Page 13 - RusRPTNov21

2.2 Vodka market growth
Alcohol is the fourth largest spending category for Russian consumers,
accounting for 7% of the total in 2020. Numerous waves of regulatory tightening have lowered per capita consumption 35% over the last ten years to 10l of pure alcohol (which is still in the top-10 globally).
Russia has one of the highest consumption rates of vodka worldwide, although beer rivals it, with both accounting for near 40% of the total. Wine is still an emerging category, at only 15%.
Beluga Group is the largest producer of vodka in the country (13% share) and is undergoing a significant strategy shift. Its main growth pillar is Winelab, a retail chain that aims to expand fourfold to 2,500 outlets by 2024.
We expect Winelab to raise its contribution to Beluga’s total revenues from 35% to 55% in the next five years. This pace fuels our expectations of Beluga’s top-line enjoying a 20% CAGR in 2021-25F; we model key P&L lines more than doubling. We initiate coverage of Beluga with a 12-mo TP of RUB 5,000 and a Buy (ETR of 56%). The stock trades at an undemanding 5x 2022F EV/EBITDA vs. 20x for global alcohol names.
The recorded alcohol consumption in Russia has declined for the last ten years (the blended annual decrease has been 4%) to reach 9.5lt of pure alcohol equivalent in 2020 per person above 15 years old. The level is 15% lower than the blended number for DM peers, despite Russia being the tenth biggest consumer of alcohol globally. The main pressure on consumption in Russia came from tightening regulations, including rapid excise increases (15% CAGR in 2010-20 for vodka, wine, and beer), monitoring systems for
13 RUSSIA Country Report November 2021 www.intellinews.com