Spirits in Kazakhstan

PROSPECTS

Downward trend dominates sales as numerous adverse factors overlap

Over the review period, the general performance of spirits has been marked by a very definite downward trend. This is attributed to a combination of adverse factors, namely weak post-crisis economic conditions, harmonisation of excise taxes with Russia as a result of Kazakhstan joining the EEU, and social factors such as the global trend towards health awareness and fitness-friendly consumption.

Premium products suffer from poor representation

Premium products are generally expected to perform poorly because of their initially small and staid customer base. Until recently, Kazakhstan has seen very few attempts by retailers to educate the population about the peculiarities and qualities associated with the consumption of sophisticated products such as single malt whiskies, cognac, premium rums and tequilas.

Growth of budget-friendly niche subcategories expected despite general pessimism

While a general decline in spirits volumes is forecast, a possibility for growth exists in niche spirits that remain affordable to Kazakhstani consumers. As economic conditions slightly improve, many consumers will stick to their old habits of consuming locally-produced brandy and vodka.

COMPETITIVE LANDSCAPE

Local players continue to lead by volume but not value

Despite the wide international brand representation across spirits, dominance by sales volume is the preserve of local manufacturers such as Bacchus AO, Kokshetauminvody TOO and Geom TOO. All three players specialise in the production of vodka, with Bacchus also holding a stake in production of budget-priced brandy.

Vodka sales adversely impacted by government crackdown on black market

Historically, spirits, especially vodka as the cheapest subcategory, has been characterised by very significant black market sales. Relatively easy to produce, illicit vodka remains a lucrative business for certain Kazakhstani entrepreneurs.

Modern grocery distribution channels gain more weight

Despite historically very strong traditional distribution channels for alcoholic drinks, the pace of modern lifestyles has created a new competitive landscape. Modern grocery retailing is developing across Kazakhstan, and has had a particular effect on distribution of alcoholic drinks.

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