News2012.11.02 12:42

Lithuanian beer market: Curiosity versus tradition

A breeze of change is blowing in the Lithuanian beer market – drinkers become increasingly fond of beers brewed in small breweries, brands imported from abroad, and canned beers. Local brewers complain of a rather lean summer but find comfort in growing exports even to markets known as traditionally beer-drinking countries.

A breeze of change is blowing in the Lithuanian beer market – drinkers become increasingly fond of beers brewed in small breweries, brands imported from abroad, and canned beers. Local brewers complain of a rather lean summer but find comfort in growing exports even to markets known as traditionally beer-drinking countries.

Retail chains, that have reported sharp drops in beer sales in the wake of the downturn, now say that figures have stabilized and are even edging up.

2008 is still a long way off

Norfa, a grocery chain, sells on average 2 million litres of beer each month and the turnover is slowly growing. “It is still a long way to go before we reach the 2008 levels, sales of beer and other alcohol are still 15-20 percent below,” Norfa spokesman Darius Ryliškis tells 15min.

Two other chains, Maxima and Rimi, has sold as much beer this year as they did last year, while Iki reported a 3-percent drop. Neither, however, agreed to share exact figures.

Lithuania's brewers are somewhat less optimistic. Dainius Smailis, corporate director of Švyturys-Utenos alus claims that the market is contracting. Among chief reasons for that he names cold summers – the high season for brewers.

Retailers confirm that beer sales are very sensitive to weather changes. “The warmer it is outside, the more people buy beer,” says Rimi Lietuva public relations officer Raminta Stanaitytė-Česnulienė. “In May, which was particularly sunny, sales grew more than 40 percent compared to less sunny months. Sales usually peak in July, while this year it did in May.”

Analysts with Švyturys-Utenos alus estimate that beer consumption per capita this year is smaller than before – a little over 90 litres.

Saulius Galadauskas, president of the Lithuanian Brewers' Guild, admits that beer consumption is dropping and that indicators from this year might be 5 percent below last year's – at least judging by sales in January-August.

For the time being, brewers can at least take comfort in successful exports, mostly to Russia (it grew 1.5 times this year), the United Kingdom, Ireland, Norway, Polant, the United States. Švyturys-Utenos alus re-launched exports to Austria and has its foot in the Hungarian market. All in all, Lithuanian brewers export to 35-40 countries.

Canadian interest

Kalnapilis-Tauras Group, which takes up about one fifth of the market, has had steady levels of production for the past several years and even the downturn did not depress it much. In the face of dropping domestic demand, the company tries to make up for the loss abroad – it exports 22 percent of its production.

According to Marijus Kirstukas, CEO of the company, Kalnapilis labels can now be spotted in Canadian shops – the country's importers spotted the Lithuanian beer after it scored victories in international competitions.

Girstukas, however, is not too happy with this year's results – beer sales dropped 6-7 percent and next year's projections do not look any better. “Consumption has dropped not only because of chilly summer. There was no summer to speak of in the first place. September and October were not cold, but sales continue to drop. People drink as much beer as before, but there are fewer people now,” he tells 15min.

Marius Horbačauskas, CEO of Kaunas-based Volfas Engelman, says the summer was not generous to his company either, even though it managed to increase its market share from 11 to 14 percent. Exports – mostly to the UK, Germany, Poland, Russia – have almost doubled.

Taste trumps price

Lithuanian brewers are witnessing growing competition from foreign brands. According to Statistics Lithuania, total imports of alcoholic beverages have grown by one fourth. Much of it came from Belarus – the country's biggest brewery, state-run Krinica, produces beer with Lithuanian labels. Over the last three years, its market share has grown from zero to three percent.

Rimi supermarkets sell beers from other European countries, Mexico, Turkey, even the Philippines and Japan – these account for almost 30 percent of all beer sales. The share of imported beers, mostly from Russia and Germany, in Maxima stores accounts for over one fifth. Norfa shelves store 15 percent of foreign beers, up from 5 percent last year. Among most popular beers are German, Russian, and economically-priced Belarusian brands. Only two percent of beer sold in Iki is foreign, but the share is growing.

The Brewers' Guild commissioned a poll which showed that 86 percent of beer drinkers are faithful to local brands while only 4 percent consistently favour foreign ones.

“Lithuanian beer is more fresh and it is really good,” Galadauskas insists. “By buying Lithuanian beer, a person takes part in a chain of value: some of the money he pays goes to farmers for malt barley. The crops take up about 30 thousand hectares, we use up 75 thousand tons of barley. Then there's also glass and other raw materials. And if he buys imported beer, the profit only goes to retailers and importers.”

Four out of five (pollsters polled 936 people) respondents choose beer primarily for its taste and only one third – for the price. Lithuanians do not exhibit much brand loyalty. In Rimi stores, 40 percent of foreign beer and 30 percent of Lithuanian beer is sold at special offer prices.

Internationally, the most popular kinds are lagers, while ales account for 30 percent of the market. In Lithuania, the balance is even more skewed towards pale lagers – 90 and 10 percent respectively.

Retailers say that consumers' habits are slowly shifting. Even though certain brands continue to dominate top lists, people are looking for variety – they try out foreign brands, unusual tastes, beers from small breweries.

Canned beer is on the rise, too. Over the last five years, its share grew from 13 to 24 percent, while that of beer in glass bottles dropped from 43 to 25 percent. The latter is being pushed out by plastic bottles (51 percent). In many European states, beer is not sold in plastic bottles at all or its share is under 1 percent. In Austria, glass bottles hold 70 percent of the market.

Experimenting left with the little ones

The Lithuanian Brewers' Guild has about 60 members. The three major brewers – Švyturys-Utenos alus, Kalnapilis-Tauras Group, and Volfas Engelman – divide up almost 80 percent of the market. However, beer brewed by the small ones is making a break-through, too, in supermarkets as well as specialized pubs.

“Competition is tough, but they manage to find their consumer,” Norfa spokesman Ryliškis says. Maxima, too, notes a growing market share of small producers.

Brewers' Guild president believes that small breweries should compete with majors by brewing sophisticated kinds of beer and then selling them for a prime price, instead of trying to copy popular brands.

There are about 60 small breweries in Lithuania. The Small Breweries Association (MADA) has five members. Lina Šileikienė, CEO of one of them, Kauno alus, says that small breweries export hardly any of its production. Instead, it is sold domestically, in bars, pubs, and specialized stores as well as major supermarket chains.

“Ours is a loyal customer. We brew exceptional beer of interesting flavours, we follow old traditions of our forefathers,” she says.

Šileikienė regrets the fact that Lithuanian consumers are rather conservative and therefore not easily lured by original beers: “It used to be that people would drink whatever was popular at the time. Now they read what's on the label instead of trusting ads. We try to show off our strength, make people try our beer and return to it again.”

Peak year – 2007

In 1996, Lithuanians drank 37 litres of beer per capita. A few years later, 47 litres and in 2002, 78 litres. Over the years, Lithuanian brewers started offering quality beer, scoring victories in international exhibitions and contests. Over the last decade, beer consumption has grown by 11 percent – from 273 million litres to 305 million. According to the State Tax Inspectorate, the peak year was 2007, just before the onset of the downturn – 322 million litres.

Compared to other European nations, Lithuanians used to lag in the back, but now they are in the middle with about 90 litres per year per capita. Unrivalled beer-drinking champions live in the Czech Republic (160 litres), followed by Irishmen, Germans, and Austrians. Beer consumption has been declining in many countries lately.

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