According to the company estimates, due to the difficult macroeconomic situation in the country in the first six months of 2015 the Russian beer market declined by 9%, compared to the same period last year.
The development of the market was hindered by the general volatility of the economic situation, as the growth of retail prices has continued to decrease the purchasing power of the population, including in respect of beer.
Earlier this year, the company was forced to cease operations of two of its ten breweries in Russia, those in Chelyabinsk and Krasnoyarsk. But the effect of the closure of enterprises, in particular, the improvement of non-material costs, did not fully neutralize the impact of the rise in prices for raw materials in the reporting period.
Despite the fact that the volume of shipments corresponded to the retail sales, an 18% decline was recorded compared to the results of the last year. The reason was the decrease in distributors’ inventories compared to the previous year due to the sharp decline of the economic growth rate and the subsequent reduction of the beer market, as well as the significant shift in the structure from the traditional channels of trade to modern commerce.
In the first six months of 2015, the company’s volume ratio of the market share was 36.1% 1. At the same time, the market share remained stable in terms of value because of higher prices and better price mix. The main drivers were the well-performing brands “Baltika 7”, “Baltika 9” and “Baltika Draught”.
The company also managed to increase its share in the modern trade channel, which is due both to the growth of the channel itself and the good results achieved in the national retail chains.
Despite the negative trend of the market, “Baltika” has continued to invest in the brands development in the first six months of 2015 maintained a high level of marketing activities. For instance, the company released a number of new products: Neon Beer and Boilermaker by Tuborg, which is a new Tuborg beer with the special whiskey bourbon malt; the Rostov plant of “Baltika” started the production of the regional brand called “Don” produced with the local malting barley grown in the Southern region.
The company continued to support sport: in particular, the XXXV Bandy World Championship held in Khabarovsk, which brought victory to Russia, organized a tour of the main trophy of the CHL to Russian cities, with the route of 9000 km; Warsteiner brand became the official partner of the first stage of FIA Formula E to be held in Russia.
In June, 20,000 fans gathered in St. Petersburg for the 10th TUBORG GREENFEST International Music Festival. Baltika also was a partner of the business communication area at the St. Petersburg International Economic Forum 2015 and celebrated the 25th anniversary of the company.
In general, due to the good price-mix, the company’s total organic net revenue in the region of Eastern Europe fell by only 3%, while organic gross profit per hl increased by approximately 10%.
The decrease in operating profit was caused by the decline of the production output coupled with higher costs of sales and investments in sales and marketing, as well as growing prices for logistics and a significant decline of the rate of the local currencies.
Jacek Pastuszka, president of Baltika Brewries LLC: In the first six months of 2015, we were facing serious challenges. Now we continue to adapt the structure and processes arrangements to the new market conditions, applying the focal approach. The company is planning to focus on protecting the profitability of our business, while at the same time maintaining the positive trend in sales volume and the market share of the company. For this purpose, we are planning to promote and support our international and local premium and mainstream brands, implement and use commercial tools at the Group level and maintain a high level of commercial realization.”
1Source: Nielsen Russia retail audit in respect of both Urban Russia and Rural Russia markets assessed in kind
Baltika Breweries LLC, part of the Carlsberg Group, is one of Russia’s largest FMCG companies, and it has been No. 1 in the Russian beer market since 1996. Baltika owns eight factories in Russia and has a broad portfolio of brands. The company is a significant part of Carlsberg Group and its Eastern Europe region, which also includes Azerbaijan, Belarus, Kazakhstan, Ukraine and Uzbekistan. Baltika Breweries LLC is the leading exporter of Russian beer: Baltika products are present in more than 75 countries, accounting for 67% of all Russian beer export.