EXPERT ANALYSIS OF THE RUSSIAN BREWERY MARKET

Abstract.

    In the present article the Russian beer market development is considered. Significant aspect of the Russian market is its high dependence on the public mind, which is in general, had started rapid development of the market after perestroika when beer began displaced vodka. Currently, the beer is subject to public criticism as a source of beer alcoholism. Considering mentioned aspect it could be noticed that local brewing require increase in PR activity and creation of own social and cultural rhetoric. That means retargeting of the product – from classic beer consumption as just alcoholic beverage to preservation and straightening of the traditions of its social and cultural role in area‘s development, with an emphasis on local patriotism.

Keywords: beer market; foreign investors; players in the Russian beer market; examination; brand; regional market.

    Beer market has had significant changes because of globalization process. Now, huge market share is divided between foreign producers. According to some experts, in 90-s there was decline, even collapse of beer industry in Russia, so in 2000-s such industry revivals. It has always been attractive for foreign investors. Glance on the major players of Russian beer market today allows experts to notice tendency of foreign and domestic companies merges via buying-out of domestic beer factories by international corporations. So that in the market the Russian brands represent Western companies.

   Among major players of Russian beer market there are such transnational corporations, as Heiniken, Sun InBev, SubMiller and OAO ‗Pivovarennaya compania Baltika‘. It should be noticed, that last one belongs to the Dutch group of companies Carlsberg. Entire mentioned companies has own production in Russia. Their market share by the experts‘ estimation is about 90%. In general, market is divided by those companies, but not homogenous - it depends upon region and existence of one or another global producer‘s factory on appropriate area. For instance, Baltika has leading positions in many regions. In Altay Kray, for example, Baltika and Sun InBev both have 50% market share, whereas local Barnaul beer factory has about 20% (Pic. -1)

   For the last three years Sun InBev company has consolidated its positions in Barnaul‘s regional market. At the same time Sun InBev had ceased production in city of Kursk, which could lead to loss of Kursk local market share. [7]

   In Nizhniy Novgorod region significant market share is occupied by Heineken with such local brands, as ‗Okskoe‘ and ‗Rusich‘ (about 40%). Significantly smaller market share is left for the regional beer producers.

    Mid-sized producers became demanded in regional markets. For instance, in Nizhniy Novgorod, according to experts‘ estimations more and more entrepreneurs are focused on local beer realization. In aspect of quality the first place belongs to ‗Bucket Chuvashii‘ and Lyskovskiy brewery. Among other players were mentioned Kirovskiy and Dzerzhinskiy breweries.

   Still, there are more pessimistic estimations of small and mid-sized brewery development, as though such companies couldn‘t successfully compete with large producers in aspect of sales promotion at the expense of bonuses, advertising campaigns, provision of exhibition equipment etc. Thus it could be notwithstanding the higher quality of small and mid-sized companies‘ products.

   Significant aspect of beer production system is an ecology issue. According to Russian Statistics Agency, to produce 1 litter of beer, 7.5 litter of water should be consumed. For instance, Sun InBev in its strives is going to reduce water consumption down to 3.5 litter of water on 1 liter of finish product. In its Russian branch water consumption had been reduced on 17% for last 3 years. That allowed to save 3 billion litter of water. [6]

   Should be noticed existence in the market of small private brewery companies, brewery-bars, beer-restaurants etc.

   Though those market share is relatively low.

   In general, experts are unanimous in evaluation of Russian beer market constant development. Some notice massive construction of new beer factories, revival of old breweries functioning more than dozen years. Such companies promote not only bottled beer, but also beer on draught. Surely, there is no such dynamic growth as it was in mid 90-s – early 2000-s, but market is still attractive for investments,

   The growth rates of beer production were not constant in course of last decade. In 2008-2009 growth rate was negative. As for now, production slump inherent those years is over and positive tendencies are outlined.

   In 2010-2011 Russian beer market became stabilized. At the same time, dynamic of production rate had been changed significantly in course of a year.

   A beer market sales analysis demonstrates growth tendencies. The fastest growing of beer market was so significant, that for the last few years sales plan has been increased 3-4 times. That was made notwithstanding the series of governmental measures, designed to hinder the development of beer market (prohibition of advertising, implementing excise duties). Price segment has been also changed. If earlier mass consumer was focused on inexpensive beer, now more expensive beverages are in requisition.

   According to experts opinion, customer rather oriented toward local breweries. Though, there's doesn't matter who de facto owns the company.

   Meanwhile, not all excepts are so optimistic in evaluation of the Russian brewery market current condition. Lots of Russian brewers anxiously look to the future.

    Firstly, there's ongoing artificial creation of negative public opinion on brewery industry, which is blamed for people's alcoholisation. Meanwhile, producers don't deny that issue. Secondly, according to one of the experts, brewery industry is brought to disadvantage comparing to other alcohol producers, because of different authorities' actions aimed at beer consumption reduction. That in long-term prospective causes increase of stiff drinks consumption, what is eventually does not solve the issue of alcoholisation. Some experts deem it as lobbying of the distilleries‘ owners.

   However, there is still prospective for Russian beer production market. That prospective experts see in development of small and mid-sized production. Brewery and drinking of beer in Russia is a tradition. Emphasis should be on exactly small breweries, which are able to produce beer with higher quality. Beer market is saturated, there are sufficient number of sorts but of low quality beer. At the same time the customer has not yet accustomed to expensive beverage. There is an opinion among experts, that large producers production is for drinking to quenching thirst, but production of small breweries – is gustatory product, made to accompany meal. Many have noticed that brewery industry development initiative should be given to small enterprises.

    Thus, aside from large transnational and All-Russian companies there is presence of small and mid-sized beer producers in the market. Those market shares differ depending on region. Altogether, small breweries are interested not in expanding of production volume, but interested in increase of specific beer consumers. In this connection their market share is relatively low. Some experts consider local beer producers as the thing of the future, as they are actively developing. By reducing costs of delivery from producer to customer, freshness is preserved, so that increases the demand. All in all, according to some estimates, quality of local beer exceeds in quality All-Russian producers. Standing by traditional brewery technologies small and mid-sized breweries should win against large producers. Particularly in current situation, when it‘s public resonance is observed about beer quality deterioration, substitution of natural raw etc.

    Notwithstanding the arrival of foreign players on Russian marker, beer is still perceived as traditional Russian beverage, so foreign brands have not displaced Russian brands. Often foreign investors prefer the strategies of business integration using resources of local brands. Russian beer market keeps on developing, though it had been affected by world financial crisis, still has potential for recovery. Significant aspect of the Russian market is it‘s depending on public opinion, which had started rapid beer market development after ‗perestroika‘, when beer began squeeze out vodka. In nowadays there is reverse process – beer runs the gauntlet by the society as a source of beer alcoholism. Considering this aspect, it should be noticed that brewery requires improvement in PR and creation of own social and cultural rhetoric. Another words, it requires retargeting – classic beer presenting as ordinary alcohol beverage should be shifted to retention and reinforcement of its social and cultural role in territory development. Accent should be made on local patriotism.

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