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Russia alcoholic drinks market: Government regulations attempt to curb alchohol consumption
Alcoholic Drinks in Russia - a new market research report on 2014-03-31 06:58:03
Alcoholic drinks witnessed volume sales falling away in Russia during 2012, as the government took further steps to reduce the consumption of alcohol in the country. The year witnessed continuing hikes in excise duty, the reclassification of beer as an alcoholic beverage, extended restrictions on alcohol trading hours and locations, and a ban on advertising alcoholic drinks. These factors all adversely impacted volume sales, which recorded an accelerated rate of decrease compared to 2011, although this marked a better performance compared to the review period CAGR, which was strongly influenced by plummeting volume sales over the course of the 2008 financial crisis. Growth rates continued to fall for several years which had a considerable impact on the overall review period average. In addition to this general recovery, however, value growth was driven by government price increases and premiumisation trends.

The government´s continuing battle with Russia´s alcohol addiction was the biggest influencing factor in the performance of alcoholic drinks. 2012 witnessed activity being stepped up on all fronts in terms limiting access to alcoholic beverages; banning alcohol advertising across various media, including the internet; raising prices to discourage frequent or excessive purchases of alcohol; and ongoing anti-drinking campaigns. This came as Russia continued to struggle with its demographic situation brought about in the main by low male life expectancy, although overall half a million annual deaths are linked to alcohol, caused by alcohol-related diseases, accidental deaths, suicides and alcohol-fuelled violence. This has clear implications both for the size and efficiency of the workforce and places considerable pressure on healthcare services. High levels of poverty are closely linked to alcohol abuse, which will makes addressing the considerable wealth polarity in the country a leading priority for the government.

One of the biggest stories was the acquisition of SABMiller´s Russian beer business by Turkish player, Anadolu Group at the beginning of 2012. As part of the deal, SABMiller swapped its Russian and Ukrainian beer businesses for a 24% stake in Anadolu Efes, which came as SABMiller reported weakening beer volume sales in Europe and China over the first half of 2011. The exchange is hoped to reduce SABMiller´s exposure to the unsteady conditions Europe and help the company to build a stronger presence in Russian alcoholic drinks. The deal brought together two important players, with their combined shares establishing them in second position in beer, under the name Moskva-Efes Pivovarnya ZAO behind Baltika Pivovarennaya Kompaniya OAO although overtaking Heineken Pivovarnya OOO and Sun Interbrew OAO.

Despite more sluggish economic conditions, specialist retailers targeted consumers with premiumisation trends and rising interest in new and more exotic alcoholic beverages. This was focussed on the capital cities to a notable extent given the wealth concentrations apparent in these areas and greater consumer exposure to Western European trends, there was some increasing activity in smaller cities. The leaders in the specialist channel remain Aroma TD ZAO and Norman-Vivat, which continued to expand their chains. This channel however, witnessed increasing competition coming from supermarkets and hypermarkets, which continue to experience strong growth and are increasingly focussed on developing their alcohol portfolios, as well as from on-trade, given the burgeoning bar and restaurant culture emerging in Russia.

Alcoholic drinks is expected to register a negative volume CAGR over the forecast period. Further notable volume sales declines are anticipated in 2013 based on further steep increases in excise duty, as well as the full impact of recent legislative changes being felt, including the reclassification of beer, restrictions on alcohol sales, and the ban on advertising. Declines are expected to moderate over the course of the forecast period, moving into growth in 2015 - 2016, when the program of excise duty increases ends. The average constant value growth rate however, will remain positive, showing fairly steady growth over the forecast period as a consequence of higher prices and continuing premiumisation trends.

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