Ceepackaging

Analysis

Beverage market expanding due to CEE

The European beverage industry meets again in the Exhibition Centre Nuremberg from 15-17 November, when BRAU Beviale 2006 impresses once more with the charisma and emotionality of an unusual industry get-together. On board this time are a good 1,400 exhibitors with raw materials, technologies, logistics and marketing ideas. Over 37,000 visitors are expected, who travelled to the last event from Germany, Austria, Switzerland, Belgium, France and the countries of Central Eastern and Eastern Europe. A special show for the logistics segment closely examines the supply chain from beverage producer to sales to show the optimization potentials here. The variety of European beers is reflected once again by the European Beer Star, which will also be awarded at the coming BRAU Beviale. It is hoped to beat last year’s record number of entries of 400 beers from 23 nations.

It’s easy to say we are all Europeans, but what justifies this collective “we”? A language? A tradition? A history? As if the different experiences and memories of the 425 million people who have lived in the enlarged single European market since May 2004 had not marked their respective conditions. Nevertheless, we are all Europeans with a past that unites us, but in many cases also separates us. What unites us is the European market, which makes us half a billion consumers. Do the international beverage and trading concerns now only think in terms of the “European consumer”? 
 
Communicating lifestyle, personality and success through consumption  
In studies of consumers from 16 countries in the united Europe in 2005 (including such apparently different nations as Great Britain and Bosnia Herzegovina), the market researchers at the Gesellschaft für Konsummarktforschung (GfK) could only isolate eight different lifestyle types, the so-called Euro-Socio Styles®. Namely, all European consumers share the same desire for a good life and more consumer spending, which is why companies in the beverage industry must base their market processing on innovations or replacements. The market performance of strong-growth and high-yield companies is distinguished by permanent innovation. This makes it possible for them to keep competitors at bay, secure submarkets or open up new markets. To enable them to utilize the long-term demand boom in the markets of Central Eastern Europe, BRAU Beviale offers exhibitors and visitors an ideal forum where they can determine and cover their requirement for innovative products, packaging and technologies in these markets. Beverage specialists from the countries of Central Eastern and Eastern Europe had already discovered BRAU Beviale long before EU enlargement. Some 4,000 experts from countries such as the Czech Republic, Poland, Hungary, the Slovak Republic or Russia source information at the industry get-together in Nürnberg every year. 
 
The homogenization of consumer requirements is certainly attributable first to the different historical development in Western and Central Eastern Europe. According to GfK, consumers in Central Eastern Europe are striving to achieve a West European level of consumption. This is why 42 per cent of consumers in Central Eastern Europe wish to raise their consumer spending (55 per cent in Poland, 24 per cent in Romania). The possibility of communicating personality, lifestyle and success through consumption, which ultimately nurtures the demand for brand products, is opened up by an appropriate level of income. According to InBev, the markets of Central Eastern Europe can already be divided into two development clusters: the mature markets of Poland, the Czech Republic, Hungary, the Slovak Republic and Slovenia with a Gross Domestic Product (GDP) of between 6,000 and 14,000 EUR per inhabitant and the emerging markets of Romania, Bulgaria, Turkey, Croatia, Bosnia-Herzegovina, Serbia & Montenegro, Kosovo and Macedonia with a GDP of between 1,000 and 3,000 EUR per inhabitant. 
 
The homogenization of consumer requirements in the named “mature” markets of Central Eastern Europe is, however, also largely due to the desire for expansion of the “Western” trading chains like Metro, Spar, Tesco and Lidl. A publication by the corporate consultant ATKearney shows that only the EU markets of Slovenia, Latvia and the Slovak Republic are among the top 10 countries in the Global Retail Development Index 2005 (an indicator of undeveloped market potential), but not Poland, the Czech Republic or Hungary. The trading chains regard these three countries as long since saturated. The top 5 Western trading chains have a market share of over 60 per cent in Hungary. This is not the case for the first three countries named. Moreover, Slovenia tempts with an average income (GDP) of 14,000 EUR (DB Research) and hence a host of consumers with high spending power, who are determined to show their lifestyle with the aid of appropriate brand products. When the East European markets of Russia and the Ukraine occupy 2nd and 3rd place in the ATKearney ranking, this indicates a – still – low market concentration (in the case of Russia, the top 3 trading chains hold a market share of less than 9 per cent), but also the necessary urgency. Trading companies from the discount segment have had Russia and the Ukraine on their radar screens for a long time. 
 
Winning types: Premium and discount  
Appearance may be deceptive, but beer has been voted the national drink in Europe in the past years. Because the GDP growth in the countries of Central Eastern Europe was always accompanied by rising beverage consumption, even the average European consumption of beer has increased by over 2 per cent per year since 2000 and is now 66 litres. The fact that most countries are far above this quantity, despite the statistical “runaways” France (32 l), Greece (40 l), Italy (31 l), Norway (56 l), Spain (55 l) and the Ukraine (45 l), is probably an indication of the enormous popularity of beer in the important age group of young adults (18 to 38 years) – and this European-wide. The market researchers from Canadean assume that beer consumption in Europe will grow by at least 1.8 per cent per year until 2010. The decline in countries such as Germany is more than compensated by the uninterrupted growth especially in the markets of the Ukraine and Russia. Two segments in the price structure will develop to an above-average extent: the premium segment and the discount segment. The low-cost segment grew by 5.4 per cent on a European-wide basis in 2004 – tendency persistent – to reach 15 per cent of total beer consumption. The premium segment expanded by an average 4 per cent to over 20 per cent of total beer consumption in the same year – tendency also persistent. The following figures support the theory that consumer behaviour has become similar in Western and Central Eastern Europe: For example, the consumption of premium beers in 2004 was 17 per cent in Bulgaria, 20.3 per cent in Hungary, 19.7 per cent in Lithuania, no less than 28 per cent in Russia, 30 per cent in the Slovak Republic and even 14 per cent in the Ukraine, in contrast to only 10 per cent in Germany (Canadean). 
 
These trends are not random, but controlled. The marketing of the international breweries in Central Eastern Europe was focused right from the start on the right mix of a brand portfolio of local beer brands, global premium brands, tactical starter-price brands and the corresponding pricing, so that a profit margin of 20 per cent (2004) could be aimed for, as in the case of SABMiller. In line with the motto of “1. Create, 2. Build, 3. Expand”, global premium brands have been systematically established and new products introduced and accompanied by the relevant packaging and merchandising innovations. Many of today’s popular beer brands in Central Eastern Europe are therefore new launches of products because only these help the breweries to ensure the necessary continuous growth of profits. 
 
One may well have reservations about the term innovation that is so often overused in business jargon, but the markets of Central Eastern Europe nevertheless provide proof of three theories: that innovations are a) essential and b) to be planned. Contrary to the often encountered opinion that innovations or replacements are not the result of random brainwaves or brilliant thinking, but of step-by-step implementation of rules, which must only be applied systematically to achieve the relevant success. Finally, the most important thing: The example of Central Eastern Europe teaches us that innovations also have something to do with democracy. As paradoxical as it may seem, what is worked out in secluded boardrooms or research laboratories is in the end open, understandable and comprehensible for everyone. This is also the reason for the importance and necessity of international trade fairs like BRAU Beviale. They make progress democratic – and cross borders.