Aug 22

Biggest companies of Ukraine – alcohol industry

DELO publishes the sector ratings of the biggest companies of Ukraine, compiled by the TOP-100 magazine. The companies were ranged according to the net revenue in 2010.



While Ukrainian vodka manufacturers were conquering the neighboring and remote countries, the potential and volume of national market let Ukrainian winemakers concentrate on local activities. “Ukrainian expansion hasn’t yet happened – right now we are witnessing its beginning,” says Volodymyr Demchak, the President of Ukrainian Commerce Confederation. “There was no sense in entering foreign markets, while the local one was still little saturated. But now it is high time for us to expand to the world market, and the reason is quite simple – its potential and purchasing capacity.”

The previous year was not a very favorable one concerning the activities of Ukrainian alcohol manufacturing companies. Unfavorable weather conditions caused the critical small yield of grapes, as well as the growth of prices for wine materials. Also, the low purchasing power, which still is not growing notwithstanding the possible overcoming of the economic crisis, didn’t allow compensating the cost value with the help of adequate prices rise. And the most disturbing factor is the prices for Ukrainian and imported alcohol products reached almost equal prices, which was partly caused the importation regime liberalization.

Imported goods at the gate

Traditionally, the maximum volume of alcohol products are imported to Ukraine from the CIS countries. To certain extent, this happens due to the free trade agreements between traditional wine manufacturing countries like Moldova and Georgia. But notwithstanding the wide presence of these countries’ products in Ukrainian market, they didn’t manage to sufficiently press Ukrainian manufacturers. Even the unprecedented marketing activities and promotion costs the Georgian manufacturers of wine and cognac undertook didn’t help them increase their supplies to Ukraine in order to compensate their losses from the fact Russian market had become closed to them. The main reason of fiasco is high price of the imported products, as well as strong positions of the local market players.

Yet, the players of Ukrainian alcohol products market anticipated the year of 2011 with a shade of caution. Namely within this year the considerable breakthrough of imported products into Ukrainian market could happen. As of January 1, 2011 Ukraine cancelled the importation duty for alcohol (earlier, the duty amounted to 10% for 1 liter of 100% alcohol), vermouth, wine with fruit extracts (previously, EUR 1 for 1 liter), cognac, liqueur and fruit liqueur (EUR 3.5 for 1 liter of 100% alcohol). This was the second – and the most considerable – decrease of importation duties from 2008, when the rate of alcohol and alcohol products duty was dropped half.

Though this duty cancellation didn’t touch the wine, the very fact of broadening of imported alcohol products presence in Ukraine infringed upon their interests. Yet, for half a year which passed from the moment of the tax burden change, the market showed no evidence of considerable changes in terms of imported products volume. Experts explain this happened because the imported are just in the process of market probing, and the expansion itself is still to come.

While the negative prognoses concerning the importation volume growth appeared to be not true, the indexes of national wine production are disturbing. From the very beginning of 2011, the statistics evidence its rapid decrease. The consumption rate was stable, but the Ukrainian production volume began falling suddenly. In April 2011, when compared to April 2010, production of wine was reduced by 43.8%, or 1.24 million decaliters. In May, the decrease was even more considerable — production of wine reduced by 51.5%, or 1.44 million decaliters, in comparison with May 2010. Total reduction of production volume amounted to almost 40% in 2011.In January-May 2011, when compared to January-May 2010, production of wine decreased by 39.9%, or 4.42 million decaliters — to 6.66 million decaliters. At the same period of the previous year the wine market showed steady growth — in 2010, when compared to 2009, production of wine grew by 27%, or 6.19 million decaliters, and amounted to 2.91 million decaliters.

Together with the objective factors, which could explain such considerable reduction of production volumes (decrease of raw materials volume, rise of cost price, low purchasing power), the experts admit such reduction was formed as a result of comparison of the industry work in 2009, which can become overestimated. “Possibly, this decrease in figures is just a result of somewhat exaggerated data concerning the previous periods. There was some doctoring in the reports, and now they try to level them”, Volodymyr Demchak says. “That is why the present figures are no decrease, but rather a more or less adequate reflection of the situation in the market”. According to the opinion of one of market players, the statistics data of the previous year turned out to be higher than the real ones, this resulting from an attempt to hide the off-the-books sales/resale of ethyl alcohol.

 

Europe is waiting

Within the negotiations of the free trade zone, European authorities decided to provide unconditional access for Ukrainian alcohol products to European market, which is the indirect indication of the fact Ukrainian winemakers are still not considered to be full-fledged competitors in European countries. It should be reminded that concerning the Ukrainian products having potential in the European market, the EU has a completely different behavior — it restricts importation with the help of quotas, or even retracts the products from the regime of free trade. This has already happened to the confectionery industry products, some agricultural products and meat. “They don’t have any of such limitations for wine,” Volodymyr Demchak states. “Some discussions appeared only concerning competence of the use of geographical names”.

Namely this short-sightedness of the Europeans can be utilized by Ukrainian manufacturers. Many of them have already begun promotion of their products abroad. “Our wine is represented in a shop next to Harrods. It is also sold in the restaurants of Bordeaux – one of the centers of French winemaking”, says Ivan Plachkov, the co-owner of Colonist plant (Colonist TM). “Our wines were represented at the conference of the Institute of Adam Smith, too”.

According to Plachkov, the company does not waste much for direct advertising, yet Colonist is one of the initiators of Wine Fest festival in Kyiv, and its sponsor as well. One of the aims of the festival is formation of the image of Ukraine as the country having rich winemaking traditions. “We have to work for our reputation, if we want to sell our wine with its price and quality equal to Italian and French ones” Volodymyr Demchak underlined. “But to succeed in this, a consumers should have a possibility to compare the products, meaning Ukrainian wine should be in the shelves next to Italian and French one”.


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Источник: ДЕЛО


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