E-Malt.com News article: Russia: Carlsberg replaces Baltika Breweries CEO in a move to address slowing sales

Danish brewer Carlsberg moved to address slowing sales at Russia division Baltika Breweries on October, 26 by replacing its long-serving chief executive with its UK head following a recent profit warning, Reuters reports.

Russian sales of No. 1 brand Baltika have weakened as the government cracks down on beer drinking to tackle alcoholism, while competition is likely to intensify as SABMiller plans to join forces with Turkey's Anadolu Efes to become the number two in the market.

"Carlsberg may have estimated that the nature of the job has changed. Russia had extreme growth in the past, but has turned to more "normal" levels," said Alm Brand analyst Stig Nymann.

"They will need to fight harder for market share as opposed to before, when the extreme growth left a bit more room for slack in the organisation."

Carlsberg, which relies on Russia for 40 percent of sales, said in August it would cut its outlook for 2011 beer volume growth in Russia after second-quarter performance missed both analysts' and Carlsberg's own expectations.

The brewer said in a statement it had appointed Isaac Sheps, chief executive of Carlsberg UK, to take over the leadership of Baltika from Anton Artemiev.

Carlsberg shares were up 1.4 percent at 0847 GMT, outperforming a 0.3 percent rise in the Copenhagen stock exchange's benchmark index

Artemiev had been president of Baltika since 2005, when it was co-owned by Carlsberg and Scottish & Newcastle.

Nymann said Carlsberg may have thought a foreign manager such as Romanian Sheps could give it greater control over the business, while keeping Russian Artemiev on the board would help the company negotiate the country's tough political landscape.

Sheps will take up his role on December 1. Artemiev would continue as a member of Baltika's supervisory board, the company said. Sheps would also be responsible for Carlsberg's operations across eastern Europe.

Carlsberg has been facing headwind in Russia due to regulatory changes and rising raw materials prices.

In August, the brewer cut its full-year profit growth target when reporting a 13 percent fall in quarterly profit after sales in the key Russian market were hit by higher prices.

The brewer said then it saw Russian beer volume growing by a low single-digit percentage figure against a previous forecast of 2-4 percent.

The Russian market declined about 2 percent in the second quarter, but Carlsberg stuck to its mid-term view of 3-5 percent beer volume growth in spite of Russia's crackdown on the sale of beer.

Russia's government introduced a surprise 200 percent excise rise on beer in January 2010, which brewers passed on to drinkers, and this year proposed a bill that will ban beer sales at outdoor kiosks, public transport stations and airports from 2013.

Beer will also be unavailable from 11pm to 8am, a restriction that already applies to vodka.


26 October, 2011