Russian drinks market decline predicted

Due to persistent international tensions and the rising cost of raw materials, the drinks market in Russia is forecast to suffer a decline in 2015. However, the hot drinks market presents an opportunity, finds a new report by Canadean.

According to the report, the Russian drinks market will lose nearly 1.5 billion litres of volume spread across all categories in 2015. Russia accounts for a third of eastern Europe’s beverage consumption and is a key export market. The economic hardship and political instability, as well as the declining consumer and industry confidence, are forecast to impact many other nations in the region. In 2015 the eastern European beverages market is expected to see a drop of almost one billion litres, equating to a decline of around 1%.

However, the research also shows that traditional products will witness growth in 2015. Hot tea in particular will outperform the rest of the beverages market with a comparatively high growth of 1%. Michael Wiggins, analyst at Canadean, says, “The hot tea market is showing growth which means that Russians might be returning to old favourites in times of uncertainty.”

The Russian juice market will suffer the most with a forecast decline of 30% in 2015. This is having a negative effect on even the major players. For example, PepsiCo plans to close the Ramsenskoe plant and move production to the Lebedyansky site. The nectars market will also contract by over a fifth in 2015. Wiggins says, “Usually, lower cost nectars benefits from a decline in juice as consumers trade down, but in Russia the increase in the cost of raw materials will badly sting both categories.”

Canadean expects beer to decline by 6% in 2015. “The decline in the market will largely be due to the tough tax regime and legislative environment adding to the external factors,” adds Wiggins. Brewers are seeking to manage the current market challenges through cost cutting measures: Carlsberg has recently announced plans to close two plants, while Baltika Breweries is to shut down plants in Chelyabinsk and Krasnoyarsk.

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