The Ukrainian beer market is important, if only because one job in the industry creates up to 10 jobs in related industries. The beer industry is one of the most modern, as producers strive to subordinate standards to the latest technology.
The peculiarity of the Ukrainian beer market is that four international companies hold the majority of its volume. In the summer of 2017, Belgian AB InBev and Turkish company Anadolu Efes signed an agreement to merge their branches in Russia and Ukraine. This event became a key event for the Ukrainian market.
There has also been an increase in the share of craft beer. In 2017, this type of beer occupied approximately 1% of the market in Ukraine. Craft in this case is the product of small independent breweries that make the drink according to traditional recipes. The trend came from the US, where craft beer took up a quarter of production volumes in 2017.
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According to the State Statistics Committee of Ukraine, the country produced 178 million dal of beer in 2017. There was a 1% decrease from 2016, continuing the negative trend that began in 2013. Experts attribute the steady decline in rates to the government’s exorbitant excise taxes. At the same time, prices for alcoholic beverages and tobacco increased by 0.6%. Exports increased by 1.5 times and imports by 35%.
Beer market analysis: production
Pro-Consulting analysts claim that the majority of products on the Ukrainian market are represented by foreign companies whose production is located in Ukraine. Imported beer occupies 1-2% of the market, while it is positioned as a premium category. Although consumers are increasingly buying specifically imported beer. Cheap beer and mid-priced beer each hold 40 and 30% of the market, respectively.
Read also: “Ukrainian Beer Market Research 2016”
The decline in production started in 2013 and the negative trend continues. It was influenced by:
- loss of plant capacities in the east of the country and in Crimea;
- the government’s decision to equate beer with hard alcohol;
- ban on trade with the Russian Federation since 2014;
- falling household incomes.
Legislative initiatives included increasing the excise tax rate, changing licensing and advertising rules. The excise tax has tripled since 2014, from UAH 0.78 per liter to UAH 2.48. Because of this, beer prices have increased, negatively impacting the industry.
Marketing research of the beer market: consumer portrait
Beer drinking is predominantly male – two-thirds of men, and of women, one-third. More than two-thirds of buyers have above-average incomes: “We can buy large appliances now, but not a new car.” Only one out of 25 Ukrainians drinks it every day, the rest use it not so often, from two times a week and less often. Mostly beer is drunk at home.
Ukrainians drink less beer than residents of other countries and rank among the last in terms of frequency of consumption. If the Czech Republic has 147 liters of beer per capita per year, in Ukraine – only 54 liters. Much more of us drink hard liquor.
Beer consumers’ first focus is on flavor. Cheap and mid-priced beers have about the same sales volume, with 43% and 37% of customers drinking them. Such brands are purchased in stalls and convenience stores and hypermarkets.
Only 4% of respondents prefer expensive beer. These beers are purchased at grocery and specialty stores. Restaurants and bars are more likely to order beer than other drinks. Premium beer producers often focus on the draught beer market in Ukraine rather than hypermarket retail.
Beer market analysisimport and export
While beer production is declining, beer exports are increasing. According to the State Fiscal Service, Ukraine exported more beer in 2017 than in 2016 – 1.7 times or 31.81 million USD in monetary terms. In physical terms, exports increased 1.5 times to more than 11 mln dal (compared to 2016).
The main buyers of Ukrainian beer are Algeria, Belarus and Moldova. The largest share of exports is occupied by the following companies: Obolon, Carlsberg Ukraine, First Private Brewery, Sun InnBev Ukraine.
Beer imports in 2017 were mainly from Germany, Belgium and Mexico. Overall, relative to 2016, imports increased by 35% (or 2.94 million dal) and in monetary terms by 43.7% or to USD 35.82 million.
To find out the big picture and compare with previous years, read also:
- “Beer Marketing Study 2005-2012”
- “Beer market research in Ukraine 2015”
- “Ukrainian Beer Market Research 2016”
Leading manufacturers
Carlsberg Ukraine is a part of Carlsberg Group in Ukraine. The company owns three plants located in Kiev, Lviv and Zaporizhzhya. Carlsberg has been leading the Ukrainian market since 2009, and since 2016 it has become the leader in terms of production volume. According to Nielsen, the company had a market share of 29.6% in 2017. Carlsberg contains more than 500 different beer brands in its brand portfolio. Among them, Baltika, Lvivske, Carlsberg, Doms, Kronenbourg, Tuborg and others are known in Ukraine.
SUN InBev Ukraine is part of AB InBev Corporation, whose plants are located in Chernihiv, Kharkiv and Mykolayiv. The company produces 7 of the 10 most popular beer brands in the world. The Ukrainian branch employs more than 2,000 people, and the corporation’s profit in 2015 amounted to more than 43.6 billion USD. The company has been operating on the Ukrainian market since 2000.
AB InBev’s portfolio consists of international and Ukrainian brands. Among the Ukrainians:
- “Chernigivske.”
- “Rogan.”
- “Amber.”
- “Zhigulivske Originalne”;
- “Hoplevus.”
Obolon is a Ukrainian beer producer since 1980. The main brewery is located in Kiev; in addition to it, there are eight other breweries in Ukraine. The company has its own beer malt plant, which produces more than 100,000 tons of raw material per year. “Obolon exports not only beer, but also malt. The beer company has also been a sponsor of the Obolon soccer club of the same name since 1999.
The manufacturer produces beer under six brands:
- “Obolon.”
- Obolon BeerMix;
- “Magnate.”
- hike premium beer;
- Zibert;
- “Airborne.”
Read also: “Analyzing the snack food market”
Efes Ukraine is part of the Anadolu Efes concern, the fifth largest beer producer in Europe by volume, according to Euromonitor. The company entered the Ukrainian market in 2012 after a deal with SABMiller, which transferred its production facilities in Russia and Ukraine in exchange for shares. In 2013, the company set a record of sorts by launching five new brands within a month.
The portfolio includes 15 brands, including: Miller Genuine Draft, Velkopopovický Kozel, REDD’S, Efes Pilsener, Stary Melnik, Zolotaya Bochka, Bely Medved, Sarmat, Zhigulivske.
Oasis CIS is an international holding company with plants in Russia, Ukraine and Belarus. Thirty percent of the shares are owned by the European Bank for Reconstruction and Development and the German beer concern Oettinger. In Ukraine, the holding owns Persha Privatna Brovarnya and PBC Radomyshl. The former has been operating since 2004, merged with the latter in 2012, and now operates two plants in Lviv and Radomyshl. Total production is 2.3 million hl of beer annually.
Among the brands produced are:
- Stare misto;
- “Bochkov.”
- “Zakarpatska Originalne”;
- “Fresh Bottling.”
- “Pshenichne Eatalon.”
- “Classic Pilsen Beer.
Craft beer
Craft beer stands out for its wide range of unusual flavors and quality recipes. Such a drink costs one and a half to two times more than beer from industrial giants because of the ingredients and production techniques. Therefore, breweries emphasize on the unusualness, the quality of the product. Their promotion methods and design are very different from the brands of large corporations. Part of the promotion is regular beer tastings in cities.
VARVAR is a Kiev brewery of businessman Vasyl Mikulin, opened in 2015. Now the company is the leader of Ukrainian craft beer. Beer varieties: Golden Ale, Milk Stout, Hoppy Lager, Equinox. The brewer also releases experimental varieties such as Varyat, Captain Salt, Let It Snow. The products are sold in the Goodwine wine chain and Sylpo supermarkets.
There are other well-known companies producing craft beer in Ukraine. The rankings below show the breweries recognized as the best in the country.
- “The Pravda Beer Theater is located in Lviv and is known for the political beer Putin Huilo.
- Collider is constantly experimenting, such as making pumpkin beer.
- “Tsipa” is recognized as the best craft brewery according to Rate Beer Best and is located in the village of Kvasy in Transcarpathia.
- Bierwelle is based in Chernihiv and produces unconventional flavors, such as hemp and nettle beers. The best brand is red ale.
- White Rabbit promotes itself in virtually no way. It is known for brewing each new brew using new recipes that produce a different result each time.
- Andrii’s Craft Brewery brews traditional American and Belgian beers, but also experiments, such as a coffee brown ale or a golden ale with honey and corn.
- K&F Brewery formed in 2014, and is now known for unusual beers. For example, Sex with Mermaid combines coffee beans with berries.
Craft beer is sold either in certain pubs and bars or through online sales on breweries’ websites. A larger selection of kraft can be found at specialty stores.
Packaging and price Beer market segmentation in Ukraine
Beer packaging is divided into primary and secondary packaging. The first kind is glass bottles, tin cans and PET bottles, anything that contains a beverage. Secondary – labels, trays, pallets, etc.
The types of packaging vary based on price category. Cheap varieties are sold in large-capacity PET packs. Premium ones, on the other hand, only come in glass bottles. If the brand is very popular, manufacturers offer different packaging options. For example, Efes Ukraine “White Bear” beer can be bought in a glass half-liter bottle and in a PET bottle of 1 and 2 liters.
According to Nielsen analytical company, PET containers account for the majority of the primary packaging market. Glass bottles are diminishing in value. According to Efes Ukraine in 2017, the structure of packaging in the producers’ portfolios is approximately as follows:
- more than 50% – PET containers;
- about 40% is glass;
- 3% are aluminum cans.
Legislative innovations and beer market share in Ukraine
In 2016, beer was legally equalized with hard alcohol, which dealt a major blow to the industry and angered brewers. In 2017, the authorities also made changes regarding the sale of alcohol – their effect will be seen in 2018.
Firstly, legislative amendments abolished alcohol certification – or rather, it became optional. Previously, Article 10 of the Law of Ukraine “On state regulation of production, turnover, sale of alcohol and alcoholic beverages” was in force. Now retailers don’t have to certify alcohol. Manufacturers were not affected by this change.
Second, small businesses received license incentives, which is why the craft brewing industry began to rise. License fees for producers have decreased – an annual license is equal to UAH 500,000. Under Article 15 of Law 481, small brewers (producing up to 3,000 hectoliters) will pay only UAH 30,000 in 2018. This is 16 times less than the previous limits.
Third, retailers no longer report sales volumes. This policy was launched in 2017, and the pilot period revealed that the lack of retail reporting does not lead to negative consequences. So in 2018, this change was enshrined in law. But manufacturers, importers and wholesalers are still required to report to the tax authorities.
Internet commerce remains unregulated because there are contradictions in the laws. After all, online does not require retail transaction ledgers, for example. The lists of requirements do not coincide in different pieces of legislation, and this applies not only to reporting, but also to window displays and fire alarms. Alcohol delivery by couriers from web-based services refers to mobile commerce. And the Fiscal Service does not give liquor licenses to mobile outlets. That is why Internet trade is de jure prohibited, but de facto quite active: sites Rozetka, Goodwine and others sell a lot of different alcohol.
As for prices and excise taxes, the debate over them ended in nothing. The levy was initially supposed to be increased by 30%, but the Finance Ministry proposed an increase of 11%, which is equal to the increase in inflation. Both initiatives failed to pass – deputies left the 2018 excise taxes at the same level, which somewhat reassured brewers. After all, it was the excise tax rate increases passed in 2016 that drove the cost of beer up 18% in 2017.
Trends in label and container design
Trends in label and beer container design are most prominent in the craft beer industry. A label is practically the only way to somehow stand out on the shelf, and new manufacturers are looking for options for unique and colorful designs. Craft beer is therefore a clear indicator of trends.
Read also: “Alcohol design: 8 trends you missed”
Key trends:
- minimalism;
- colorful accents;
- patterns;
- layering;
- unusual shapes of labels and bottles;
- The use of contemporary art images.
Minimalism: it’s as if manufacturers are competing to see who can offer the simplest bottle and jar designs. This design involves a lot of blank space on the label, 1-2 colors, and minimal lettering. It really makes the beer stand out on shelves where multi-colored and brightly colored labels are prevalent. It’s likely that in the years to come, monotony will become too popular and manufacturers will switch back to colorful designs.
The other “extreme” is multi-colored and complex designs. The artists use colors unusual for beer – pink, orange with red, purple. Colors swirl in spiral patterns with shimmering tones.
Ornaments and patterns are an easy way to vary the design for different brand names. The logo, beer name and overall style remain the same, while the background images change to represent the different brews. Patterns can be of geometric shapes or flowing lines.
Layering is a design technique where the layers of an image are overlaid on top of each other in a slightly skewed pattern. Images can shine through each other and this creates a picture as rich as ornamental patterns. This can include grunge labels – deliberately sloppy, as is customary in this style.
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Some manufacturers make a label of unusual shape – its contour can follow the curves of the pattern. A label like this is quite artistic, making the bottle stand out on the shelf – especially the premium varieties.
Continuing the theme of artistry – labels that look like works of modern art, with references to pop art or the style of Soviet posters from the early 20th century. For example, the labels of the political brands of Pravda Beer Theater are characterized by provocative and even satirical content.
At the moment, Ukrainian kraft producers prefer to stand out by selecting fonts and colors. Compared to the traditional labels of beer giants, their designs look very fresh – they don’t need to compete with each other, only with hypermarket standard beers.
Conclusion
The negative trend of the beer industry’s decline is still going on – less and less product is being produced. Although we can say the situation is stabilizing – 2017 produced only 1% less than 2016. When production declines, Ukrainian beer exports abroad increase.
It appears that the regulatory amendments made in 2017 will impact the beer industry in a positive way, especially small businesses. There is a possibility that brewers in Ukraine will be able to recover from the previous rather difficult years. After all, beer is still the favorite drink of two-thirds of men and one-third of women, and that trend isn’t changing.
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