Russia Beer Production Down Nearly 10%

Does not add up to 100% due to rounding. Source: Business Analytica

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Underlining BMI‘s bearish near-medium term view on Russian beer, the Federal Statistics Service (FSS) has reported that headline beer production plummeted by 9.99% year-on-year (y-o-y) in the six months to June 30 2010. We point to two underlining factors behind the decline:

  • Russia has taken a hard line stance on beer – almost trebling the excise rate on beer in 2010. Bearing in mind that the excise rate levied on beer will continue to increase in 2011 and 2012 (with more anti-beer legislation not to be ruled out).
  • Reacting to the looming tax hike, retailers and vendors pursued heavy stock piling to build up their inventories in the run up to 2010. This was evened out by destocking in the Q110 period in particular, which we believed contributed to the decline reported by the FSS.

The near 10% slip came notwithstanding favourable weather and tail-end momentum likely to have been provided by the World Cup (despite Russia not qualifying) in Q210. The excise hike has come as a hammer blow to the industry, compounding what was a dismal 2009.

Our H210 Outlook

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