Carbonates in Azerbaijan
Headlines
·
In 2008, sales increase by 22%
in total current value terms and by 5% in total volume terms, to reach AZN242
million and 207 million litres
·
Carbonates develops in 2008 due
to local product launches, the strong inflow of Georgian and Turkish offerings,
and the consumers’ support for added-value products
·
In 2008, low calorie cola
carbonates records the highest sales growth of 14% in total volume terms and
41% in total current value terms, although value sales are exaggerated by the
rapidly increasing inflation rate
·
The average unit price
increases by 7% in off-trade current value terms in 2008
·
In off-trade volume terms,
multinationals Baku Coca-Cola Bottlers Ltd and Mars Overseas Baku Ltd TSAZ lead
in 2008, although the category is competitive with local, Russian, Turkish,
Georgian, Ukrainian, and Latvian brands
·
Over the forecast period,
carbonates is expected to grow by an 8% total volume CAGR and an 11% total
constant value CAGR
Trends
·
In 2008, many new brands were
launched, mainly in the non-cola, and “other” non-cola carbonates category.
Georgian brands, Natakhtari, Kazbegi and Lagi, expanded their presence by
establishing solid distribution networks, higher fruit content and competitive
pricing strategies. Moreover, in 2007-2008, there were launches of new products
by the leading players: Fanta World Braziliya Citrus by Baku Coca-Cola Bottlers
and Mountain Dew by Mars Overseas Baku Ltd. Additionally, consumers are
increasingly keen on added value products, such as carbonates with juice
content or based on natural ingredients. Kvas, especially by Russian and
Latvian manufacturers, is popular due to the consumers’ trust in its quality.
·
Total volume sales grew by 5%
in 2008, slightly down on the review period CAGR. This slowdown in growth was
largely due to the saturation carbonates and unit price increases.
·
Overall, carbonates’
development was largely driven by the inflow of new brands and products in
non-cola carbonates which included a wide assortment of various fruit, vanilla,
and combination flavours, added juice content and kvas. Orange carbonates and
lemonade/lime remained among the most popular flavours in 2008 with key new
launches of locally produced products.
·
In 2008, the off-trade channel
continued to witness a variety of carbonate formats. The most active
development was witnessed by carbonates in 0.5-litre packaging, as these are
most suitable for impulse purchases and on-the-go consumption, particularly
during the long summer in Azerbaijan. The high number of new product launches
and rising consumer income stimulated off-trade value growth of 11% in 2008.
·
In 2008, on-trade volume sales
of carbonates grew by 6%. This growth rate was derived from the fast
development of foodservice outlets in Azerbaijan in the form of pubs, bars,
restaurants, wedding houses, fast food outlets, and hot dog carts in parks at
the end of the review period. These foodservice operations significantly
boosted on-trade consumption. However, on-trade volume sales remained quite low
accounting for 52 million litres and a 25% share of total volume sales in 2008.
·
Fountain sales in Azerbaijan
continued to expand and in 2008 on-trade volume sales reached 10 million litres,
mainly through Coca-Cola, Fanta and Sprite. This development is largely
attributable to the expansion of McDonald’s and Chudo Pechka. Overall, fast
food restaurants played a major role in the sales growth of fountain sales of
carbonates, as people enjoy socialising with friends and family in such
outlets, particularly at McDonald’s.
·
The average unit price of
carbonates increased by 16% in total current value terms in 2008. This growth
was largely attributable to the rising inflation rate in the country which, in
turn, affected the price of raw materials need to produce carbonates.
·
Overall, consumers of
carbonates in Azerbaijan are not limited by age or income. Nevertheless, the
main audience is largely comprised of children, teenagers and young-to-middle-aged
consumers. The older generation tends not to trust carbonates, assuming that
they are manufactured from artificial ingredients and chemical additives. These
products are most commonly consumed at home (especially during holidays or
family occasions) or outside while walking in the park. The consumption of
carbonates in Azerbaijan has no specific seasonal framework, however, during
cold weather, its consumption normally diminishes and it is usually consumed
during family or state holidays or special events.
·
In Azerbaijan, 0.5- and 1-litre
plastic bottles are the most common pack types/sizes, however non-cola
carbonates such as Gulustan and Khayal packed their products in 0.5-, 1- and
1.5-litre plastic bottles. At the end of the review period, alongside small
packages, Mars launched 7-Up, Diet 7-Up, Pepsi, and Mirinda in 2.25-litre
plastic bottles. Pepsi, Fanta, and Mirinda carbonates in 330ml cans are mostly
consumed by children and teenagers. More and more teenagers and 20-25-year-old
consumers are purchasing carbonates in cans despite this pack type being more
expensive than plastic bottles.
Competitive Landscape
·
Coca-Cola Bottlers Ltd led with
a 30% share of off-trade volume sales in 2008. Followed by Mars Overseas Baku
Ltd TSAZ. In 2007, Mars introduced the new Mountain Dew brand in 0.5- and
1-litre plastic bottles to attract family and on-the-go consumption. Moreover,
the company is recognised by the quality of its products through years of
activity. Coca-Cola was the leading brand with a 16% share of retail volume
sales in 2008, and it also benefited from high consumer recognition due to its
long history in the country.
·
Lomisi Ltd experienced the
highest increase in off-trade volume sales in 2008, growing by 67%. This growth
was the result of the large penetration of Georgian carbonates, as these
products are trusted in terms of quality and taste. The largest decrease in
off-trade volume sales in 2008 was 79%, recorded by Shollar, which is mainly
active in bottled water.
·
Most carbonates are manufactured
domestically. In general, the category is competitive with Turkish, Georgian,
Ukrainian, Russian and other imported brands, alongside the multinational
brands of The Coca-Cola Co and PepsiCo Inc, produced by local subsidiaries,
Baku Coca-Cola Bottlers Ltd and Mars Overseas Baku Ltd TSAZ, respectively. In
non-cola carbonates, the sales performances of domestic and international
brands are based on the fruit flavours offered by brands. Overall, players tend
to succeed only if they remain competitive in terms of the quality of their
offerings and pricing and by developing a diverse product assortment in terms
of fruit flavours.
·
The key new launches in 2008
were Fanta World Braziliya Citrus by Baku Coca-Cola, Mountain Dew by Mars,
Georgian brands, such as Kazbegi and Lagi, and Natakhtari which launched its
carbonates in plastic, and glass bottles. These brands all benefited from new
launches in terms of off-trade sales. Additionally, the local producer Golden
Water MMC launched Lider cola and lemonade products in 2007-2008. Kazakhstan
Fanta by Koka-Kola Almati Bottlers TOO SP launched in cans also had an impact
on the category. Fanta-lovers, especially teen-agers, were pleased to drink it
from the can, which is also cheaper compared to Fanta sold in glass bottles.
·
In 2008, the key TV advertising
campaigns supported the Coca-Cola, Gulustan and Khayal brands. Gulustan
launched a competition, with the image of the prize shown on the inside of the
cap closure. Moreover, Coca-Cola was advertised on street billboards and
in-store posters. Natakhtari and Fanta were also advertised via in-store
posters.
·
Fanta was introduced in moulded
plastic bottles, which make it easier to handle, especially for large bottles,
while pouring. Overall, plastic PET bottles was the main pack type for
carbonates in Azerbaijan.
·
Carbonates consists of products
in various price segments. Mixers, juice-based carbonates, imported products
and kvas are usually more expensive than non-juice-based alternatives and
domestic brands. Key local brands normally utilise point-of-sale displays in
stores. Overall, all types of carbonates are usually on offer in stores.
Higher-priced varieties are frequently chosen by better-off consumers, as they
are less affected by price.
Prospects
·
Over the forecast period,
carbonates is expected to grow by an 8% total volume CAGR, an improvement on
the review period performance. The rapid inflow of new brands will continue in
the short-to-medium term. Mars and Baku Coca-Cola are forecast to expand their
offer of carbonates in metal beverage cans.
·
It is expected that products
with natural ingredients, essentially juice-based carbonates from Russia and
Ukraine, will grow in popularity. Natural ingredients and the presence of added
vitamins will increasingly appeal to consumers in Azerbaijan. New local
manufacturers use packaging labels to promote the natural contents of their
products. The competition is expected to intensify, as Russian, Georgian, and
Ukrainian manufacturers expand their offer of carbonates based on natural
ingredients.
·
Overall, no major threat to
forecast growth is expected, however, the demand for fruit/vegetable juice and
flavoured bottled water could have an impact on sales.
·
Low calorie cola carbonates is
expected to register the fastest sales growth over the forecast period, by an
18% total volume CAGR and a 21% total constant value CAGR, since added-value
carbonates are expected to enjoy high demand. The main rival to low calorie
cola carbonates is fruit-flavoured carbonates.
·
Over the forecast period,
carbonates players will offer products in all price segments. Consumers will
remain price sensitive and price will remain a key factor in the purchasing
decision. Due to the inflow of new brands and products, discounting/price
competition is likely to limit unit price increases and restrict margins.
·
The new products launched in
2007-2008 are expected to perform well in the short term. Fanta’s new product
and Mountain Dew are forecast to stay longer on retailers’ shelves. New kvas
products are expected to enjoy success, since they satisfy the demand for
healthier drinks. In response, other manufacturers might broaden their ranges
by offering additional fruit flavours or combination of fruits, invest in wide
advertising campaigns and/or launch carbonates with natural ingredients during
the forecast period.
·
No major company activity is
expected over the forecast period.
