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6/2017


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DRINKS
Prospects of Development of the Russian Wine Market
Research by the Center for Investigations of Federal and Regional Alcohol Markets (CIFRRA)

Review of the Russian Beer Market
Research by the Company I-Marketing

TEA & COFFEE
Review of the Russian Coffee Market
Research by the Company Step by Step

CONFECTIONERY
Review of the Russian Confectionery Market
Research by the Information Agency Credinform

Review of the Russian Market of Fruit Preserves
Research by the Company I-Marketing

MEAT
Review of the Russian Meat Market
Research by the Company Market Analitika

FISH & SEAFOOD
Review of the Russian Market of Fish and Fish Products
Research by the Company NeoAnalytics

DAIRY PRODUCTS
Review of the Russian Dairy Market
Research by Information Agency Credinform

Ways to Increase Realization of Expired Food Products
Study by the Marketing Agency ScanMarket

INGREDIENTS
Review of the Russian Market of Starch Products
Research by the Company ID-Marketing

TRADE SHOWS
22nd International Exhibition Agroprodmash-2017


4th exhibition Anufood China-2017


34th Exhibition Anuga-2017


Exhibition Drinktec-2017


26th International WorldFood Moscow Exhibition


FOODSERVICE
Review of the Russian Restaurant Market*
Research by the Company RBC Market Research

FINANCE & LOANS
Leasing Market in Russia
Research by the Rating Agency RAEX (Expert RA)



Review of the Russian Beer Market

Research of the Company IndexBox
Due to the continuous downturn in the Russian market of beer, domestic producers urged the government to lift the restrictions on beer sales and advertising. Will there be any response to their hopes from the regulating authorities?
In late November, the Higher School or Economics (HSE) and the Union of Russian Brewers presented the Concept of separate regulation of production and turnover of beer products to the Ministry of Economic Development (MED). The document proposes to allow beer sales in non-stationary retail, to lift the limits on its advertising and to deprive regional authorities of the power to set their own barriers for producers.
The industry participants initiative to make said proposals was caused by the downturn in the beer market that had lasted for 5 years. In 20102015 production of beer in Russia was declining at the average annual rate of 7%, eventually reaching 7.3 billion liters. The market is negatively affected by both legislative restrictions in the alcohol industry and the economic crisis as a whole: consumers became more conservative in their purchases against the backdrop of declining real incomes having decreased by 0.7% in 2014 and by 4.3% in 2015
However, in 2016 the situation in the industry shifted: over the first 9 months production of beer in annual terms increased by 3%. Said growth has to do with beer in PET containers of a large volume having started to be sold, and with favorable weather conditions in most parts of Russia in the summer*. It should be noted that production of alcoholic beverages in plastic containers larger than 1.5 liters will be banned starting with January 1, 2017, and retail sale of alcohol in said containers will be banned from July 1, 2017. The original edition of the bill implied that sales of alcoholic beverages with ethyl alcohol content over 6% in plastic containers larger than 1.5 liters were to be banned from 1 January, 2015, and sales of beverages containing more than 4% of alcohol in plastic containers greater than 0.5 liters in volume were supposed to be banned in early 2016. The bill has not been reviewed since then. Analysts at IndexBox believe that UEFA Euro 2016 also had a positive effect on beer sales its TV broadcasts were accompanied by brewers advertising campaigns.
Experts at IndexBox believe that the 2016 UEFA European Championship also had a positive effect: its TV broadcasts were accompanied by advertising campaigns of beer producers.
Maksim Kurokhtin, Head of Marketing Department at Tomskoe Pivo (Tomsk Beer) JSC (one of the largest producers of draught beer in Russia), is less optimistic: in his opinion, production growth is a statistical fiction caused by the implementation of the Unified State Automated Information System (EGAIS), which contributed to small breweries emerging from the shadows. However, according to him, in reality there is no growth in production, as consumption of beer keeps declining.
The fastest growing segment in the industry has been non-alcoholic beer, the share of which amounts to 1.2% of beer production in Russia: its output grew by 90% in the second quarter of 2016 and by 19% in the third quarter, reaching 30 million liters. At the same time, throughout most of 20152016 monthly production in annual terms was demonstrating growth.
Positive dynamics in said segment are largely due to the fact that only non-alcoholic beer is allowed to be advertised without restrictions on TV. Advertising of alcoholic beer is only allowed during sports broadcasts and on specialized sports channels. Therefore manufacturers often act as sponsors for sports event broadcasts on TV and place their own commercials within them.
In JanuarySeptember 2016, production of beer in monetary terms increased by 13% to the similar period of 2015, and average consumer prices grew by 10%. The price increase was caused by the ban on recycled glass usage and a reduction in the number of low-alcohol beverage sale outlets (kiosks), according to analysts at IndexBox. Another factor was ruble devaluation, which made international companies raise beer prices in order to compensate for the decline in foreign currency earnings.
The leading companies of the industry today include: Pivovarennaya Kompaniya Baltika LLC, Obyedinennye Pivovarni Kheineken (Heineken United Breweries) LLC (Saint-Petersburg), SUN InBev OJSC (Moscow region), Pivovarnya Moskva-Efes (Moscow-Efes Brewery) CJSC, and Moskovskaya Pivovarennaya Kompaniya (Moscow Beer Brewing Company) CJSC. Overall, there are over seven hundred large and small companies in the beer market, and the position of some of them are particularly strong in certain regions: for instance, in Saint-Petersburg the beer brand AF Brew is in high demand; in Tomsk it would be Tomskoe Pivo; in Penza Samko and Vizit; in Nizhny Novgorod Okskoe and Malz & Hopfen; in Krasnodar Krai Karachaevskoe and Khadyzhevskoe; in Irkutsk Admiral Kolchak; in Novgorod Khvoyninskoe; in Glazov (Udmurtia) Chepetskoe.
In the third quarter of 2016, the region leading in beer production was the Volga Federal District, the share of which in the structure of overall Russian production equaled 28.3% (579 million liters). Second and third were the Central and Siberian Federal Districts, which produced 576 million liters (28.1%) and 332 million liters (16.2%) respectively over the period of JulySeptember 2016.
According to industry participants surveyed by IndexBox, Russian beer producers potential for exports remains low. Today, the leading Russian exporter is Baltika brewing company, which accounts for 48% of beer exports from the Russian Federation** its products are present in over 75 countries of the world.
Maksim Kurokhtin notes that Russian craft beer, due to its exotic nature, may be interesting to foreign consumers. However, establishing exports from Russia statistically significant enough is problematic due to logistics costs, he says it would be more profitable to establish contract bottling and launch production in recipient countries in question.
Today the government and brewers are interested in increasing beer sales and production this will, in turn, increase revenue of the industry participants and thus their contribution to the budget through excise duties. Therefore regulating authorities may separate beer regulation from alcohol. However, regardless of their actions the segments of non-alcoholic and craft beer will remain the fastest growing in the Russian market, analysts at IndexBox conclude.

* Report of Pivovarennaya Kompaniya (Beer Brewing Company) Baltika.

** Data of the company.

Elena Koltykova




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