Hungary: Brewers boost production by 4% in 2005 despite shrinking market

Members of the Hungarian Association of Breweries, accounting for 99% of Hungary's beer production, brewed 4% more beer in 2005 than a year earlier despite a 4% contraction of the market, the association's outgoing president Elemér Kiss announced on July 18. In 2005 total beer sales self-produced (including exports) amounted for 6.77 million hl versus 6.48 million hl in 2004.

Domestic beer sales in Hungary in 2005 registered 6.852 million hl compared to 6.825 million hl. Of these 5.236 mln hl of Standard segment, 1.423 mln hl of Premium and 193,000 hl of Specialities.

Despite the wide range of non-alcoholic products offered by the brewers of Hungary, the declining trend of non-alcoholic beer consumption first noted in 2004 continued and registered 171,000 hl (179,000 hl in 2004).

Elemér Kiss said: “Last year was the first full year since the Hungarian Republic has become full member of the European Union. The most important challenge for the Association’s member companies was to adapt to the ensuing new market environment. As their annual sales figures would suggest, this adjustment was successful. The Association is also pleased to note the opening new ways of co-operation with the government: the brewers were invited to comment on a number of draft legislations during the year. In spites its developing networking, the Association’s efforts in curtailing excise taxes were not rewarding, and its arguments against combining last year’s 5% cut in VAT with an increase in excise tax on beer were fi nally not recognised… “

Currently, there are four large brewers with local production and offering on the Hungarian market. Introducing new products year to year, all brewers use innovative forms of packaging for their traditional beer products. There is fierce competition among the four brewers on the market, which is a major contributor to the traditionally excellent quality of beer produced in Hungary.

The size of the Hungarian beer market has been characterised by an average beer consumption per capita of about 70 litres for many years. In view of these trends, approaching the over 100 litres per capita consumption of the past decades no longer seems to be a realistic target.

As a rather adverse development in the last few years, the gradual saturation of the consumer market was coupled by the significant, if not dramatic year-to-year increase in the level of the single most important tax item in the sector – previously referred to as consumer tax, lately as excise tax. The current level of excise tax is considered by the brewers as unreasonably high. Although no adjustment of the tax rate was implemented in the years 2004 and 2005, the 5% reduction of the VAT rate at the end of the last year was off set by yet another rise in excise tax. The effects of this latest increase are yet to be seen in 2006. As far as the market position of the brewers in Hungary is concerned, 2005 was the first full year following Hungary’s accession to the European Union when the effect of imports (and the associated costs) no longer played a role in local beer production. As a result, the market share of local brewers stopped shrinking and slightly increased. One of the most determinant factors in the brewers’ operational environment last year was the Act on Environmental Product Charges, the effects of which are demonstrated by the developments in the different forms of packaging used.

The total public contribution of the Association’s members increased by 8% from 2004 at only 4% growth in sales. As these fi gures would suggest, the overall tax burden of the beer sector has continued to grow.

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