplied to the market in small portions – and at a much higher price.
AVERAGE RETAIL PRICE DYNAMICS
If the dynamics of beer prices are monitored, a gradual increase in prices for domestic beer and a decline in prices for imported beer can be observed. In April 2018, Russian beer was sold at 111 rubles per liter on average, which is 3.4% higher than in the similar period of 2017. Foreign beer, on the other hand, cost 215 rubles per liter, which is 7% lower.
Taking into account the small share of imports in the segment, further growth in prices for domestic beer is held back by declining consumption.
ANALYSIS OF FOREIGN TRADE TURNOVER
In the total volume of the Russian market, the share of imported beer is rather modest – in 2017 it did not exceed 3.4% in total consumption. The Russian Federation exports around 4.2% of beer produced. Considering the above, Russian companies fully satisfy domestic demand, and local breweries are hardly oriented at foreign markets.
Ukraine remains the main importer of Russian beer, accounting for the share of 23.5% of the overall volume of supplies in physical terms. It is followed by the partners in the Eurasian Economic Union – Belarus and Kazakhstan – which have the shares of 21.3 and 18.5% respectively in supplies. The monetary value of beer exports in 2017 equaled $128.8 million.
Together, Germany, Belarus and Czech Republic provide more than 65% of all beer supplies to Russia. Beer imports reached $195.1 million in monetary terms in 2017.
According to the data available in the GLOBAS database, the top 5 breweries occupy around 71% of the market in total annual revenue, which increased to 318.6 billion rubles in the fiscal year 2016.
“Pivovarennaya Kompaniya (Brewery) “Baltika” LLC is the largest beer manufacturer in Russia, accumulating almost a third of the total revenue among all companies in the industry.
Since March 30, 2018, “Anadolu Efes” and “AB InBev” have been under the same management, which may indicate that the business merging process is about to start. In case of a final merger, the corporation will occupy up to 25% of the market, thus getting extremely close to the industry leader.
Since 2008, beer consumption in Russia has been gradually decreasing, which is due to both active social advertising and various forms of healthy lifestyle propaganda, as well as legal restrictions. In addition, alternate types of leisure are becoming increasingly available and affordable, in particular in large cities. These factors lead to fiercer competition for consumers, which initiated market consolidation involving mergers and acquisitions among breweries.
* Data by “Kirin Holdings Company” (Japan); calculations by “Credinform”.