Results of Q1 2016 have allowed Baltika to retain its leading position in the market. Despite continuing shrinking of the market, in general, Baltika's share, in terms of volume, grew by 1.7% in Q1 2016 compared against Q4 2015, reaching a total of 35.1%*.
The Eastern European beer markets declined by mid-single-digit percentages, but Carlsberg Group achieved growth of primary sales in Russia, Kazakhstan, and Ukraine. The Russian volume growth was mainly due to easy comparisons with last year when we took significant measures to reduce stock levels at distributors, reflecting the market decline and the further shift from traditional to modern trade.
Positive dynamics was registered in the first 3 months period of 2016 for such flagship brands as Zhigulevskoye and Carlsberg. Last year novelty brands Neon Beer and low-alcohol Seth&Riley’s Garage also demonstrated growth.
In the first quarter, Baltika continued to focus on developing its flagship brands and supporting sports with a view to developing and creating good "rooting" culture. Baltika had long been a partner of KHL championship. Thanks to Baltika 3 brand, the main KHL trophy visited 11 cities in Russia and Belarus from January 16 through March 27, 2016. The legend came to the residents of St. Petersburg, Minsk, Moscow, Yekaterinburg, Chelyabinsk, Magnitogorsk, Omsk, Novokuznetsk, Novosibirsk, Khabarovsk, and Vladivostok, chosen by voting at www.baltika3.ru to serve the final destination for the tour.
Sport supporting is a priority for Baltika Breweries in its relations with local communities; company pays a lot of attention to local sports development. A contract signed in March made the Russian Far East brand DV an official partner of the SKA-Energiya football club. Another brand, Samara, continued to be engaged in its actively growing partnership with the Krylia Sovetov football club, hosting a number of events together, designed to build stronger ties with fans and develop responsible drinking culture among sport lovers.
Non-CIS countries became a major driver of export sales growth in Q1 2016: export to China grew 2.5 times, Australia and Côte-d'Ivoire business was re-launched, European countries continued to show growth rates due to the wider range and advertising support on TV. Middle East and Northern and Central America grew dramatically, more than 5 times. In addition, non-alcoholic brands continued to conquer Muslim countries: Flash Up energy drink strengthened its leadership in Kirgizia and Uzbekistan; while non-alcoholic malt drinks Baltika 0 with three different flavors entered new territories in the Middle East and Africa.
Eastern European net revenue of Carlsberg Group grew organically by 20% over the quarter, driven by a strong price/mix and organic growth in total volumes. Reported net revenue declined by 2% due to a significantly negative currency impact.
Jacek Pastuszka, President of Baltika Breweries, Executive Vice President of Carlsberg Group in Eastern Europe:
"In the past Q1, Carlsberg Group presented its 7-year strategy SAIL’22 that comprised a series of crucial internal initiatives allowing to realize 100% of our potential and make the Group even more efficient. A special focus in the strategy is placed on Russia, which remains one of the priority markets for the Group. Baltika is already a strong and profitable business. We have a unique production infrastructure, unparalleled route-to-market and an outstanding portfolio of international, national and regional brands. And while we expect a further decline in the industry, the starting point for the implementation of our SAIL'22 stratagy is very good. But I must say that all further company operations and progress in the industry, overall, will still be strongly determined by the developments in the macroeconomic environment in Russia and balanced regulation in the industry."
* Source: based on data of Nielsen Russia retail audit, by volume for City and Country Russia markets