Ken Research announced its latest publication on, “Spirits excluding FABs & Fort Wine Consumption Volume and Growth Forecast to 2021-East Europe”, offer insights on the changing trends and key issues within the East European Spirits market. The publication includes an insightful analysis of volume (M liters) and growth (Y-o-Y) trends, consumer behavior, packaging trends, leading players and distribution trends withinEast European Spirits market. The analysis of the aforementioned trends has been done across eighteen individual countries in East Europe namely Belarus, Bosnia, Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Macedonia, Poland, Romania, Russia, Serbia, Slovak Republic, Slovenia, Turkey, and Ukraine.
Economic Environment of East Europe
Europe is one of the wealthiest and largest regions in the world with home to 731million people, about 11% of world’s population, in 48 different countries. The wealth of different European countries’ varies; however, being one among the most developed regions of the world, even the poorest country in Europe has GDP and living standards well above the poorest countries of other continents. Most European countries have GDP per capita exceeding the global average. In 2010, Europe had a GDP of 19.920 trillion USD, which was about one-third of the global economy and GDP per capita (PPP) of 18.140 trillion USD. There are regional developmental variations within Europe, with North and West Europe being more stable and wealthy than the East Europe. However, with the fast growth of East European countries, the gap is reducing.
From early 1990s up until the global crisis of 2008, the East European economy registered record growth on account of privatization, implementation of labour reforms and influx of foreign capital. However the global recession revealed many flaws in the economy model of East Europe such as very high consumption (about 80 percent of GDP during 2005-2008), high level of borrowings due to soft lending policies, savings lagging behind investments and crisis of FDI due to recession. Hence now re-establishing the previous growth requires increasing investment, expanding high-value exports, raising productivity, reviving FDI, and increasing domestic savings.
Looking at the current landscape, the Eastern Europe economic outlook varies among countries. As per IMF, the region will show decent economic growth except for Russia and Ukraine, due to their conflict. In Russia, falling oil prices and extension of sanctions by the EU and US will limit the growth. The rest of East Europe will show positive growth mainly on account of increased domestic demand due to increasing real income, carefully increasing low interest rates as well as rising capita spending and exports growth. Thus, GDP is expected to show positive growth in east Europe except for Russia and Ukraine. Economic growth, establishment of European Regional Development Fund and high growth govt. commitment by European govt. has strengthened East European the financial sector. High inflation is expected to fall in Russia and Ukraine while inflation will hit bottom in rest of the east Europe.
Brief Overview of the Spirits Market in East Europe
The East European Spirits market is one of the largest emerging spirits market in the world. In recent years, the market has witnessed biggest increase in consumption per capita, especially for wine and beer. Looking in the past, the East European countries have one of the longest tradition of local spirits production using their distillation skills and hence creating their unique regional products.Herbal liqueurs in Czech Republic, fruit brandies in Hungary, Bulgaria and Romania etc. were some of the prominent offerings at that time. Over the time, these locally managed distilleries were nationalized and both quality and image of these regional spirit products were improved, which led to the revival of the East European spirits market. These regional spirits have gained national as well as international recognition. Today world class grapes of Bulgaria is used to make high-quality variants of ‘Rakiya’ a traditional Bulgarian drink, which is exported to more than 30 markets, including US, Hong Kong and China.
Looking at the current scenario of the East European market, local spirits still make up vast majority of spirits volume in Eastern Europe. Russia, Ukraine and Poland are some of the most dynamic spirits markets in the region. Among various categories of spirits, East Europe is the core region for Vodka production in the world.In recent years, however, the region has experienced steep double digit decline in Vodka volume consumption leading to global volume decline in vodka consumption.Also, the overall volume consumption of other spirits categories has significantly declined. Legislative changes such as series of tax hikes and minimum pricing in Russia, year on year increase in spirit duty & turmoil in Ukraine are some of the prominent reasons for this decline, contributed by major decline in Poland and Slovak Republic.As a result of minimum pricing, the consumers are turning to ‘Grey Trade’. This trade of products through unofficial distribution channels rival those traded through official channels in terms of price. The tide of illegal and unauthorised spirits consumption continues to affect the business of the main producers and importers of international liquor brands. Despite this negative volume growth, sustainable value growth has supported by positive underlying consumer trends and evolving brand portfolio, investment in brand communications, innovation and operational capabilities.
The major spirits in East Europe include Anise Spirits, Asian Spirits, Bitters, Brandy, Fruit Brandy, Gin &Genever, Liqueurs & Specialties, Rum & Cane Spirit, Schnapps/Aquavit, Vodka, and Whiskey. The leading multinational companies in the East European Spirits market include: Global Spirits, Stock spirits, Chivas Brothers, VinpromPeshtera, Bacardi-Martini, Moët Hennessy, Diageo, Beam Suntory, Davide Campari Milano, Pernod Ricard, Rémy Cointreau and Brown-Forman.
East European Spirits Market Prospects
In the review period (2010-2015), the East European Spirits market has witnessed slowdown, with decline volume consumption, especially for the vodka category, and hence negative volume growth rates. However, the value growth rates have remained fairly stable owing to positive consumer trends in the market.
Over the next five years, the East European Spirits market is expected to exhibit the same growth trends as the underlying consumer, producer behaviour and regulatory environment continues to be the same. Due to legislative changes in Russia (minimum pricing) and Ukraine (Spirit duty & turmoil), the volume consumption is expected to post further decline in many East European region. However, sustainable value growth will be underpinned on account of following key factors driving growth in Spirits market:
- Desire for affordable luxury
- Diversification of drinking occasions
- Increasing spirits consumption by female and younger drinkers
- Growing confidence in local brands
- Raised awareness of health and demand for lower alcohol-by-volume spirits ranges
- Producers investing in brand communications, innovation and operational capabilities
- Rising disposable income and demand for higher value spirits in the region.
The booming black leading to declining profits of main producers will however continue to challenge the growth of the spirits market in future if the tax burden is not eased.
Key Topics Covered in the Report
- Detailed profile of Spirits market in East Europe.
- Overall volume & growth analysis of Spirits market in East Europe
- Country wise volume & growth analysis of Spirits market in East Europe
- Consumer demographics, trends and behaviours
- Key consumer trends which will influence Spirits consumption
- Historic and forecast consumption values in the East EuropeanSpirits market
- Competitive landscape of the East EuropeanSpirits market
- Distribution channels & Packaging landscape of the East European Spirits market
To know more on coverage on report titled “SPIRITS EXCLUDING FABS & FORT WINE CONSUMPTION VOLUME AND GROWTH FORECAST TO 2021-EAST EUROPE”, click on the link below:
Ankur Gupta, Head Marketing & Communications