- Technical contribution
- Non-alcoholic beverages
- Wine, sparkling wine
Business opportunities in Russia's beverage industry - a market report
Russia is an attractive sales market for beverage manufacturers. Retail sales of food, beverages and tobacco products are around 200 billion euros. Since 2012, they have increased by half on a rouble basis. The food industry is one of the most important manufacturing sectors in Russia. Only oil refining and metallurgy achieve higher benefit. Gerit Schulze, Germany Trade & Invest, and Andreas Brunnbauer, Representative Office of the Free State of Bavaria in the Russian Federation, provide insights into the current market situation.
Current market trends
Currently, the weak development of purchasing power is proving to be an obstacle. According to initial estimates, real disposable income fell by three percent in 2020. This has a negative impact on beverage sales.
In soft drinks, the trend is towards less sweetener and smaller packaging sizes. The members of the Russian manufacturers' association SPBN have committed in a code at the end of 2019 to reduce the sugar content by 10 per cent within five years and to offer more beverage packaging up to 500 millilitres. According to market research firm Nielsen, sales of sugary drinks fell by 5 per cent in 2019. In contrast, sales of low-calorie drinks rose by a fifth.
The demand for bottled mineral and drinking water has increased by 30 per cent between 2015 and 2019. According to the information portal RBC, 8.2 billion litres were sold in 2019. The leading mineral water brands are Svyatoi Istochnik (7 per cent market share), Bonaqua, Aqua Minerale, Karachinskaya and Shishkin Les (4 per cent each). According to forecasts, demand for mineral and drinking water will grow by 1.9-3.5 per cent annually in 2021-2024 to 8.85 billion litres in 2024. Limiting factors are decreasing purchasing power and shrinking population as well as a wide range of cheap household filters for purifying tap water.
Energy drinks are recording high sales growth. Nielsen has determined a sales increase of almost 30 percent for September 2018 to August 2019. More than 400 million litres are sold per year. The largest suppliers are PepsiCo, Red Bull and Baltika. Coca-Cola has also been bottling energy drinks in Russia since the end of 2019.
Alcoholic beverages: sales growth and interest in new things
The alcoholic beverages market grew by 4.2 per cent in 2019 - this applies to all beverage segments with the exception of vodka, whose sales are stagnating. In particular, the market shares of gin and whisky are growing by 26 per cent and 15.8 per cent respectively: the reasons for this are the market entry of local players who can offer competitively priced drinks. There is particular demand for drinks sold in small formats (less than 0.5 litres). Growth rates for sales of such products are particularly high and amount to 14.4 per cent. This allows customers to test different beverages from premium suppliers by buying smaller portions.
The average price of alcohol grew in 2019 due to changes in consumption patterns: Customers are increasingly testing new types of drinks, which usually cost more. This trend remains in the Russian beer market, which is the largest segment of the Russian alcohol market. Price growth here is due to increasing demand for imported and unfiltered beer, as well as beer produced by smaller breweries.
Most important producers
Foreign beverage companies also have a strong market position in domestic production. Major investors include Nestlé, Danone, Coca-Cola and PepsiCo. They are also among the largest beverage producers. Among the original Russian producers, Baltika Brewery is on the list of major producers (it now belongs to the Danish Carlsberg Group).
In recent years, Bavarian exports of beverages have grown continuously (Fig. 1). In 2019, they reached a value of 63 million euros.
In particular, deliveries of beer have increased significantly: from 39.2 million euros in 2017 to 53.7 million euros in 2019. Export increases are also observed for malt and hops.
Russia imported a total of US$3.027 billion worth of beverages in 2019. Of this, alcoholic beverages accounted for 2.073 billion US dollars.
The most important supplier countries are Italy, France, Great Britain, Georgia, Armenia, Spain and Germany.
Market regulationFor packaged drinking water (mineral and table water), the digital labelling pilot project will run until 1 March 2021. The Ministry of Industry and Trade and the Ministry of Agriculture adopted guidelines for the digital labelling of packaged water on 7 August 2020. In 2020, the law on viticulture and wine production also came into force. It defines the various wine products and regulates state financial aid for the industry. The winegrowers are unhappy with the passage that they will have to source the raw materials domestically in the future. This is intended to support domestic winegrowers.
As there are not enough raw material suppliers in Russia, experts fear a 40 percent slump in wine production for 2021. In 2019, the import volume for wine raw materials was still 1.1 million hectolitres.
A new law regulating the alcohol market affects breweries.
According to it, they may only market beer in "consumer packaging" - i.e. bottles and cans. This would amount to a ban on retail beer kegs. These are popular because customers can have individual quantities filled from them.
For smaller breweries, this is an important sales channel. According to the Rosstat statistics office, beer production stagnated at around 77 million hectolitres in 2019. About one fifth of the volume is filled into kegs.
Russia will remain an interesting sales market for German beverage producers in the future, especially in the alcoholic beverage sector. The development of real incomes and market regulations have an inhibiting effect.
• Germany Trade & Invest (www.gtai.de/russland)
• Information platform RBC (https://marketing.rbc.ru/articles/11763/)
• The Nielsen Company: (https://www.nielsen.com/ru/ru/insights/article/2020/bolshe-no-menshe-glavnye-trendy-alkogolnogo-rynka/)
• Federal Statistic Office, Germany
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