Page 105 - RusRPTMay20

The Association of Beer Producers, which was created at the initiative of AB InBev Efes, Carlsberg and Heineken, has sent a proposal to the government about potential support measures for the industry, ​including a reduction in the excise rate for beer and beer-related beverages with an ABV of up to 8.6% from 1 July 2020. That could result in the current excise of RUB22/l being cut to RUB21/l, with the latter then being frozen until 2022. Apart from that, the association has proposed implementing a temporary moratorium on raising the current tax rates for the next two years, as well as deferring the payment of income tax, VAT and social contribution payments until the situation has stabilised. In addition, the measures need to include reducing VAT to 18%, postponing the marking of related goods and removing the import quotas for the import raw materials.The list of proposed subsidies for the beer sector is significant and we anticipate further comments from the government about their possible implementation. The three key producers, AB InBev Efes (JV of Anadolu Efes and AB InBev), Heineken and Carlsberg, account for some 70% of the market and are the main members of the new Association of Beer Producers. It was created after they exited the Russian Beer Union, as there were disagreements on the proposals to fight counterfeit volumes, the introduction of a minimum retail price, and regulations regarding recipes. Excises were gradually lifted from RUB12/l in 2012 to RUB21/l in 2017, putting additional pressure on the market (a negative CAGR of 6% in 2013-17). In 2018 and 2019, the excises were left flat, and the market grew with a 2% CAGR in that period, also supported by the 2018 FIFA World Cup. As the excise has been increased 5% y/y in 2020, we expect beer volumes to be at least flat y/y. If the excise remains the same for the next three years, that could potentially return the market to volume growth. Anadolu Efes has 60% of its volumes coming from Russia, making it the market leader with a 28% share.
Two retail chains, L'Etoile and Natura Siberica, have published information about the problems they face sue to the spread of coronavirus. ​The former has temporarily closed all its stores, losing 95% of its turnover, while the online channel (5% of total revenues) does not compensate for such losses. In 2019, the company's sales amounted to €1.5bn (RUB110bn), across some 1,000 locations (350,000sqm of selling space) and L’Etoile employed 17,800 people.​ ​Natura Siberica estimates that around 30% of its stores will be closed permanently, with the worst case scenario being only five locations left. The company is part of the Pervoye Reshenie group (also operates Organic Shop, Planeta Organica and Agafya Shop), with traditional outlets constituting some 40% of total group sales, while online has a share of 5-7%. There are currently 45 Natura Siberica locations (11 of them abroad), 41 Organic Shop stores and one each of Planeta Organica and AgafyaShop.​S​ eparately,accordingtoPresidentVladimirPutin,asreported by Interfax, overall retail sales have dropped 35% in April.
April sees 25% traffic decline at convenience stores and 50% loss at large format stores​. According to the Association of Retail Stores (AKORT), there was a major decrease in traffic in April after the peak in March, while the average check growth also started to slow. Convenience formats lost 20-30% of traffic, while hypermarkets and supermarkets showed declines of 40-60%. The food retail sector saw a spike in mid-March, as people stocked up, while demand has started to cool in April. Hypermarkets are in a disadvantageous position, as they tend to be located further away and are largely present in shopping malls (rather than other formats), while supermarkets are lagging due to their more premium offer. The convenience format is less affected, due to
105​ RUSSIA Country Report​ May 2020 ​ ​www.intellinews.com