Inderes published extensive company report on Anora on September 27, 2022. Anora’s relevant market is mainly the Nordic wine and spirits market, and here is the summary of report's section about the market for alcoholic beverages in the Nordic countries.
The market is very stable
The latest market figures reported by Anora are from 2020. However, the market is stable, so we believe that this gives a good picture of the current market size as well. Anora estimates the value of the entire Nordic market for wine and spirits to be approximately EUR 12 billion. Around 2/3 of this or EUR 8 billion is wine and 1/3, or EUR 4 billion, spirits. These sums are, however, at retail prices, so they cannot directly be compared with Anora’s figures, e.g., when calculating market shares. In volume terms, the market size is about 640 million liters, of which 87% is wines and 13% spirits. So the price per liter for spirits is considerably higher than that of wines. The total market for spirits is thus about 83 million liters, whereas Anora’s volume in monopoly channels alone is about 24 million liters. This illustrates Anora’s strong position in the market.
Anora estimates that the volume development of the wine market has been slightly increasing, at 1.7% p.a. in 2015-20 and it expects similar average growth in 2021-25. In spirits, historical growth is 1.2% p.a. and the estimate is 1.6%. So the figures in terms of market growth are very small but nonetheless positive. The market for alcoholic beverages is also very defensive and stable, i.e. there are no significant annual fluctuations. However, the COVID years 2020-21 form an exception, especially if one considers the sale of monopoly chains that is important to Anora. During COVID, consumption shifted from restaurants and DFTR to monopoly chains.
Sweden the largest wine market, in spirits Finland is close
Country-specific market information can be found via monopoly chains from Finland, Sweden and Norway. When comparing these countries, Sweden stands out as a very large wine market, with a volume of about 200 million liters per year, while Finland and Norway remain at about 50 and 65 million liters. Denmark is in between these with a volume of good 100 million liters. We have used 2019 figures, because we believe it gives a better picture than the higher sales volume in the COVID years. In Sweden, Viva Wine Group is the clear market leader. Anora’s market share is relatively weaker in Sweden and it is number two on the market.
The Danish wine market is much larger per capita than in the other Nordic countries (over 4 l/capita converted to 100% alcohol vs. about 3 l/capita in others). This is probably due to more liberal alcohol legislation, which allows alcohol to be sold in normal retail trade. Globus, acquired by Anora, is number one in the Danish wine market.
In terms of spirits, Sweden and Finland are the same size markets, while Norway is smaller. Differences in the markets can be partly by explained by different tax policies. In Finland and Norway, the taxation of spirits and wines is relatively close to one another, while in Sweden spirits are taxed in relative terms more severely than wines. Compared to other European countries, taxation in the monopoly markets is by far the highest and Denmark's taxation is also above average.
The competitive field is extensive
In the table, we outline the competitive field for Anora in the Nordic countries. It consists of 1) global alcohol producers, who are responsible for distributing their products in the Nordic countries, 2) regional companies such as Viva Wine Group or Royal Unibrew better known as a brewery group, and 3) small local distributors. The market is more consolidated in spirits, while wines have a large number of competitors. However, the wine market is also becoming consolidated and already the five largest players are responsible for about half of the wine volume (Finland, Sweden & Norway). The list is not complete and aims only to describe the leading players in the Nordic market.
With regard to Anora’s market position, we see a risk that the market of international alcohol producers consolidates further, allowing a larger proportion of the volume to come directly from producers to retail.
In terms of margins, comparison with competitors is to some extent useless, as there are no other companies like Anora that operate both in wine and spirits and both as producers and distributors. The margins of large producers are manifold (at EBIT level) compared to Anora, while pure distributors have very low margin levels.
Alcohol sale is restricted with age limits
The sale of alcohol is limited in all of Anora's markets with age limits. The age limits vary depending on the strength of the drinks and the channel of sale.
In retail trade, the age limits vary between 16-20 years, while restaurants typically allow purchase of all alcoholic beverages at the age of 18.
Monopoly markets restrict advertising
In monopoly markets, advertising of alcohol is also restricted in different ways.
In Finland , the law prohibits advertising of all strong alcoholic beverages (over 22% by volume). Advertising of weaker alcoholic beverages than this is generally permitted, although it involves restrictions, e.g., in relation to public spaces. Alcohol advertising directed at young people is also prohibited.
In Sweden, alcohol advertising was completely banned in 2003, but has since been liberalized. Advertising of beverages over 15% by volume is still completely prohibited, as is directing advertising at those under the age of 25. The style and presentation of advertising is also regulated.
In Norway, all advertising of alcoholic beverages of over 2.5% by volume is explicitly prohibited. In Denmark, alcohol advertising is more liberal. However, there too, it involves both regulatory and voluntary regulation and supervision. Advertising aimed at children under the age of 18 is prohibited.
Advertising of Anora’s products is therefore possible in Denmark for all products, in Finland and Sweden for wines and in Norway only for non-alcoholic products. The presence or absence of advertising naturally affects the company and its competitors' ability to support product sales. To the extent that advertising is not possible, access to the shelf of (monopoly) stores is in itself crucial. This also highlights the role of the monopoly chains in the distribution of market shares.
Distribution mainly carried out through monopoly chains
As mentioned earlier, Anora’s main sales channels are the alcohol monopoly chains in Finland, Sweden and Norway. These monopolies are the only retail outlet in these countries for wines and spirits. Denmark is a different market because there alcohol sales is free.
All monopoly chains have a similar process when they choose which beverages they want to sell. In these processes, monopoly chains typically publish a description of what kind of product (category, age, country, taste, and price) they want. Then producers/importers like Anora submit their proposals to the monopoly chain. The selection process is slightly different in different countries, either based on the taste of the wine or it can also consider, e.g., packaging/appearance. All product samples also undergo a rigorous quality inspection.
The offering of monopoly chains is typically divided into permanent products, seasonal/temporary products and order selection. The order selection can also be a way to become part of the permanent selection if the product reaches a certain level of sales. Thus, products can also be included in the selection without a process initiated by the monopoly chain. Going forward into the permanent selection through the order selection is therefore more typical for Anora’s wines than through the selection process.
However, in our view, the choice of selection based on the monopoly chains’ requirements to some extent limits Anora’s ability to find and launch products on the market that interest consumers (compared to a completely free market). On the other hand, once a product is included in the selection, it will remain there if certain sales volumes are exceeded.
Industrial's market
The market is quite different for the Industrial segment. The main end uses of technical ethanol are techno chemicals, liquids for geothermal heat pumps and the pharmaceutical and packaging industries. The growing demand for geothermal heat pumps supports the market for technical ethanol. Anora is the market leader in the market of liquids for geothermal heat pumps in Finland under its own Naturet brand. The main competitors in this market are Aspo owned Telko and international chemical giants Ineos and Cargill.
In the case of starch, Anora cooperates closely with Finnish Chemigate and also sells directly to the brewery and food industry. In 2018, the company estimated that its market share on the Finnish starch market was around 25%. However, the price of starch is determined by the world market. The main competitors are international Cargill and Roquette.
As regards feed components, Anora has a cooperation agreement with Atria-owned A-Rehu that purchases all feed components by Anora.
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Anora Group
Anora Group is a producer of alcoholic beverages. The product portfolio consists of wine and spirits marketed under various brands. The largest operations are found in the Nordics and the Baltics, and the company's products are exported to retailers in Europe and North America. The company was created through a merger of Altia and Arcus in 2021 and has its headquarters in Helsinki.
Read more on company pageKey Estimate Figures26.09.2022
2021 | 22e | 23e | |
---|---|---|---|
Revenue | 665.0 | 709.8 | 727.3 |
growth-% | 94.22 % | 6.74 % | 2.46 % |
EBIT (adj.) | 69.8 | 51.4 | 53.6 |
EBIT-% (adj.) | 10.50 % | 7.23 % | 7.37 % |
EPS (adj.) | 1.04 | 0.49 | 0.48 |
Dividend | 0.45 | 0.45 | 0.45 |
Dividend % | 4.14 % | 9.24 % | 9.24 % |
P/E (adj.) | 10.42 | 9.87 | 10.13 |
EV/EBITDA | 9.03 | 6.94 | 5.74 |