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More from 仆亟亠亶 弌舒 (20)
Russia alcomarket
- 1. Russian spirits market 2013: new growth drivers needed to uncover hidden opportunities Stas Marketing Group Opinion 2013
- 2. Four major factors have been driving Russian spirits market growth during last decade Russian vodka market dynamics 則р Vodka: ZURABLI, FIVE LAKES, 397 360 355 363 ZELENAYA MARKA, BELENKAYA, 325 327 335 348 PUTUNKA, etc. 298 Brand launches 則р Brandy: STARIY GOROD, TROFEYNIY, 252 217 KOMANDIRSKY, STARIY KOENIGSBERG, -38% etc. 211 216 221 218 197 185 則р Active growth aligned with 177 166 158 136 137 development of independent retail Distributors Exclusive brand teams paid by brand development 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012E owners and working together with distributors sales force Russian brandy and cognac market dynamics 113 則р New marketing channels 105 Aggressive 則р Partial ban of alco advertising 85 91 82 Promotion via stimulated creativity inside the media channels industry 62 49 +3% 33 38 22 28 11 11 11 12 12 則р Illegal schemes of writing off and 5 6 6 7 8 9 reselling excise stamps to other Resorting to companies 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012E fraud 則р Illegal excise optimization schemes through using complicated factoring Value, bn RUR operations Volume, mn dal Page 則 2 Source: Russian Federal Statistics Service, Stas Marketing analysis
- 3. Series of unfavorable events devalue the market growth drivers Basic growth drivers of Russian spirits market dont work anymore Reinforcement of alcohol market regulation 則р 2009: Federal Alcohol Market Control Agency 則р New vodka brands cannot be established as a body within Government successfully launched without Brand launches aggressive advertising support Excise tax increase and minimum retail price 則р Middle class consumers slowly moving imposition toward consumption of other products 則р 170 RUR for 0,5l vodka, 280 RUR for 0,5l cognac, 250 RUR for 0,5l bandy from 01.01.13 則р Shelf space is limited no chance for new brands to be placed on shelf Distributors Re-licensing of distributors in 2011-2012 則р Distributors became unreliable development partners with high risk of license 則р Up to half of distributors have lost their annulation licenses and businesses in 2011-2012 則р Only in-store marketing and viral Banning of alcohol advertising in majority of Aggressive marketing are still available for media channels Promotion via spirits marketers in Russia media channels 則р New edition of advertising law place the total ban on all advertising activities except in-store and horeca promotion 則р Illegal schemes are no less available Changes in consumers preferences for companies without special Resorting to fraud support and contacts in regulation 則р Growth in consumption of non-traditional authorities premium spirits Page 則 3 Source: Stas Marketing analysis
- 4. Russian spirits market regulation is becoming more and more restrictive Sphere of regulation Possible alternatives of regulation measures Minimum retail price for vodka, cognac Loss-making sales are not permitted No Price regulation and brandy Annual excise tax increase for Excise tax and special tax for alcohol Tax regulation alcoholic drinks with pure Special tax sales (differ in categories) alcohol content>9% Obligatory marking the product with excise label No Product labeling Production site is to be licensed State monopoly (before 1994) No Production regulation Sales and consumption Point of sales are to be licensed State monopoly for retail sales of alcoholic No restrictions Consumption place are limited drinks Low-alcohol content drinks allowed Spirits allowed from 20/21 years Any drinks allowed from 18 Drinking age limits from 18 years old old Drinks sales are limited within daytime Drinks sales are limited to certain days of the No Time restrictions for sales week Full ban of advertising of drinks with alcohol Spirits advertising is banned. Wine and beer advertising Advertising restriction content is limited Page 則 4 Source: Stas Marketing analysis
- 5. SWOT-analysis of an 束typical company損 in spirits market (based on more than 50 projects in alcohol industry Strategic alternatives for independent spirits company in Russia lies on the crossroad of internal and external development factors Opportunities Strengths 則р Consumers income growth, switch to premium 則р Wide coverage of channels and regions(S1) brands (O1) 則р Own production capacities (S2) 則р Modern Trade and HoReCa upgrowth (O2) 則р High level of quality control (S3) 則р Changes in consumers preferences (O3) 則р Successful brands of previous decade(S4) 則р A lot of production capacity is available (O4) EXTERNAL FACTORS Strategic alternatives INTERNAL FACTORS Threats Weakness 則р Share of heavy drinkers goes down (丐1) 則р Focus on low price segments (W1) 則р Restrictive, even repressive state policy (T2) 則р Poor portfolio and cost management(W2) 則р Product names line COGNAC is in the risk area 則р Periodic Out-of-stock (W3) (T3) 則р Sales team motivation schemes conflict 則р Market consolidation, high risk of aggressive with business objectives and needs (W4) acquisition (T4) Page 則 5 Source: Stas Marketing analysis
- 6. Five strategic alternatives which can activate new growth drivers are developed based on SWOT-analysis of an 束averaged company損 STRENGTHS (S) WEAKNESSES (W) S1 S2 S3 S4 W1 W2 W3 W4 OPPORTUNITIES (O) O1 Focusing on private label production for third-party O2 companies Transferring production of O3 own brand to the third- Focusing on premium party production facilities market segment O4 T1 THREATS (T) T2 Operating processes optimization Export markets entrance T3 Minimum risk strategy T4 Page 則 6 Source: Stas Marketing analysis
- 7. Only companies which increase its operating effieciency will have an ability to stay and earn in changing spirits market Operating income increasing strategies PnL structure before PnL structure after 2012 * 2012 * 1. Operating processes bn RUR bn RUR optimization 油15 油15 2. Focusing on premium market segment 油10 油10 14 15 (91%) 3. Export markets entrance (100%) 7 油5 油5 9 (76%) (100%) 4. Focusing on private label 1 production for third-party (9%) 2 companies (24%) 油0 油0 从舒 Expenses Operating 从舒 Expenses Operating income income 5. Transferring production of Company with large sales volume/ Focus on operation efficiency may affect sales own brand to the third-party value but low operating income decrease but surely significant increase in production facilities operating income * Estimation based on financial data of market leaders and outsiders Page 則 7 Source: Stas Marketing analysis
- 8. Operating processes optimization strategy assumes following solutions in distribution, logistics and sales teams incentive schemes Distribution and logistics optimization 則р Client base optimization 則р Logistics strategy should be and clients regrouping allow reengineered in order to reshaping commercial terms avoid out-of-stock and conducting focused situations, especially in trade marketing activities peak seasons Sales teams incentive schemes optimization 則р Sales team incentive scheme should be build to increase sales, reduce client debt and stimulate distribution 則р Wider use of non-monetary incentives. 則р Wider use of period / target motivation Page 則 8 Source: Stas Marketing methodology
- 9. Operating processes optimization strategy assumes following solutions in category management, costs reduction and trade stock optimization Category management and costs reduction 則р Regular cutting range tail 則р Uncovering new margin (products generating less drivers and loss generators than 10% of total sales) through deeper analysis of value chain 則р Implementing cost monitoring Trade stock optimization 則р Reducing loans and interest payments through minimizing low-demand products stocks and production 則р Reducing warehousing and transportation costs 則р Increasing product turnover Page 則 9 Source: Stas Marketing methodology
- 10. More risky strategies are focusing on premium market segment, export market entrance and changes in production policy Focusing on premium market segments Export market entrance 則р Seeding and growing own 則р Understanding priority Focus on premium premium brands markets market with 則р RTM (Routes-to- emphasis on 則р Regular valuation and Market ) development modern trade and acquisition of promising for faster entrance in HORECA but yet small premium foreign markets brands Private labels bottling for retail chains Outsourcing production Middle class 則р Outsourcing own brand In the lack of advertising consumer is looking bottling abroad possibilities and growing for new products as appetite of retail bottling an alternative to 則р Launching the brands looking private labels might be a old-fashioned vodka similar to famous imported good opportunities for the premium brands companies with modern high-productive capacities Page 則 10 Source: Stas Marketing methodology
- 11. For more info please contact Andrei Stas Stas Marketing / Managing Partner andrei@stasmarketing.com Kirill Safronov Stas Marketing / Senior Associate k.safronov@stasmarketing.com STAS MARKETING MOSCOW +7 499 504 1653 (t) +7 499 504 1654 (f) www.stasmarketing.com info@stasmarketing.com Page 則 11