It was not so long ago that Russia did not officially classify beer as an alcoholic drink, which from a licensing and access point of view made the drink relatively easy to acquire from off-license shops and kiosks. However, in addition to tax increases, the recent implementation of legislation aimed at restricting sales of beer at stores with a floor space of less than 50 square metres is likely to affect the fundamental growth outlook for beer.
With informal kiosks ,maintaining their prevalence across a lot of the country, these smaller outlets represented a major sales point for commercial beer - an industry that up until 2008 was growing brilliantly. Since then, the landscape has changed drastically , mainly due to a dramatic increase in taxes levied on beer beginning in 2010. Further impacting the industry will be the aforementioned ban on the sale of beer f rom smaller shops between 11pm and 8 am in the country. Beer now can be purchased only at restaurants, cafés and venues of at least 50 square meters during that time .
As the accompanying chart illustrates, we do not hold a positive view on the fundamental growth outlook for beer to 2017 in volume terms. The main factor continues to be rising taxes, which inevitably have forced the industry to raise prices. Further tax increases are expected to be phased in over the next few years and are expected to increase by between 20 % and 25% per annum between 2012 and 2014.
|Not What Would Have Been Envisaged Pre-2008|
|Russia - Beer Sales|
Were it not for the tax hikes, we believe that the beer industry would have rebounded far more aggressively than has been the case. While consumer spending did take a big hit in the 2009 recession , 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 quite a sharp effect on consumer spending.
While beer has been the most affected of the main alcohol categories as part of the government's clampdown on alcohol, this is not entirely surprising given that out of the main categories, including spirits, it is perhaps the most organised and ultimately formalised , with multinationals dominant. Spirits - in particular vodka - are a lot more opaque and are arguably far more culpable in the alcoholism problem plaguing Russia. Up to 600,000 Russians die from alcohol-related illnesses every year, according to medical journal The Lancet. About 20 litres of pure alcohol per capita are drunk annually - a figure almost without parallel globally.
Effective January 1 2013, television advertising for beer will be restricted , while sales at kiosks will not be permitted between 11pm and 8am. This is connected to beer now being officially classified as beer . P reviously , beer had been included in the 'foodstuff' bracket, a classification previously for alcohol drinks with an alcohol content of less than 10%.