Beer consumption slows, competition increases

MOSCOW, July 28 (RIA Novosti commentator Peter Lavelle). Beer consumption in Russia decreased 3.7% during the first five months of the year, according to the Federal Statistics Service and in line with market expectations. Before the end of summer, another 1% is likely to be added to this figure, and by year's end annual growth of the beer sector should reach 5%. Starting next year the sector is expected to grow a healthy 3% a year.

The slowing of volume growth does not necessarily mean a slowing of income generation for the sector as consumers are expected to trade up to highly quality and more expensive brands.

Increasing disposal income and extensive advertising and promotional campaigns are likely to overcome recent advertising restrictions and public warnings about alcohol consumption.

At present, the sector is highly consolidated and dominated by large, and primarily foreign-owned, brewers. With the exception of Baltika, smaller domestic brewers are squeezed out of the market share by larger players. Under these conditions, competition should increase and put pressure on the margins of all market players.

As the sector develops, market watchers expect the larger brewers to extend market share and force the smaller producers to either fold or become niche players.