Challenging times for glass in Russia

According to Euromonitor International, the glass industry globally has started to recover from the global economic downturn.

At the same time, however, the industry's performance in Eastern Europe remains negative. This difference can be explained by the different impact of the economic slowdown on various regions. In 2009, GDP in Eastern Europe dropped by 22%, while globally the figure was 'only' a 5% decline.

Russian glass industry also does not look too promising for the forecast period with retail unit volumes of glass predicted to decline by CAGR 2% over 2011-2015.

It is obvious, that declining alcohol consumption in Russia (-1% CAGR over 2006-2011) has a natural effect on this, however, Russia is fourth in the world in terms of pure alcohol consumption.

The Russian government has been working to actively combat alcohol abuse in Russia. The Ministry of Health announced that the pure alcohol consumption was 18 litres per capita in 2009. In 2010, this figure dropped to 15 litres. However, the improvement in statistics is occurring only among urban residents. The situation is not improving in the rural areas.


Retail FMCG Glass Packaging in Russia 2006-2015

Source: Euromonitor International

A difficult time in white spirits

The weaker volume growth recorded for glass in Eastern Europe was due almost entirely to a poor performance from white spirits in Russia, where glass bottle units fell by 4% on average per year over 2006-2011.

Changes in taxation and further plans to place a double excise on vodka exerted a heavy influence on consumer purchasing power, thus contributing to reduced glass bottle sales amid the country's still weak economy. A further sales decline for white spirits, primarily vodka due to its maturity and saturation, is likely. It is expected that retail volume sales of white spirits will decline at a CAGR of 4% over 2010-2015 in Russia.

Glass bottles remain the traditional packaging format for strong spirits. However, a shift in demand from premium quality to standard quality glass and back again was observed. While the 2009 crisis affected sales of spirits, and the standard 500ml glass bottle was in strong demand, in 2010-2011 premium spirits slowly recovered. Therefore, producers of spirits (especially vodka and cognac) started to again play with bottle shape, glass quality and printing in order to make their products stand out on retail shelves.

Glass becomes out-dated in wine

Glass packaging in wine is gradually losing its position in Russia. Despite the fact, that the usage of glass in wine grew by 4% CAGR over 2006-2011 in Russia, it was the most slowly growing pack type in this product category.

Since the mid-2000s, wine in bag-in-box packaging, especially non-grape wine, has gained share at the expense of glass packaging.

In grape wine, brick liquid cartons, which are also replacing glass, are becoming increasingly popular. Many producers still follow tradition and use both glass and liquid cartons. Experiments with metal beverage cans in wine may also pose a threat to the traditional consumption of wine in glass bottles.

Rough competition with PET in beer

Glass bottle production is highly consolidated with the leading players producing more than 50% of total volume of glass packaging.

Glass bottles in beer demonstrated the highest decline rate in 2010 and 2011 – 8% and 6% respectively – these years were not very successful for beer sales due to growing popularity of beer in less expensive and bigger PET bottles. PET demonstrated only 1% decline in 2011.

General negative trends in beer in the review period were mainly linked to the recession and restrictions in retail: beer sales were banned after 23.00hrs and until 08.00hrs. Besides, since 1 July 2011, beer advertising on TV and radio advertising has also been banned.

1 May 2012 - Felicity Murray