E-Malt.com News article: 1310

Russia is already the world's fifth-largest beer market after Brazil, Germany, the United States and China. However, the growth rate of Russia's beer market is now slowing after a boom in the 1990s, according to a Reuters report. Investors, keen to extend their share of the increasingly competitive market, will have to buy more domestic breweries, analysts said. They see the market rising to 86.8 million hectolitres by 2007, from 70.9 million last year, generating nearly $8.7 billion in revenues. "The growth rate is still the fastest in the world but it's not what it was two or three years ago," said Marina Alekseenkova, an analyst at Rye, Man & Gor Securities .

Russia's 2003 beer consumption will grow by 6 to 9 % to about 75.7 million hectolitres, after jumping by 11 % in 2002, analysts estimate. By contrast the European beer market will grow by just 2 to 3 % this year. "The slowdown in the growth rate shows that the market is becoming more competitive, and the only way for foreign producers to appear here is by acquiring Russian brewers," said Alexei Krivoshapko, consumer goods analyst at United Financial Group. "I expect some large Russian breweries will change hands within the next three years."

The biggest Russian brewers, accounting for over 50 % of the market, are already owned by foreign firms. Baltic Beverage Holdings (BBH), which belongs to Carlsberg and Scottish & Newcastle Breweries, owns Russian brewers Baltika, Pikra, Yarpivo and others. BBH's Russian firms account for 36-37 % of the local market. The market share of Sun Interbrew Limited, which owns eight breweries in Russia, is about 15 %.

But there are still many independent brewers like Ochakovo and Red East, each accounting for 7 % of the market. There are also hundreds of smaller independents, seen as ripe for consolidation into bigger firms and considered the most attractive targets for a takeover. "Big players will force out the small producers. In the end there will be four to five big players plus a few more in the premium segment. Small brewers will have to consolidate or leave the business," said Vladimir Savov, an analyst at Brunswick UBS. Analysts cite the largest U.S. producer Anheuser Busch and Australia's Fosters as among foreign firms with a possible interest in acquiring local breweries.

"I think Heineken, which owns Bravo brewer, does not want to remain a small player in Russia with just 4 % of the market. It always wants to be among the leaders," Krivoshapka said. Thony Ruys, chief executive of Heineken, said last week that he would like to expand in the Russian market and would look at acquisitions, but not at any price. "Russia is an interesting market ... perhaps it is better to launch a brand as a greenfield project there," he said.


14 July, 2003