BIG BEER HIT BY TAX HIKES, ADVERTISING & KIOSK SALES BANS
Coca-Cola Hellenic expects Coke sales to fizz as beer falls flat in Russia
Yesterday, in its first earnings announcement since its listing on the London Stock Exchange since its listing there on April 29, CCH reported a slight year-on-year Q1 2013 sales decline (less than 1%) to €1.431bn, while unit case volume sales fell slightly to 426.7m.
CCH posted loss of €11.3m in the quarter ending March 29, blaming difficult trading in established markets such as Italy, Ireland and Greece, where problems include austerity measures hitting disposable income levels, rising unemployment and political uncertainty.
Cold weather in Central and Eastern Europe also hit CCH’s sales in March 2013, but this gloom was offset by strong Q1 growth in emerging markets, especially Nigeria and Russia.
Stealing share from Pepsi
In Russia, Coca-Cola and Fanta brand sales grew 13%, Sprite grew 5%, and energy drinks were up double digit; RTD tea was up 30% and juice sales grew by 11% – with a 13% uptick for mainstream juice brand Dobry and a 25% rise for premium brand Rich.
On a later earning call, analyst Samar Chand from Barclays Capital asked who CCH had won share from in Russia, Pepsi or the local players? And had CCH benefited from the beer sales ban in kiosks?
“Yes, with regards to market share we have been gaining against our major competitor, and this has been consistent over quite a few quarters,” CEO Dimitris Lois replied, noting the tenth consecutive quarter for Coca-Cola where the drink had gained share.
“Moving on to beer, you’re absolutely correct. Sales are prohibited in kiosks, open markets and sport events. And it’s a total ban for borderline advertising, even in print,” he added.
Recruiting ‘beer switchers’ to Coke
“So definitely, this provides an additional opportunity for us to recruit beer switchers to Coke and a few of our other brands,” Lois said.
Opportunities were more evident in immediate consumption channels, he added, which would allow CCH to enhance its single-serve business and expand its cooler network.
Adam Spielman from Citigroup asked if Lois thought CCH could continue to take market share from beer due to the government restrictions outlined above.
Beyond the short-term boost provided by beer being expelled from kiosks - major market players in Russian beer, in order of share, include Baltika Breweries (Carlsberg), Anheuser-Busch InBev and Heineken - did Lois believe the trend would continue until the end of 2013, and on into 2014?
“Of course, there’s a benefit with the new legislation,” Lois replied. “So the answer is yes, we do expect that we will be gaining share, and we will be gaining share against our main competitors [including PepsiCo/Wimm-Bill-Dann] and also beer.”
