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Hot Drinks in the CIS in 2017

June 2017

Following years of economic turmoil, consumers in the 11 countries of the Commonwealth of Independent States (CIS) are seeing growing incomes once again. With hot drinks spending levels unusually high in the CIS states, great opportunities exist in categories such as instant coffee and premium teas as consumers move look for something new out of their hot beverages.

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The members of the CIS have a number of similarities when it comes to hot drinks consumption

The 11 members of the Commonwealth of Independent States (CIS) have a great number of features in common with each other that they do not share with their neighbours, or even with the other post-communist states of Eastern Europe. The most important of these are high levels of black tea consumption and a significant degree of Russian economic influence.

Black tea is dominant in the region, but is giving way to alternative forms of hot drinks

Standard black tea has been the main form of hot drinks consumption in the region for a long time, with several countries in the region having some of the highest consumption levels in the world. They are led by Russia, the world’s largest market for black tea. However, trends including interest in health and wellness, a growing coffee shop culture, and a simple desire for something new are boosting alternative forms of tea and coffee.

Russian companies remain major players, but will have to fight to retain their turf

Russian hot drinks companies such as Orimi Trade and Mai Kompanya exert significant influence not only in Russia, but in much of the CIS. These companies, which rose to prominence focusing on black tea, are now faced with the need to pivot to new forms of hot drinks to compensate for changing consumption patterns in Russia and the wider region. The growing degree of influence of global companies such as JDE and Unilever will also pose a significant challenge to their share.

Forecast growth is strong now that the area is emerging from recession

Hot drinks growth will be robust over the forecast period in every CIS state except for recession-ravaged Ukraine. Black tea will still continue to grow thanks to economic and population growth in Central Asia, but the more dynamic growth will be in coffee and new forms of tea, including value-added forms of black tea that cater to consumers’ desire for novelty.

Introduction

Scope
A note on research coverage
Key findings

Strategic Overview

The CIS is a major growth market for hot drinks
A shared history remains a powerful force on the region
Spending on hot drinks is a major consumer priority
Growth will be powered by an expanding middle class
Consumers are moving towards value-added brands again…
…but many consumers remain in low-income brackets
The health of the Russian economy is critically important
Belarus is set to overtake Russia in per capita hot drinks spending
Population growth in Central Asia is also a major driver
Key takeaways: Hot drinks spending potential in the CIS
Black tea, instant coffee are the key categories
Russia’s size keeps it the main source of absolute growth
Coffee and non-black tea more reliant on trends, income
Prospects for hot drinks growth in the CIS by category

Competitive Landscape

Three main groups of companies target the region

Competitive landscape

Russian companies are the leaders within the CIS
Orimi Trade is the most significant hot drinks player in the CIS
The Orimi product mix is changing
Instant coffee is a focus area for Orimi going forwards
Greenfield Tea and the importance of being “British”
Unilever tries to encroach on Greenfield’s share in premium tea
Nestl é is losing share in coffee as pods fail to catch on
JDE’s brand portfolio helps it gain a strong position
Mai Kompanaya is heavily reliant on black tea in Russia
Ahmad is a UK company with a strong focus on Russia
A limited number of companies’ brands dominate the CIS market
Areas to watch in CIS hot drinks

Market Analysis

Category potential is strongly linked to sub-region
Russian companies are growing their share at home
Belarus is a battleground between Russian and European brands
Fresh coffee, chicory sales only significant in Russia
The shrinking market in Ukraine leaves little to fight over
Turkish influence makes Azerbaijan unusual
JDE and Orimi fight for control of instant coffee in Kazakhstan
The Uzbekistani market holds much potential
Difficulty of doing business weighs down Turkmenistan

Market analysis

Conclusion: Key trends in the four major sub-regions

Future Outlook

A great deal of uncertainty exists in regional hot drinks
Oil prices could dramatically change market potential
A population window will open up in the middle of the next decade
Growth of café culture should provide a boost to coffee
Tea may leap into RTD form in Central Asia, but not Eastern Europe
Geopolitical flashpoints remain scattered throughout the region
Conclusion: The CIS in 2030
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