Market Analysis for Beer on the Romanian Market

Thousands of years ago, people discovered that by means of cereal fermentation they obtain a
nourishing and tasteful drink, namely the beer. The mass beer production on the Romanian
territory goes back to the beginning of the 19th century, when Johann de Gotha inaugurated a
beer factory, in 1809, just outside of Bucharest. Very soon, the beer house became an
institution and most of all, a meeting point for journalists, politicians or artists.
Over the past 10 years the brewing industry had a positive trend in terms of quality, diversity of
brands and production. This evolution was possible thanks to the ambitious policies of foreign
investors that led to an increased competition on the domestic market.
Romanian beer is known in Central and Eastern Europe for its taste and very low price.
Romanian law considers beer and wine to be foodstuffs and therefore they are not subject to
the usual tariffs and restrictions imposed upon alcoholic beverages. As a result, there are over
65 major beer brands in Romania, and many small, local producers.

1. Market capacity
Beer addresses to a large segment of consumers. Any lover of beer over 18 who appreciates
tradition and authentic values will appreciate the fine-brewed beers.
The beer market covers:
Absolute Nonconsumers - that will never buy beer, they have a fairly low percentage,
around 9%. This category includes persons who are forbidden to drink alcohol or to
smoke (e.g. on religious grounds).
Relative Nonconsumers - who would consume the product, but for some reason they
dont do it: either lack of money or that they do not know the taste of beer (e.g. children).
The percentage is around 13%.
Effective Consumers - people who drink beer. According to the Brewers Association
Statistics 78.67% of the total population consume beer. The biggest consumers of beer are
young people under age 30 and people over 60 years.
The number of potential consumers of beer in 2015 was 16.000.000.

There was an increase of the beer market by 6.5% in terms of volume in 2015, reaching a
total sales volume of 15.8 million hectoliters, the Brewers of Romania association said. In
the last years the beer market declined by 16% compared to 2008, the year when the beer
sales volume reached a maximum quota of 20.2 million hectoliters.
The beer consumption per capita in 2015 recorded a value of 80 liters and the consumer
preferences regarding the packaging of beer was: PET - 49.3%, bottle-31,7%, can-16% and
draft - 3%.
The main distribution channel of the beer remains the retail market. According to market
research, through the retail market, there are sold the four multinational beer brands, which
represented 90.4% of the total beer sales. Both in terms of volumes, as well as values, the
main channel of retail distribution remains the one represented by the grocery store. These
locations experienced 41.2% of volumes sold throughout retail market. Large grocery stores
had a sales rate equal to 9.7% by volume component and 8.6% on the value. Kiosks and
general stores have reached a volume of 13.6% of the market, while the value was of 12% of
the total sales of beer. Hypermarkets have reached a holding of 11.8% of volume component
and 9.5% on the value. Other types of stores have made 23.8% of sales volume of beer on the
retail chain and 34.3% of the total values.
At this point the five companies members of the Brewers of Romania Association reached
a total volume of 15.3 million hectoliters, with 4.4% less compared to 2010, and offer a total
of over 4100 jobs in the 10 beer factories located in several cities all over the country. The
beer industry generates a total number of 96 400 employees, in its factories and also in
related sectors such as hospitality, retail, suppliers, and distributors.
Timisoreana has 4 plants in Cluj, Timisoara, Buzau and Brasov. Each of the four cities where
they have factories has their own distribution system and focuses on areas in the immediate
vicinity. Beer consumption is higher in the cities with factories, and the brand loyalty is also
higher there because people feel the beer as being local and not national.
Timisoreana sales reached 2.8 million hectoliters. Calculating the annual average price of a
liter of beer in 2015, Timisoreana shelf achieved sales of around 220 million euros. At the
same time, Timisoreana had a 15% market share, according to representatives of Ursus
Breweries. This means that in the last year, Timisoara has won more than 3% of the market.
2. Market structure
Main customer segments of the product/service market and characteristics of the buying and
consumption behavior:

"Beer is a national industry, the most recent statistics showing that 99% of beer consumption
in Romania is covered by domestic production," said Association President "Brewers of
Romania", Jan van Karnebeek Derck.
Segmenting consumer markets:
Demographic segmentation:
Regarding the gender, men are consuming more beer because they associate it with
football.
According to the age, it appears that most beer drinkers are aged between 18-44 years
old. After that, their number decreases significantly (61% against 37%).
According to the level of education, 70% of Romanians choose lager. It is followed by
the brown ale, with 14.24% and 1.6% alcohol free. Educated consumers of beer
appreciate at a rate of 66% the light beer, while those with average education at 73%.
People with low incomes or low education have a higher propensity to purchase in stores
while those with high income and high education rather buy from supermarkets,
hypermarkets / cash & carry and convenience stores. But most people buy beer in pubs,
discos and terraces (especially in warm weather).
Regarding the family size, two thirds of those who drink beer are married, and 60% of
drinkers do not have children.
Psychographic segmentation: people with regular incomes and lifestyles prefer beer.
The Beer Manufacturers Association statistics show that the biggest consumers of beer
are business people consuming an average 13.75 liters / person / year. Meanwhile, in the
peasant households four liters of beer are consumed per year, and the employees also
consume annually 8.5 liters of beer per person.
Regarding the place where drinkers enjoy consuming beer, the statistics show that: 51%
of consumers drink bottled beer only at home, 9% prefer drinking beer somewhere else,
and there are still 40% for whom the place does not matter so much, drinking beer at
home and elsewhere.
-

Behavioral segmentation: both people who tend to focus on one product at a time and
persons who are easily influenced by mass-media buy beer.
Consumers surveyed provide details about taste, color, consistency, transparency or foam.
Surprises occur in blind tests when the majority cannot identify their favorite brand after

the features that have previously been described in great detail with the label in front. The
conclusion is obvious: beer brands are emotional.
In essence, beer is a popular and relatively cheap. We want what's best at the lowest price
possible. However, we pay for the brand that resonates with us.
3. Market evolution
The following indicator will be taken into consideration: the average variation rhythm of the
sales value of the product(service) during the period 2012-2015; to determine it use the following
formula:

n 1

Y
Y

n
1

1 * 100

, where:

n- the sales volume in the year 2015;

1- the sales volume in 2012;

n - the number of years taken into consideration

In 2012 we have a volume of 17 million hectoliters sold so this means that aproximately
850,000,000 bottles were sold.
In 2015 we have a volume of 20.2 million hectoliters sold so this means that aproximately
1,010,000,000 bottles were sold.
Calculations:
1,010,000,000 divided by 850,000,000 is 1.1882
n-1 is 3 years one = 2 years
square root of 1.1882 = 1.09
1.09 1 = 0.09
0.09 * 100 = 9 %
The evolution trend of the analyzed market
The Romanian beer consumption decreased with about 11% during the first semester of
this year compared to the same period from last year, the entire beer sector registering a volume
of about 8 million.
Members of Brewers of Romania Bergenbier, Heineken Romania, Romaqua Group,
United Romanian Breweries and Ursus Breweries sold 7,4 mil hl of beer in the first semester of
2015, which means a decrease of about 11% compared to the first six months of 2014, when the
beer sells reached the level of 8,3 mil hl of beer.

how can be explained the evolution of the market in the year 2014 over the previous
year

General economic crisis has affected also the beer market in Romania and led to changes
in habits of Romanians, some of them coming less whichever city and choosing home
consumption option. The Romanians have continued this year to have a conservative consumer
behavior, perspective and deepen of the economic downturn putting more pressure on personal
budgets. However, it is certain that Romanians love beer, while producers in Romania have
shown so far that they have made substantial efforts by strong investments and contributions to
the state budget to maintain the beer sector at high standards and to meet consumer demands as
well, Mr. Jan Derck van Karnebeek, President of Brewers of Romania said.

in 2015 over 2014, the product(service) market have developed crossed, both
extensively and intensively.
Beer, when responsibly consumed is compatible with a balanced and healthy lifestyle and is
enjoyed in a responsible way by the vast majority of consumers. Beer marketing is directed only
at those above the legal purchasing age and is carried out with sufficient regard so as not to
encourage excessive or irresponsible consumption. The provisions of these Rules on Commercial
Communications for Beer are the basis for the assessment of actual activities pertaining to
commercial communications. This allows the brewing industry to develop commercial
communications for beer in a creative manner and in line with brand values such as:

drinking as a pleasurable personal or social experience;

drinking as a social activity, and responsible consumption as a source of enjoyment and

relaxation;

responsible consumption as part of a healthy lifestyle for vast majority of consumers;

drinking should done with moderation;

To maintain consumer confidence, it is in the interest of the brewing industry to ensure that
its commercial communications are properly regulated, so that they are seen to be legal, decent,
honest, truthful and socially acceptable.

4. Product/service supply
In 2016, the Romanian market is dominated by four multinational brewing companies:
Heineken Romania SA, a subsidiary of Heineken International; Ursus Breweries SA, a
subsidiary of SABMiller; Bergenbier SA, a subsidiary of Molson Coors; and United
Romanian Breweries Bereprod SRL (Tuborg Romania), a licensee of The Carlsberg Group.
Together, the four produce or distribute more than 30 brands of beer in Romania. Most of the
international brands are brewed on Romanian soil. Nearly every Romanian bar and restaurant
has a contract or gentlemens agreement with a multinational distributor, ensuring their
customers drink beers brewed or distributed by a single multinational.

The suppliers are those who provide resources necessary to carry normal business activity.
For Romanian beer raw material suppliers are mainly farmers who grow corn, barley, hops
needed in brewing.
In April 2016, the Romanian Competition Council (RCC) published the preliminary results
of its sector inquiry into the national beer market covering the period between 2007 and
2015.

The inquiry reveals that the market is an oligopoly dominated by four big producers with a
cumulative market share of 85-90%. It appears that the main players have put in place a
strategy to enhance their products portfolio on different segments, at the same time cutting
down competitive pressure, while the smaller producers focused their strategy on private
brands for modern retail (hyper/supermarkets).
According to the inquiry, the main distribution channels in Romania are: traditional retail
(convenience stores) with 52% of sales, HoReCa segment with 25% of sales, modern retail
with 15% and cash & carry traders with 8%. Wholesale distribution is mainly carried out
through exclusive distribution contracts recommending the resale price or a maximum resale
price. These exclusive distribution contracts fall under the block exemption regulation.
Consequently, the Competition Council encouraged the two biggest producers with a market
share each of over 30% to assess their exclusive distribution system in order to establish
whether the agreements concluded lead to real efficiency gains, countervailing the reduction
of intra-brand competition.
The development and realization of the brand building strategies are a key competition and a
competitive advantage. Therefore, in order to launch the brands on the market, the
development of the trade marketing capacities in the organization becomes a priority. The
sales force has to be trained in order to observe and approached in the proper way the
customers from they are serving. The company works with the distributor's sales force. They
will be responsible for taking the order for all the locations and the manufacturer will only
deal with the locations defined as brand building opportunities.
The main producers of beer in Romania are:

Part of the international Heineken Group, Heineken Romania was funded

in 1998, under the initial name of Brau Union. Starting March 2007, it became Heineken
Romania, change that also implied the natural adoption of the Heineken values and culture.
Starting 2000, Heineken Romania has a strong position on the Romanian beer market, with
almost 30% market share (AC Nielsen, June 2008) after having bought Bere Mure in 2008.
The brand portfolio of Heineken Romania is the widest on the Romanian market with 12
brands from all segments: Heineken, Zipfer (imported brand), Gosser, Schlossgold, Silva,
Ciuc, Golden Brau, Neumarkt, Bucegi, Gambrinus, Harghita, Haegana.
Heineken Romania has 5 breweries throughout Romania, in Constana, Craiova, Haeg,
Miercurea Ciuc and Targu Mure. The Company has approximately 1500 employees.
In 2008, Heineken Romania invested over 50 million euros mainly in its breweries.
In the next years the company will continue the investments in Romania.

InBev Romania is part of the multinational brewer Anheuser-Busch

InBev, the leading global brewer and one of the worlds top five consumer products
companies.
InBev leverages the collective strengths of its 120,000 employees based in operations in over
30 countries across the world. Anheuser-Busch InBev manages a portfolio of over 200 brands
that includes global flagship brands Budweiser, Stella Artois and Becks, fast growing
multicountry brands like Leffe and Hoegaarden, and strong local jewels such as
Bergenbier, Bud Light, Brahma, Quilmes, Michelob, and Jupiler, among others.
Currently, InBev Romania owns two breweries, in Ploieti and Blaj, has over 750 employees
and a national distribution network. Having been present on the local market for 15 years,
InBev Romania successfully produces the brands Stella Artois, Becks, Bergenbier,
Lowenbrau and Noroc and imports the Belgian specialties Leffe and Hoegaarden.

Ursus Breweries, is a subsidiary of SABMiller plc, one of the worlds

largest brewers. SABMiller plc has brewing interests and distribution agreements across six
continents.
Ursus Breweries has its headquarter in Bucharest and owns 4 breweries in Cluj-Napoca,
Timioara, Buzu and Braov and employs over 1,500 people. URSUS Breweries brands are
Peroni Nastro Azzurro, URSUS, Timioreana, Ciuca, Stejar Pilsner, Redds and Pilsner
Urquell.
At present, the investment of SABMiller in Romania exceeds the amount of 250 million
EURO, which reflects the companys concern to meet the demands of the Romanian
consumer and ensure the quality of its products by developing the Romanian brands.
5 Imports and exports
The following indicators will be taken into consideration:
total volume of exports and imports for the product(service) in 2015
dynamics of exports and imports during the period 2012-2015
major 3 export/import markets for the product (service) in 2015
Romania is the sixth largest beer producer in Europe. Our country exports beer especially
towards countries where Romanians have emigrated such as: Italy, Spain, USA and Australia. It
seems that Romanians leave the country, but they take with them their beer culture. Romanians
are known as being large beer consumers. Although the costs related to the export of the beer are
pretty high, thanks to its quality, Romanian workers from abroad are willing to pay more for this
beer.
In 2013, the imports of beer have dropped. In parallel, the exports have risen and as a
result the two indicators have become equal. Due to the fact that Romanians prefer beer which is
produced locally, the percentage of imports has dropped under 1% out of the total sales volume
compared to the 2,5% registered in the previous year. This means that over 99% of the beer
consumed is made in Romania. Despite this fact, the quantity imported has risen from 170 000
hectoliters in 2013 to 500 000 hectoliters in 2014 accordingly to Jan Derck van Karnebeeks
declaration , the president of the Berarii Romaniei Association.
However, the results of the Ernst & Young study showed in 2014 that although our
country produced large quantities of beer, it was still on the last but one exporter country in
Europe. The leading countries were Holland and Belgium which export over 60% of their
production.
Year

2011

2012

2013

2014

2015

Imports*

0.059

0.028

0.032

0.18

0.5

Exports*

0.024

0.056

0.076

0.026

0.06

*million hl
Source : National Institute of Statistics

6. Prices and tariffs

The following indicators will be taken into consideration:
the average selling price in 2015;
The price is an accessible one because the targeted people are those with a modest income. For
example, the domestic beer (0.5 L) is sold on average at the price of 3.04 LEI. The imported beer
(0.33 L) is 4.65 LEI on average. These are the prices available in markets.
the interval of variation of the average selling price, minimal and maximal price
in 2015;
The minimum price for a dose of beer 0.5 L was of 2.39 RON and the maximum one was 6.99
RON. The average price for the most sold beer, PET 2.l in 2015 lies between 5.3 RON and 6
RON.
average price dynamics during 2012-2015 in comparable prices
However there has been a more than significant change of price in the interval 2012-2015. The
causes were on the one hand the price of the raw material- the hop- which has tripled during this
period of time and, on the other hand, the excises. As a consequence the price of beer has
increased.