Brewers cautious despite growth in 2012

Good summer weather and sports events were the main factors which pushed up the beer market by 7 percent in 2012 compared to the previous year, while purchasing power showed and continues to show no sign of improvement. Brewers are not optimistic about 2013 given that a recent 10 percent excise tax hike could bring not only a market drop but also losses in other areas of the Romanian economy, they warn.

By Simona Bazavan

Romanians drank 18.2 million hectoliters of beer in 2012, up 7 percent y-o-y but still below the record level of 20.2 million hectoliters in 2008, according to data released last week by the Brewers of Romania Association whose five main members – Bergenbier, Heineken Romania, Romaqua Group, United Romanian Breweries and Ursus Breweries – account for over 90 percent of the beer sold in the country. The companies reported a 6.5 percent increase in sold volumes last year (16.6 million hectoliters). In value, the market reached some EUR 1.7-1.8 billion in 2012.

However, despite this growth, brewers are not confident the momentum will be maintained this year. “Although we saw an upward trend in beer consumption last year, we are cautious regarding this year’s evolution. The factors which have influenced the 2012 growth were contextual and this is why we consider it premature to speak about a positive trend on the long run. Romanians did not have more money to spend in 2012 compared to the previous years in order to boost consumption,” said Andrew Highcock, the association’s president and also president of Ursus Breweries. Last year’s hike was mainly generated by sports events such as the Olympics and the Europa League final as well as warm weather during the summer months when brewers sell the most beer.

Moreover, after the excise tax for beer went up by about 10 percent this February on top of another 5 percent increase, beer industry representatives are even more cautious about their prospects in 2013 given that purchasing power shows no sign of improving. And while Romanians like the amber nectar – they drank 90 liters per capita last year, putting the country in sixth position in Europe behind the Czech Republic, Austria, Germany, Lithuania and Poland – they have to work on average 24 minutes to be able to afford a liter of beer, whereas the European average is only five minutes.

“If we have the same favorable factors boosting beer consumption – hot weather during the summer months and cultural and sports events – there is a chance that the local beer market will report a similar volume to last year,” Constantin Bratu, general director of the Brewers of Romania Association, told BR. In other words, if these two factors compensate for the excise tax increase, the market will stagnate, this being the best case scenario advanced so far. However, anything can happen, and a market contraction is not out of the question.

With 98 percent of the beer drunk in Romania being produced locally, should consumption go down following the price increases generated by a higher excise tax, it is not only the brewers who will be affected but the entire economy, the industry warns.

“We hope this change will not have an overall negative impact on the market and producers won’t be forced to find other means besides price increases (e.n. such as layoffs) to survive,” added Bratu.

The association’s members say they have invested EUR 1.2 billion locally since the Brewers of Romania was set up in 2004. Each year the industry purchases goods and services worth EUR 500 million and employs over 4,250 people in the 12 beer factories operated by the companies’ part of the association. Overall, however, the sector has created a total of 76,000 jobs locally, as for every employee working directly in the beer industry, another 13 jobs are generated elsewhere, in agriculture, distribution, transport, retail and sales.

Additionally, taxes already represent a large percentage of the price of a beer, brewers complain. About half of the sum a drinker pays for a bottle of beer is accounted for by taxes, the industry having generated some EUR 2 billion for the state budget since 2004 and about EUR 283 million last year alone. Overall, the beer sector contributed 60 percent of all the excise tax revenues collected by the state for alcohol products, twice the European average. These data show that the beer industry makes a significant contribution to the Romanian economy but the added value created in the economy and the tax revenues generated to the state budget are directly linked to the market’s size and thereby the final consumption, said Highcock. Instead of putting more pressure on good taxpayers – the industry claims to report zero tax evasion – the government should instead increase tax collection by effectively fighting tax evasion in the spirit sector, he recommended.

Stimulating the beer market with an adequate fiscal policy instead of simply hiking the excise tax would definitely bring better results for the industry, the economy and the state budget, stressed Bratu. He added that after the recent 10 percent hike, the excise tax reaches EUR 0.822 per hectoliter multiplied by the Plato factor, up from EUR 0.748 per hectoliter. By comparison, in Germany, the country where the average consumer has to work only 3.7 minutes in order to purchase a liter of beer, compared to 24 minutes in Romania, the excise has remained unchanged for the past 15 years at EUR 0.787 per hectoliter.

PET preference

In terms of the packaging preferred by Romanian consumers, 2013 has not brought considerable changes. Because of its good volume/price ratio, PET continues to account for the majority of the volumes sold locally and went up by 1.2 percent last year to a total of 52.5 percent of the market. Ever since this packaging type was introduced in 1998, the market has grown considerably, rising from about 7.7 million hl that year to the record 20.2 million hl reported in 2008, said Bratu. PET is followed by the bottle with 28.2 percent (down 2 percent y-o-y), can with 15.8 percent (up 1 percent y-o-y) and draft, which accounts for 3.5 percent of the market (down 0.2 percent y-o-y).

simona.bazavan@business-review.ro

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