Soft Drinks in Azerbaijan
Executive Summary
Price Increases, High Demand, New Brands and Dynamic Growth in Soft Drinks
The overall
performance of soft drinks was characterised by strong total volume and value
growth in 2008. Almost all categories received a strong inflow of new brands.
Soft drinks experienced unit price increases, causing strong retail value
growth. A huge price increase was recorded in fruit/vegetable juice, affecting
imported and local brands, and creating the demand for the newly launched Jale
brand by Qabala Meyva Emali Muessisasi, a subsidiary of the local giant, Gilan
Holding MMC. The new brand has an economy positioning, though it is a high
quality offering available in a variety of packaging. Carbonates and bottled
water were driven by the constant inflow of brands and fierce competition.
Energy drinks welcomed new brands, however Pfanner and Red Bull remained the
biggest-selling brands, with the latter investing heavily in advertising
campaigns. Pfanner Ice Tea, Lipton Ice Tea and Nestea Ice Tea remain the
leading brands in RTD tea. Traditional kisel brands regained its popularity
with brand names that are active in herbs and spices (Pripravich, Cykoria),
helping to revive powder concentrates.
Substantial Price Increases in Fruit/vegetable Juice
At the end of
the review period, fruit/vegetable juice experienced substantial price
increases in terms of imported and local brands. Within this environment, the
newly-launched local Jale brand turned out to be cheaper than other brands.
Jale immediately adhered to the main trends in packaging, and won the
consumers’ preference through taste, and heavy investment in advertising
campaigns through TV, billboards and posters. In order to survive the high
price increase environment, two local giants, SAF and Sonti brands, merged to
create Azeri Fruit Co, aiming to enter the international market with the new
Azeri Fruit brand.
Financially and Structurally Strong Players Create Competitive Environment
Local brands
with high sales shares exist in the leading categories, such as cola
carbonates, fruit/vegetable juice and bottled water. With continuous industry
development, there has been a redistribution of shares among these local
brands. Additionally, in these categories, locals compete with Russian,
Turkish, Georgian, Ukrainian, German, Belarussian, and Moldovan brands.
Throughout the year, the brands of small manufacturers appear and then quickly
disappear, unable to sustain their offerings in the strong competitive environment,
created by financially and structurally stronger competitors. RTD tea and
coffee, concentrates and energy drinks lack the presence of local brands, and
established imported brands dominate and new entries struggle to gain the
acceptance of consumers.
Consolidation of Existing Distribution Channels
By the end of
the review period, the main distribution channels remained supermarkets
discounters and independent small grocers. (Hypermarkets are not yet present in
Azerbaijan.) The Sevimli Dad chain (“other” grocery retailers) also developed
gradually. “Other” grocery retailers also includes small mobile refrigerators,
mainly in parks, squares and streets, kiosks selling only carbonates, bottled
water and fruit/vegetable juice in small packages and bottles. The role of
forecourt retailers has gradually increased, however, the concept of purchasing
soft drinks from petrol/gas/service stations is underdeveloped. Some bakeries,
particularly newly opened ones, sell bottled water, Coca-Cola, Fanta, and Sprite.
Bottled water was also distributed by direct selling, mainly through office
delivery. Although supermarkets recorded a large increase in sales in most
categories, independent small grocers continued to lead in terms of retail
volume sales in 2008.
Volume and Value Sales To Continue Strong Growth
Over the
forecast period, soft drinks in Azerbaijan will continue to register strong
total volume and value sales growth. Carbonates, concentrates, and energy
drinks will record faster total volume growth compared to the review period.
Carbonates will see faster volume growth, mainly due to non-cola carbonates,
while energy drinks’ appeal will be driven by the concept of healthy living.
The predicted growth of liquid concentrates is attributable to the influence of
the Lipton brand. Powder concentrates will be influenced by the sales of kisel
brands which have been popular at least since Soviet times. However,
carbonates, bottled water, and fruit/vegetable juice will remain the leading
categories and price sensitivity will continue to be essential in terms of
brand choice.
Fountain Sales
Trends
·
In Azerbaijan, fountain sales,
mainly carbonates and fruit/vegetable juice, are available through bars, pubs,
fast food outlets such as McDonald’s, and the Chudo Pechka bakery chain.
Fountain sales started to be widely available from 1999. Since there are no
convenience stores in Azerbaijan, all fountain sales are concentrated in
foodservice outlets.
·
In the context of the review
period, overall on-trade volume growth was slower in 2008, largely due to price
increases and higher sales of soft drinks from off-trade outlets. Carbonates
(mainly Coca-Cola, Fanta, Sprite) is the largest category in terms of fountain
sales.
·
In fountain sales, the leading
soft drinks companies in Azerbaijan are Chudo Pechka, which has seven outlets,
and McDonald’s Azerbaijan LLC. McDonald’s has four outlets in Baku and a fifth
one is planned on the outskirts of Baku. No fast food players are as deeply
established in the country as McDonald’s, although attempts have been made by
American Fast Food and Turkish Mudurnu Chicken from 1999. However, they failed
to withstand the competition and disappeared. Besides these outlets, small
fountain sales exist in bazaars, however, they are less trustworthy in terms of
hygiene and water source, although the authorities control their activity from
time to time and uncover violations.
·
Since all fountain sales
establishments are concentrated in the capital city, Baku, the key consumers
are mainly drawn from this area. McDonald’s offers outlets where family and
friends can socialise and is a popular foodservice option. However, during the
hot summer months, eat-in bakeries are frequented by consumers looking for a
glass of cola, or non-cola carbonates with fruit syrup, which retails at around
AZN0.20.
·
Carbonates (Coca-Cola, Fanta,
Sprite) is expected to register the fastest on-volume growth through fountain
sales over the forecast period, while fruit/vegetable juice and bottled water
are expected to register slower volume growth compared to the review period.
Chudo Pechka and McDonald’s and small- or medium-sized bakeries are expected to
drive fountain sales. Since McDonald’s and Chudo Pechka are expanding, no major
threats to forecast growth are expected. However, at the end of the review
period, McDonald’s announced through the mass media that it is going to raise
product prices, as it is unable to make a profit without price increases due to
the inflation rate environment in Azerbaijan. Meanwhile, energy drinks,
concentrates, RTD tea, and RTD coffee are very unlikely to appear as fountain
sales, since these categories are still not widely developed through the
off-trade channel.