Russia Improving, Great For Carlsberg


When Russia sneezes, Carlsberg catches a cold. This way of thinking was well-justified during the past few years, as a slowdown in consumer spending, a hike in beer taxes and, more recently, a decline in market share hit the Danish brewing company hard given that Russia makes up about 40% of its sales. More recently, however, things have improved both on a fundamental and company-level basis.

In the years leading up to 2008/2009 , Russia was a gold mine for Carlsberg , as the dynamic oil-led economy, rising incomes and relatively low taxes made for a great story with regard to beer. However, the aforementioned challenges severely affected the brewer in recent years. Our outlook for the Russian beer industry will very likely be good news for Carl s berg; w e see total beer sales in Russia growing by 2.8% in 2012 before climbing up to 3 .0 % in 2013 after three consecutive annual contractions.

From Carlsberg's perspective, this ties in well with the fact that it has partially reversed some of the market share declines from the past year or so. Its share of the Russian market following the third quarter to September 2012 now stands at close to 39%, which leave s it well ahead of rivals such as AB InBev and Anadolu Efes , both of whom have sizeable businesses in Russia through their domestic subsidiaries.

Finally On The Comeback Trail
Russia - Beer Sales By Volume (mn litres)

Carlsberg's third - quarter volumes increased by 2% year-on-year in Russia, which follows a 1% increase in the first-half period to June. Were it not for the tax hikes, we believe that the beer industry would have rebounded far more robustly than has been the case. While consumer spending did take a big hit in 2009, it is worth noting that going into the crisis most Russian households were not overly leveraged, and so once confidence began to improve, there was a quite a sharp effect on consumer spending. Over the coming quarters, Carlsberg will try to take its market share back above 40% w hile continuing to pursue volume growth as the beer industry finally makes positive progress again.

This article is tagged to:
Sector: Food & Drink
Geography: Russia

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