More than 880 types of beer are produced in Ukraine today (data provided by Denis Khrenov, Acting General Director of SUN InBev Ukraine). Among all alcoholic products beer ranks first in terms of sales and accounts for 46.1% in the segment of alcoholic beverages. For the year from 01.07.2015 to 01.06.2016 sales in the category “beer” increased by 20.5% (Nielsen data, without the territory of the ARC, Donetsk and Lugansk regions). In 2015, the price of beer was growing: compared to 2014 it increased by 37%. In 2016, the trend did not disappear: the price increased by 27%.
The beer market last showed growth in 2008 (330 mln. dal. produced). After that it started to fall. And at the moment it has already shrunk by 1.5 (one and a half) times. The fall accelerated in late 2013 – early 2014. The crisis in the country, the loss of territories, the ATO: all this affected the deplorable results of the industry. Beer exports decreased (Russia was one of the main markets for Ukrainian products). In addition, the production facilities of one of the market leaders, Efes-Ukraine, were located in Donetsk. Now the operation of the enterprise has been suspended, and It ended 2015 with a loss of 1.272 billion. UAH. The ill-conceived legislative changes of 2015 also contributed.
The financial situation in the families of Ukrainians has also had an impact. Sociologists say that in times of crisis, consumption of strong alcoholic beverages usually increases. This is also confirmed by statistics. Both the mid-price and low-price segments sagged in 2015. The former from 44.5% in 2014 to 43.4% in 2015, the latter from 31.7% to 30.7%. These people didn’t give up alcohol. They simply chose hard liquor over beer.
Beer market overview: production
The year 2015 ended with an approximate drop in beer production by 17% compared to the results of 2014 (calculations of PJSC Carlsberg Ukraine, excluding the territory of Crimea and the ATO zone). According to Pro Consulting and the State Statistics Service, the drop amounted to 19.6%. In 2016, the decline of the beer market continued. In the first half of 2016, brewers produced 90.0 million dal. of beer, which is 8.2% less than the same indicators of 2015. As of the end of October, beer production in 2016 reached 155.7 million dal. This is 93.3% of the figures for the first 10 months of 2015. Which means that the drop in production amounted to 6.7%.
It is unlikely that the industry will catch up with the previous year’s figures in the remaining 2 months of 2016, as beer consumption peaks in spring and summer. In the fall and winter, demand traditionally drops.
Beer market overview: imports and exports
Ukrainian beer exports to Russia de facto stopped in the fall of 2014 (it was the No. 1 consumer). The other two importers, Moldova and Belarus, reduced the number of purchases. By the end of 2015, Ukrainian brewers noted a 2-fold drop in exports compared to 2014. The demand for Ukrainian product in Poland has grown. In 2015, 12% of all exported beer went there.
In 2016, Moldova became the No. 1 importer of Ukrainian beer (data for the first 6 months of 2016). It is followed by Belarus and Lithuania. At the same time, the latter increased imports of Ukrainian products by 2 times – from 6% to 12%. Georgia and Israel round out the top five. It is noteworthy that Poland in 2016 has significantly reduced imports of Ukrainian beer products: from 14% to 2%.
In the first half of the year, Obolon was the leader among exporting producers. 49% of all exports belong to it. The company’s export share grew by 10% in 2016. The second place is occupied by PBC “Slavutich” (owned by Carlsberg Ukraine) with the share of 27%. This is less by 11% compared to last year. In third place is SUN InBev Ukraine with a share of 14%.
The largest amount of imported beer came to Ukraine from Belgium. Its share in the first half of 2016 amounted to 54%. This is a big increase, in 2015 the figure was much lower -21%. Germany is in second place with a share of 14%. Moldova rounds out the top three with a modest 6% (in 2015 its share was 23%).
Among the importing companies, SUN InBev Ukraine is the leader. It is followed by Slavutich Brewery and Fozzy Food chain. Overall, in 2015, the share of imported beer on the shelves almost doubled: from 1.4% to 3.4%.
Beer in the ATO zone: Russia has established supplies
Russia has stopped its supplies to Ukraine, although in 2015 its share among imported beer amounted to 15%. However, it supplies beer to a “gray area.” More than 60% of all beer that Russia exports abroad ends up in Ukraine. And although a ban on imports from Russia came into effect at the beginning of 2016 (January 10), it did not prevent imports of beer from the north. In the first half of 2016, Ukraine imported 6.06 million dal. of beer from Russia. It is sold in the ATO zone. The main supplier companies are MPKB Ochakovo (69 million dal.), Lipetskpivo (1.56 million dal.) and Moscow Brewing Company (0.26 million dal.).
Beer market analysis: consumption picture and portrait of the beer consumer
In Ukraine beer is consumed by the overwhelming part of the population. It is the number one product in terms of consumption among all alcoholic beverages and accounts for 46.1%. Out of 100% of consumers, approximately 60% are men and about 40% are women. Women prefer cider to beer or choose beer with sweet additives (beer drinks).
The age of consumers ranges from 18 to 65 years old. Minors also drink beer, but this percentage is minuscule (not shown in official statistics) and there is a downward trend. The largest number of beer lovers among Ukrainians in the age scale from 18 to 30 years – about 50% of consumers. They are followed by the 35 to 45 category. Next is category number 3 – 45-60 years old. More than half of beer consumers have higher education and permanent jobs.
The situation of beer consumption depends on the season and weather. In the first place is domestic consumption. In summer, the percentage of beer drinking on the street, in establishments with summer terraces or in nature increases.
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Beer market analysis: packaging preferences
As can be seen from the graph, PET bottles are in the lead. From this we can conclude that people more often buy large packages. After all, it is beer of a liter and above that is sold in plastic containers.
Draft beer sales are very dependent on weather conditions and the temperature outside the window. Beer is a seasonal product that is not a necessity. Its consumption peaks in July and August (or abnormally hot months). Then it goes into decline. Producers note that consumption falls because in the conditions of falling purchasing power, people abandon it as an unnecessary product (they buy it less often). As a consequence, outlets close down.
Beer market: preferences and selection factors
When choosing beer, promotional offers play an important role. Among 100% of consumers, 36% are constantly on the lookout for promotions and promotional offers. Among alcoholic beverages, in the first half of 2016, 45% were realized thanks to promotions. Meanwhile, for the beer category, 20% of products are realized thanks to a direct discount. The average discount increased from 01.07.2015 to 01.06.2016 and amounts to 22%. The largest discounts are presented for beer of the medium-price segment. It occupies the largest share of the market – 43.4%. Then follows the low-price segment with a market share of 30.7% and premium products.
Another 32% of products are sold thanks to special packaging. It can be either a large format or a limited edition. It all depends on the target audience of the product.
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Ukrainian beer market: legislative innovations
Beer has been equated with alcohol. The law came into effect on July 1, 2015. Beer producers now operate on virtually equal terms with producers of strong alcohol. The main changes concerned the rules of beer advertising and licenses. A license for a point of sale for a year now costs UAH 8,000. Licenses for wholesale activities are also required. The cost of such a license for a mini-brewery is UAH 500 thousand. This led to the closure of many small businesses, as it made their existence unprofitable. The law led to a lot of hype, and bills were developed to level its detrimental impact on business. In August 2016, one of such acts passed the first reading. However, it never made it to the second reading. In October 2016, another attempt was made. But the bill on partial deregulation of the industry (No. 2971-d) was not registered for consideration in the hall of the Verkhovna Rada.
The prohibition of advertising has brought big losses for television producers. On radio and on the Internet it is realistic to advertise beer during the daytime, but on television beer can now only sponsor programs. And only in the evening.
Experts agree that the law is extremely ill-conceived and too restrictive of the rights of producers. LIGA.net journalists compared legislation for brewers in different European countries. Their conclusions are very revealing: Ukrainian innovations are the most cruel (compared with the legislation of Belgium, Germany, Poland, Lithuania, Latvia, Estonia). More data can be found here.
The bans have brought losses for the industry. Yevhen Shevchenko (head of Carlsberg Ukraine) estimates the company’s losses from of the law at a minimum of 7.5 million. UAH. This is mainly related to the re-branding of products, as new markings on labels are required (data on the place of production must be put on the front side of the beer label). And branding of umbrellas, refrigerators, tables, glasses, etc. is prohibited by the new legislation. Brewers consider these restrictions ridiculous. They insist that they were invented for strong alcohol. And it is illogical to transfer them to beer, as you will not encounter such restrictions in Europe. In addition, beer producers have been banned from sponsoring a number of events. Sports restrictions are most painfully perceived, as beer and soccer or boxing have long become associative concepts. Companies have been sponsors of broadcasts and have used sports images and the spirit of unity in advertising campaigns.
Excise tax from January 01, 2016 increased to 2.48 kopecks per liter. This is not the first increase in price. In general, the tax has increased 3 times since 2014: from 0.87 kopecks to 2.48 per liter. This has also left its mark on the decline of the beer market. Many consumers are dissatisfied with the prices, they complain about the taste of beer, repeating that it is not worth its money.
In addition, many city councils impose restrictions on the sale of alcohol after a certain time. For example, in Kyiv from September 22, 2016, a decision to ban the sale of alcohol, beer and low-alcoholic beverages from 23:00 to 10:00 came into effect. This decision applies to all retail, but does not apply to cafes, bars and restaurants. Kyiv Council deputies insist that this will help make the city friendlier and safer. Some see the ban as a lobby for representatives of the hotel and restaurant business. In any case, such a ban will affect sales, which may decrease by several percent. It may also push consumers toward vendors who are not licensed.
Key players in the beer market
The main giants of Ukraine’s brewing industry include SUN InBev Ukraine, Carlsberg Ukraine (Carlsberg Ukraine) and Obolon Company. They are followed by Persha Privatna Browarnya.
SUN InBev Ukraine is an international company with more than 200 beer brands in its portfolio. The world giants Budweiser, Corona Extra, Stella Artois belong to SUN InBev. On the Ukrainian market, in addition to the above mentioned, there are international brands Hoegaarden, Leffe, Staropramen, Taller, Beck’s, Lowenbrau, Franziskaner. The Ukrainian local brand Chernigivske also belongs to SUN InBev. Besides it, the company owns the brands Rogan, Yantar, Zhigulivske Originalne. Anheuser-Busch InBev ended 2015 with a profit of 43.6 billion dollars. In 2015, Anheuser-Busch InBev ended 2015 with a profit of 43.6 billion dollars (we are talking about the entire profit, not the income of the Ukrainian division). The positioning of the corporation is built around unity. This is a good approach for a big global company, and it is a great fit for alcohol.
The company owns 3 breweries in Ukraine: Chernihivska, Kharkivska and Mykolaivska. Experts agree that in 2015 the Chernigivske brand moved from the category of a medium-price product to the category of a low-price product.
Carlsberg Ukraine (Carlsberg Ukraine) is a Ukrainian division of the international concern Carlsbeg Group (headquarters in Denmark), the company ranks 2nd among Ukrainian brewers (by production volume). In the Ukrainian market Carlsberg is represented by brands, Carlsberg, Tuborg, Kronenbourg 1664, Somersby, Guinness, Warsteiner, Grimbergen, König Ludwig, “Arsenal”, “Slavutich”, “Lvivske”, “Baltika”. Carlsbeg Group’s revenue in 2015 amounted to 9.5 billion dollars. The company’s Ukrainian plants are located in Lviv, Kyiv, and Zaporizhzhya.
In 2015, the company increased its market share by 1.4 points: from 28.2% to 29.6%. This is the highest growth rate among the major players (however, it still does not cover the overall market decline). The growth was due to gaining positions in the premium segment and development in the kvass niche. The premium brand Kronenbourg (a novelty) took 26% of sales of the whole premium beer segment. In addition, Carlsberg is the leader in the cider segment (primarily due to the Somersby brand). Their share is 74% of all cider on the market, and sales in 2015 grew by 25%.
Obolon Corporation is the third largest brewer in Ukraine. It consists of the central Kyiv brewery and 9 related enterprises. It owns the brands Hike, Zlata Praha, Carling, Keten Brug, BeerMix, Zibert, Obolon, Desant, Zhigulivske, Okhtirske and Zolotiy Maister. 2015 was a bad year for the company. It ended it with losses of 335.173 mln. UAH. These results are quite disappointing as 2014 also ended with 575.1 million. UAH. The unfavorable situation in the economy and legislative innovations have hit the corporation hard. It also affects the fact that the two leaders have support from outside – they are international corporations. And Obolon is a national brand.
The 4th place is occupied by “Persha privatna browarna”. The company owns the brands Stare misto, Galitska Korona, Chorne, Bochkove, Autorske, Svizhiy Bottling, Zakarpatska Originalne, Andriivskiy Spruce, VOZDVIJENSKE, B-A, Persha Varka and others. Also “Persha privatna brewery” since the end of 2015 brews “Heineken” under license. for 2016, the company finished with good results. Its market share amounted to 12.6% in physical terms and 13.1% in monetary terms. By the end of 2016 it is planned to increase the first indicator to 15%. In summer 2016, the reconstruction of the Lviv plant was completed and its productivity increased by 30%.
Also in 2016. “PPB” presented a collection of beer “Privit z Kyiv” (“Andriyivskyi El”, “ZЄвбазу”, “Lviviy Bereg” and “VOZDVIJENSKE”.), which drew our attention. This is a very hipster beer, in a good way. Retro motifs and bright colors attract attention, and the labels of the collection are very different from the range of Ukrainian shelves.
Beer market overview: top Ukrainian companies
Notes
- Radomyshl Beer and Soft Drinks Co. is a part of “Persha Privatna Brovarnya”.
- “Ziberta Brewery” is a subsidiary of “Obolon” corporation.
Beer market research: trends in label and container design
Sophisticated design: a key trend in premium products
Premium brands always stand out. Their packaging looks bright, they impress and entice. We consider Wolffer No. 139 cider to be the best example of premium packaging in 2016. The collage helps tell the story of the company that makes the cider and conveys its bohemian spirit. This is a product about the fashionistas of the past for the fashionistas of the present. It is destined for success.
Laughter as a key to communication
Beer is a product that is associated with fun. It is drunk in company, meeting with friends, relaxing after a hard day’s work. Abroad, manufacturers have long realized that it is possible to appeal to the consumer not only by showing that their products are high-quality and elite. They have come to realize that it is possible to amuse the consumer, to make the packaging funny and the product cool.
Example of beer can design and project references
Comic books are back in style
Today, comic books are experiencing a new peak of popularity. The Marvel movie universe continues to grow and compete with DC, and the drawn heroes are not only watching us from movie screens. They can now be found on packaging. We’ve already written about this in our article. However, beer design has given a new incentive to mention this trend.
Gold is the new black
The beer bottle and label designs are dominated by 4 main colors: green, blue, red and brown. Recently, we have seen a trend of a new era of golden color. It is used not as an additional color (it was used before), but as the main color. It is in fashion again and its use is not associated with “bourgeois” taste, but looks stylish and up-to-date. An example is the design of cans of the American beer brand Old Blue Last Beer. The beer is designed to be sold in bars. The company is starting to enter the market from New York and the suburbs and plans to expand: first into the state and later into the whole country.
Craft is everything
In Europe and Australia, craft brewing is at the height of its popularity. In beer design, this is reflected in special “handmade” labels, as well as labels that resemble works of art: expressionist paintings or the use of art-house photos as “covers” for labels.
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Forecast for the Ukrainian beer market
- Adjusting the law on new standards for the beer industry will help all brewers. However, it will benefit small home breweries the most. It will provide a quality product to the consumer and stimulate the development of small businesses. If the law is not repealed or adjusted, the industry will not be able to grow.
- International corporations will do best. Multinational companies can afford to cover failures in the Ukrainian market with positive results in other countries with better economies. But Ukrainian companies will have a hard time, as they cannot rely on support.
- The price of excise duty may rise again, as there is an IMF recommendation to raise excise duty by another 25%. Brewers are expecting these changes, but claim that they will not bear positive fruit for the industry.
- There are also several initiatives that could, in theory, become laws. Among them are an additional tax on packaging recycling, an idea to introduce a ban on selling beer in sets (for cafes and 1+1 offers) and a proposal to introduce electronic excise tax. The latter seems particularly ridiculous to brewers, as there is no illegal beer market in Ukraine.
- The industry’s decline will continue, but will slow down. Although the general director of the industry association “Ukrpivo” Halyna Korenkova predicted a decline of 20-22%, and on some resources we met a figure of 25%, our forecasts are more optimistic. According to the data that we have on our first graph, we can see that in the first 10 months of 2016 the decline amounted to 6.7%. Hypothetically, if no beer is produced after October, the drop would be 19.8%. However, this situation is unrealistic. We forecast a drop of about 12% (±2).
- A global trend in the beer market is the rise in the number of craft breweries. For example, in Belgium, their number increased by 86% between 2011 and 2016. In Ukraine, the trend is less noticeable, but it may develop if the draft law No. 2971-d is passed in the second reading and the price for a license for small production facilities decreases from 500 thousand hryvnias to 30 thousand hryvnias.
- Beers with unusual flavors are growing in popularity. Chocolate strawberry, blueberry – in the United States, according to 2015 results, 27% of all beer sold was categorized as gourmet (or beer drinks). This is a consequence of evolving consumer markets and one way to engage audiences. Read more about the trends in our articles: 6 consumer trends in the crisis and the everyday market.
- Another global trend is the consolidation of the beer market. 4 international corporations (AB InBev, SABMiller, Heineken and Carlsberg) now control 47% of the market (in volume) and generate 74% of profit. At the same time there are talks about merger of two of them – AB InBev and SABMiller. This will lead to the fact that 30% of the world market (in volume) will be controlled by one corporation, and AB InBev’s market share will grow by 29%.
In order to react quickly to crises, to know consumer sentiment and to offer new solutions, you need to be aware of the latest trends and statistical information. Contact KOLORO and order a desk market research of your target market. We are the best in our business!
