Baltika Brand Rejuvenation

Case study prepared for Adam Smith Conferences 3rd International Forum forThe Russian Food and Bev erage Industry

Andrey Rukavishnikov, Marketing Director, Balt ika Brew ery

Size that matters. Baltika is as big as Russia

1

2

34

6

7 8 910

11 1213

1415

1617

18 1920 2122

2324 25

26 2728 29

31 305

BreweriesBreweriesDistribution Distribution centerscenters

• Russia:– Approx imately 1/6 of the land mass– Covers 11 time zones– Stretches across almost half of the

circumference of the globe

• Baltika:– 1st Russian domestic brand– Market leader since 1996– Sells every 4th beer bottle in Russia– 5 breweries & 31 sales rep offices– Owner of 2nd beer brand in Europe

Facts and figures

25 % market share – Company sales11% Baltika brand share

Brews biggest Russian brand ever –Baltika

Distribution 97%Everywhere in Russia

24 mln HL per y ear, 0.33 bottle per each human being per y ear in the w orld. Biggest and the most profitable brew ery in Europe

Biggest production capacity

32 beer brands / v arieties on saleSuits every consumer taste

Ov er 2000 mln USD capitalisationTop Russian FMCG company

35 countries serv edWorldwide operations

FiguresFacts

185

296650

1583

2076

0

500

1000

1500

2000

2500

Baltika Sun Interbrew Wimm Bill Dann RBC Kalina

Mln

USD

Top companies in Russian FMCG sector(capitalization, mln USD, Oct 2004)

* Including Ukrainian operations

*

*

0

10

20

30

40

50

60

70

80

91 92 93 94 95 96 97 98 99 00 01 02 03 04 (F)

27,4

(-12%)25,7

(-6%)

23,9

(-7%)

23,9

(0%)

28,1

(+23%)22,9

(-4%)

35,8

(+27%)

44,1

(+23%)

52,4

(+19%)

63,5

(+21%)

68,8

(+8%)

73,3(+6%)

14,0(+32%)10,6

(+62%)6,6(+34%)4,9

(+62%)3,0(+73%)1,7

(+54%)1,1(+27%)

0,9(+46%)

0,6(+85%)

0,3(+22%)

16,0(+14%)

BALTIKA

16,1 (+1%)

19,8 (+23%)

81,0 (+11%)

MARKET

((mhlmhl))Baltika and Russian beer market development

Production leadership

Quality leadership

National distribution leadership

Distribution refinement

Marketing driven company

Baltika market leadership

6.7%6.9%7.3%

14.8%

25.0%

6.1%6.6%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

Baltika Interbrew Heineken Efes Red East Yarpivo Ochakovo

%

Source: BBH

Baltika segment leadership

Baltika share in Russia, vo lume

Baltika

BBH, 2004

25%

Baltika share in mid - price segment

Baltika

Baltika share in premium seg me nt

Baltika

33%

22%

Market segments

Beer market

Business - Analytica, Sep 2004

Baltika brand before 2004 –action required

• Maximum awareness• Huge share• Extremely high distribution• Quality (perceived and actual)• Baltika 3 sub-brand - the biggest beer brand

in the market (2 times bigger than the closest competitor)

• Dated packaging• No restyling / innovations during past years• “ Old – fashioned” perception• Unclear brand equity• Lack of clear positioning for sub-brands

• Positioning clarification• Offer diversification (sub-brand positioning)• Brand rejuvenation

• Competitive communication increase• Competitive portfolio diversification• Competitors gaining share• Proliferation of emotional benefits

Solution at sub-brand level

To rejuvenate the Baltika brand via:1. Development of an effective positioning strategy2. Diversification of the Target Audiences3. Rolling out striking creative executions4. Relaunch along the lines of innovation and premiality5. Sub-brand specific support6. Further sub-brand reinforcement through umbrella

communication

• Top Russian beer brand• Over 5% SOM, market leadership• Price benchmark for the market• Major volume driver• Highest distribution level• The only single SKU (0,5L bottle) sub-brand in the

market

Baltika 3 sub-brand background

Baltika-3 sales development in RussiaJan-Oct 2004 vs 2003

78%

-9%-13%

-27%

-35%

-15%

55%47%

25%

20%

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

Jan F eb Mar Apr May Jun Jul Aug Sep Oct

mon

thly

gro

wth

2004

vs.

200

3

Change perception –new bottle and label

Added modernity –can launch

Build emotional link - New ATL series

Relaunched products promo • Increase nterest among existing consumers• Stimulate trial among new consumers

“Future” umbrella support communication

Relaunch support campaign

Baltika 3 can launch

TeaserMoscow, S.Petersburg

RevealFederal outdoor campaign

Back

Baltika 3 bottle relaunch

Back

ATL Campaign “Baltika Express” series

Back

Umbrella communication “From Heritage to the Future”

Back

Baltika 3 promo campaign: +78 % sales growth

Back

Next steps

• Premium line upgrade• Packaging consistency

– Restyling of the whole SKU range• New communication strategy

– Separate sub–brands media strategy and advertising support

• Aggressive NPD

Baltika Brewery sales development in Russia – Jan-Oct 2004 vs 2003

47%

3%

13%

4%4%

10%

38%31%

27%

26%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Jan Feb Mar Apr May Jun Jul Aug Sep Oct

mon

thly

gro

wth

200

4 vs

. 200

3

Thank you!