Beer Leap 2009

The most impressive trend of the Russian beer market in 2009 was the all-round opening of draught beer outlets. In some regions the number of people interested in draught beer sales increased in 2-3 times. Such an influx is observed for the first time. So why did draught beer obtain such popularity in the difficult crisis period?

Impossible to refuse
In 2009 there began an active decline in some economical sectors. The crisis made entrepreneurs look for new directions of activity and investment objects. Many of them payed their attention to beer stores as to extra earnings, which would help to keep afloat. Even in Novosibirsk, where the market was in the active phase of development by the beginning of 2009, the number of draught beer outlets rose by a third.
Mr. Evgeniy Trifonov, the Beer Dispensing Equipment Product Manager of the Novosibirskprodmash company, the major Russian producer of draught beer dispensers, explains that there are certain reasons for the attractiveness of draught beer sales business. These are: 1) low price entrance to the market – 120 000 RUR; 2) quickness of opening procedure – 1-2 months; 3) high profitability of draught beer segment. “The margin of a beer store can reach from 30 to 100% during a season”- says Evgeniy. Of course, there is a seasonal prevalence which influences the profitability. The harvest peak for beer outlets falls traditionally on summer. The year 2009 wasn't an exception in this respect. And this happened in spite of the fact that weather conditions were not very favorable in the majority of Russian regions.

The soul demands
In 2009 consumers chose draught beer more often considering it of a better quality and fresher. Some sellers are sure that exactly the market demand contributed to the draught beer sales growth. Thus, the Director of the beer store chain 'Bank Beer' in Novosibirsk, Vadim Kusnetsov, thinks that the higher quality of draught beer favoured, on the one hand, the decline in the volume of pre-packaged beer sales, and on the other hand, the development of beer to-go segment. The fact that people began to pay more attention to saving money also acted in favour of beer outlets. Drinking beer at home became not an exception but the rule. Many people who wanted to drink draught beer were not ready to go to the public places with non-democratic prices.
Alexander Razenkov, the Draught Beer Sales Manager in Siberian and Far Eastern regions of the "Baltika" company, thinks that the popularity of draught beer stores is a specific feature of Siberia and Far East: "In Moscow and St. Petersburg the restaurant-and-bar net is very developed and people prefer to drink beer in such places. Here the HoReCa segment is not so developed, that is why a customer buy beer-to-go in stores”. However, the Novosibirskprodmash Company doesn't agree with it. According to Evgeniy Trifonov, the geography of PEGAS sales (systems for beer dispensing from keg into plastic bottles) widened considerably: “Draught beer outlets started to open actively almost in all Russian regions. The supply of the PEGAS systems to Moscow and Moscow region, South and Central Districts and many other regions rose several times”.
Lower prices for draught beer in comparison with pre-packaged beer also were the reason of consumer attraction to beer-to-go. The price difference made nearly 20%.

In trend
The world biggest beer producers also payed attention to the increased popularity of draught beer. On the bottled beer market there arouse the trend to launch “draught beer in a bottle”. In brand names there appear actively the word “draught” beer and its associations: from keg, etc.
Many producers plan not only to increase the share of beer in kegs, but also to broaden the product range in this segment. This is dictated by market demand, higher profitability and opportunity to decrease costs connected with bottle-filling. “While the share of draught beer in total sales volume of the “Barnaul Beer Factory” made 17% in 2006, it took already around 27% of the market in 2008. Following the growing market demand we increased the range of beer dispensing equipment by 30% and now our company is working at the creation of new draught beer sorts,” says Mr. Maxim Polozov, Marketing Manager of the “Barnaul Beer Factory”,

On federal scale
The federal product chains also began to develop beer departments with draught beer. The company “Holiday” opened the departments of draught beer sales in its stores in 2009. The company was going to set up such departments almost in all its stores and bring the take-out draught beer sales volume to 1 million liters per month. The General Director of the “Holiday” , Mr. Alexey Zakharov, explains the interest in draught beer by the sales decline in the bottled beer segment.
The General Director of the Trade Yard “Anix”, Mr. Yuriy Nikitin, also confirmed the profitability of draught beer sales: “The demand is changing. We have turned to the draught beer market in 2008 together with “Bochkarevskiy pivzavod”. It appeared in 30-40 of our stores. The results made us very glad. This year we continue to work with this segment”.
Also the year 2009 was marked by the appearance of the first player which develops the chain of draught beer sales on the federal scale. The biggest Moscow chain called “LIT.Ra”, which owns 38 outlets in Moscow and Moscow Region, began its expansion in regions. For a year “LIT.Ra” opened its stores in Russia, St.Petersburg, Nizhniy Novgorod, Tver, Pskov, Velikiy Novgorod, Vladimir and Solnechnogorsk.

“To-Go” abroad
The trend of “keg beer” also went outside the borders of our country. According to the data of the Novosibirskprodmash company, the PEGAS NovoTap systems for fast foam-free beer dispensing into PET bottles were bought by one of the world major beer producer, the Molson Coors company, in 2009. The major beer producer used this system for filling beer into 5.6-liter plastic bottles, which were then supplied to different stores and sold there. This sales experience proved to be successful and now the company plans to develop this direction. The highly-developed net of take-out draught beer outlets in Russia arouse the interest of foreign representatives of other world biggest beer producers – Heineken and AB InBev.
In 2009 for the first time the PEGAS NovoTap devices were sold to microbreweries in the USA, Slovakia, Switzerland, France, and beer equipment suppliers from Austria, Australia and Israel.
Also in 2009 the Novosibirskprodmash signed the distribution contract with the Japanese trade company. The PEGAS NovoTap devices and the PEGAS Dragon beer towers made in Novosibirsk are installed in Japanese bars, which now actively offer their customers to take their favorite drink with them.

Will there be beer?
In the second half of 2009 the Russian market was disturbed by the information about the planned rise of beer excise taxes. In case of the excise tax rise, beer producers predicted the overall fall of beer sales and in the draught beer segment, in particular. “The increase of excise tax will hit first of all the small and medium size enterprises including trade. For clients of take-out draught beer outlets the price difference even in 1-2 rubles is considerable. And in case of the triple excise rise, the increase of retail prices will make about 30%. For the beer retail trade this can not be the reason for development anyway, quite the contrary” - noticed Alexander Razenkov, the draught beer sales head in the Siberian and Far Eastern regions of OAO “Pivovarennaya kompaniya “Baltika”.
In spite of the active confrontation and lobbying the interests, the excise tax increase in Russia took place. Since 2010 the beer excise rose three times and made 9RUR per liter. The international analytical magazine “Pivnoe delo” gives the data, that the beer price started to increase gradually since the autumn as soon as it became known about the excise rise in the new year. The spokesman of the Russian subdivision of the SAB Miller Kirill Bolmatov says: “This will continue till the middle of spring”. According to him, the total beer price growth will make 5-6 RUR per liter.

There will be beer!
It is too early to say, how the excise tax increase will influence the draught beer market. However, according to Evgeniy Trifonov, the Beer Dispensing Equipment Product Manager of the Novosibirskprodmash company, this measure won't considerably influence the sales of beer-to-go: “ In our opinion, there won't be any considerable price rise in take-out draught beer segment. Producers, suppliers and sellers will prefer to decrease their profit than to rapidly increase the price. At the same time the segment of cheap beer will feel the influence of excise rise to a greater degree than premium sorts. Buyers choosing between bottled and draught beer will still prefer the second one”.
This opinion is proved by Dmitriy Potapenko, the franchisee of the “Kopeyka” and the co-owner of the “Gastronomchik” chain: “Purchase prices for beer rose by 11-12%. However, we didn't increase the price markups”.
According to Evgeniy Trifonov, the trend to the active development of draught beer segment will go on in 2010: “The year 2009 showed that the take-out draught beer market proved to be very attractive beer producers and suppliers. They are ready to develop it and invest extra money”.
Alexander Razenkov also confirms it: “We continue to develop the direction of draught beer, because we consider it as a very profitable one”.