Contracting Lithuanian Cider/Perry Market Avoids Extinction in 2015

Lithuania has no deep traditions rooted in cider/perry, thus it is subject to global trends that shape the consumption of the category. Even though globally cider/perry saw a value CAGR of 7% during the 2010-2014 period, the Lithuanian market was still reeling from the post-crisis blow. Fortunately, it appears that the category is finally regaining its growth and strength and is predicted to see a value CAGR of 3% at constant 2015 prices, until 2020.

The story so far

Until the financial crisis in 2007, cider/perry had been growing in Lithuania, reaching almost 30 million litres in total sales terms. Such success was fashion-led with intense advertising campaigns from the first cider/perry brands to enter the market. The situation changed dramatically in 2008 when the category fell into steep decline. In just a few years, cider/perry sales volumes decreased by a third and have been falling further for almost a decade; with the category reaching less than one third of its pre-crisis volumes in 2014. The reduction in consumers’ disposable income after the crisis was not the only reason for such fall of cider/perry. Legislative reasons were the second biggest factor to negatively impact the category, as excise duty for cider/perry increased by 113% during the 2007-2014 period; the sharpest excise duty increase of all alcoholic drinks. Lastly, the demographic and emigration crisis in Lithuania sharply reduced the young females consumer group who were the main target of the category.

Nevertheless, it seems that 2014-2015 was a turning point for the category, as total volume sales have stabilised around seven million litres. Positive growth is foreseen for several reasons. Firstly, greater focus by international producers, mainly brewers, on promotion, as they internationalise their brands, such as Somersby. Secondly, product premiumisation has spilled over from beer and has been visible since 2013. As cider/perry in Lithuania saw little product innovation before and after the crisis period, consumers warmly welcome the new brands, despite their higher prices.

The beginning of the recovery

2015 is expected to be one of the most dynamic years so far for cider/perry. The competition intensified as leading manufacturers introduced or rebranded their products and focused all advertising attention on them. The main reason for that is the further fall of their cheaper and scale-oriented products as consumers are demanding different, exceptional products. The assured leader of the market since 2012 has been Carlsberg’s Somersby brand. The company managed to become a category leader in 2015 with more than 40% of the total market share by launching two more flavours of Somersby. The second biggest manufacturer was Volfas Engelman with less than 28% of the total market share in 2015. Volfas Engelman launched a benchmarked Somersby product, Sherwood, also in 2012 and similarly to Švyturys Utenos Alus started replacing its earlier established economy brands. However, it appears that the major players will have to try harder as the third cider/perry producer and third biggest beer producer in Lithuania, Kalnapilio-Tauro Grupe, intensifies the competition by strengthening its position in the category. The company successfully rebranded its economy brand SUN cider to premium brand Happy Joe, and is expected to be the third biggest share holder with 8% of total cider/perry sales.

Moreover, some new craft cider manufacturers entered the market in 2015 with the goal of educating consumers with traditional, non-sweet cider/perry products and to build a cider/perry culture in Lithuania. Even though microbreweries produce very small volumes compared to the total market size, their establishment, together with new on-trade specialist cider/perry houses, is further evidence that cider/perry is starting to grow again.

Given the most recent changes in Lithuanian cider/perry, it appears that the category might finally be on the way to revival. It is expected that the category will see value sales rise at a CAGR of 3% at constant 2015 prices over the forecast period, reaching €18 million by 2020. The key question for the upcoming years is whether the category will sustain its growth, as legislation is scheduling a further increase in excise tax in 2016 and has plans to forbid advertising of alcoholic drinks in the following years.