The Russian beer market is currently at the stage of recession, which followed its rapid growth that lasted from the early 1990s until the beginning of the crisis in 2008. A sharp production increase took place in 1997 (+25.3% to 1996)*, when foreign producers began their activity in Russia. Afterwards, up until 2007, double-digit growth rates in production were recorded virtually every year. In 2007, the volume of beer production exceeded the level of 1997 by 4.4 times. Starting with 2008, Russian beer production has been demonstrating negative dynamics. The maximum decline fell on 2013, when production dropped by 12.8% to the value of 2012.
In January–September 2017, 577 million decalitres of beer were produced, which is 4.6% lower than in January–September 2016. Based on this, forecasts suggest that in 2017 the volume of production will be maintained at the same level, or will decline by 3–5%.
Traditionally, the Central, Volga and Siberian Federal Districts are leading in Russia’s beer production, as production facilities of the main market players are located in these regions of the country. These three federal districts account for almost two thirds of the total volume of beer produced in Russia. It is reasonable to state that, all in all, the structure of Russian production is rather stable.
Speaking of changes in the structure of beer production in Russia, growth in the shares of non-alcoholic and strong beer should be noted. The share of light beer has remained virtually the same. At the same time, there has been redistribution between the shares of dark and unfiltered beer. This is partly due to development in the category of craft varieties of light, dark and unfiltered beer in the HoReCa market and in the segment of microbreweries. Said trend has been penetrating the market of beer produced on the industrial scale as well.
The market share of imported beer is rather low, and its prices are significantly higher than those for beer produced in Russia.
Growth in average producer prices for beer has dynamics different from growth in consumer prices. Despite the drop in producer prices in 2014, consumer prices have grown due to increased retail prices. During other time periods, growth rates of consumer prices were exceeding growth rates of producer prices, whereas in 2015 retail kept producer price growth high, having increased consumer prices by 13.6% compared to producer prices having grown by 17.2%.
One can state that retail sales of beer in monetary terms have been demonstrating dynamics similar to production dynamics. This is largely due to the fact that most beer sold in Russia is produced within the country. In addition, during the time period analysed, growth in consumer prices remained stable, which compensated for the decline in retail sales compared to production: the drop in retail sales in value terms amounted to 22.3% in 2010–2016, whereas production declined by 26% in physical terms.
Retail sales of beer are declining in all federal districts.
At the same time, changes in the structure of retail trade are taking place across federal districts.
Just like in case of production, the structure of beer retail sales is relatively stable. There has been a decrease in the shares of retail sales in Moscow (12.04% in 2015 and 10.96% in 2016) and Saint Petersburg (2.32 and 2.27% respectively).
In monetary terms, Germany, Czech Republic, Belgium, Belarus and Ireland accounted for 72.2% of beer imports into Russia in 2016 ($ 124 million total worth of products imported) and 74.3% of imports during the first 8 months of 2017 ($ 114 million). Germany was leading in beer imports into the Russian Federation, its share accounting for 29% of imports in 2016 and 32.1% in January–August 2017.
Compared to January–August 2016, the volume of imports in January–August 2017 increased by 31.8% in volume terms (from 9.41 million to 12.4 million decalitres respectively) and by 39.4% in value terms (from $ 81.8 million to $ 114 million respectively).
In monetary terms, 63.7% of exports fell on Ukraine, Belarus and Kazakhstan in 2016 ($ 123 million worth of products exported), and during the first 8 months of 2017 these countries accounted for 60.7% of exports ($ 89.6 million).
Compared to January–August 2016, the volume of exports in January–August 2017 declined by 18.5% in physical terms (from 22.5 million to 18.4 million decalitres respectively) and increased by 4.3% in monetary terms (from $ 85.9 million to $ 89.6 million respectively).
The comparison of volumes of domestic beer production, exports and imports indicates that Russians’ demand is virtually fully met by domestic production. Since export volumes are insignificant, one may conditionally state that the market size is approximately the same as the volume of production.
The decline in production and the beer market reduction occurred due to a decrease in beer consumption among Russians caused by the following:
* decline in demographics as a result of declining birth rate;
* population ageing – older people tend to consume less alcoholic beverages;
* economic crisis, which led to a decline in household incomes and demand shifting towards the necessity food product categories (bread, meat, milk and others);
* climate changes in Russia during the recent years – cold weather results in lower demand for beer in the summer and in the winter;
* healthy lifestyle propaganda;
* demand partially shifting towards the restaurant industry, including private brewery restaurants (beer is much more expensive in these establishments, but it is perceived as more natural and delicious);
* tightening in state regulation of the alcoholic beverage market (beer included);
* higher drink driving fines;
* consumers’ dissatisfaction with beer quality, which leads to decreased consumption of bottled beer. At the same time, demand for beer produced in private breweries has been growing – consumers are ready to pay more for proper taste and quality despite consuming less beer in quantitative terms.
In 2017, the market was also limited by the ban on sales of beer in PET bottles above 1.5 litres, which used to be a common purchase for ‘mass’ consumption at picnics and in other types of joint leisure.
Along with the reduction in the beer market on the whole, the segment of non-alcoholic beer has been growing. In 2016, the share of non-alcoholic beer amounted to 1.07% of the total beer production volume in the country, according to Rosstat. For comparison, the share of non-alcoholic beer in 2012 was as low as 0.83% of the total production volume. Despite the overall decline in beer production, dynamics of non-alcoholic beer production in 2014–2015 were positive.
It is important to note that, from the marketing standpoint, non-alcoholic beer is a special product type, as it has consumer properties different from those of regular beer, and mainly competes with other categories of soft drinks (juices, kvass, lemonades, and even ice tea or water) rather than alcoholic beverages.
Unlike non-alcoholic wine, non-alcoholic beer successfully stayed in the market, and its share has been actively growing. However, it is unlikely that the category will become a significant part of the beer market, since it has a rather limited target audience, despite the growth of the latter.
Non-alcoholic beer consumers include individuals:
* engaged in sports and having an active lifestyle;
* living a healthy lifestyle and watching their weight (calorie count and glycemic index of non-alcoholic beer are lower than those of regular beer);
* spending most of their time driving, or afraid of exceeding the permitted blood alcohol content;
* wishing to support the company during certain events and meetings where other participants drink traditional beer;
* having stopped consuming any alcohol-containing beverages.
Similar trends have been emerging in other countries’ markets. One of the main factors limiting growth of the category of non-alcoholic beer is Russian consumers not understanding the concept and purpose of said drink – this is most common among consumers of the older generation.
Growth in non-alcoholic beer consumption is also strongly affected by advertising activities of producers themselves. Unlike traditional beer, advertising of non-alcoholic beer is not banned or restricted nowadays. However, even consumers inexperienced in marketing realise that by advertising non-alcoholic beer, producers aim to advertise their products on the whole, as beer is produced and sold under single umbrella brands.
It is challenging to give an estimate on how much non-alcoholic beer advertising contributes to traditional beer sales. However, any advertising mentioning a brand always increases brand awareness, which correlates with consumption. This is demonstrated by numerous studies on different product categories in the food and drinks market (higher brand awareness means higher consumption). A correct choice of consumption motivation shown in ads inevitably supports beer brands through appealing to values corresponding to consumers’ value systems. Apart from values mentioned above concerning non-alcoholic beer, these are values common for the whole product category – taste and quality; friendship; leisure; nature; pleasure and satisfaction with life; traditions of consumption, and others.
According to “Pivovarennaya Kompaniya (Beer Brewing Company) “Baltika” LLC, non-alcoholic beer accounts for 5% in total beer consumption in Germany and 15% in Spain. One should not expect similar values in Russia. However, as a result of the aforementioned changes in consumer behaviour, the category of non-alcoholic beer has the potential to have reached the structural share of 2–2.5% of the beer market on the whole by 2020–2022.
* Here and below, data by Rosstat.
Candidate of economic sciences,
member of the Russian Guild of Marketing Specialists,