E-Malt.com News article: Kazakhstan: Beer, Kazakhstan’s most popular drink, is to enjoy ever growing demand - analysts

Although Russia continues to attract the bulk of investments in the CIS’s food and drinks sector, the Kazakhstan drinks sector also has increased in popularity among expansion-oriented international operators, Research and Markets said in a recently published report.

Beer is the most popular alcoholic drink in Kazakhstan, with the domestic market experiencing booming growth in recent years. Kazakhstan has attracted considerable attention from international brewers for it is seen as one of the CIS region's best-performing economies due to a commendable post independence reform effort, coupled with sound fiscal and monetary policies, which has led to enviable levels of economic growth and rising disposable incomes. Another factor has been the government’s recent acknowledgment that there is a need to diversify its economy to reduce its dependency on energy exports, which provides opportunities for investors in other industries, such as alcoholic drinks.

The Turkish Efes Breweries International (EBI) has been making major investments in the country for years and is now reaping the benefits. In April 2008 EBI announced impressive full year results for 2007, as sales volumes grew 13.8% year-on-year (y-o-y) to 13.3 mln hl in 2007. The company pointed to Kazakhstan, a key emerging market, saying that robust volume growth in both Russia and Kazakhstan are expected to help expand margins.

However, EBI can expect strong competition from Carlsberg-controlled Baltic Beverages Holding (BHH) which also has a long-established presence in the market and is the leading brewery.

In recent years the company has been investing heavily in the Central Asian markets, and has this year completed its first brewery in neighbouring Uzbekistan’s capital Tashkent. BHH has said that in the future markets such as Kazakhstan will become increasingly important as growth drivers, as the beer market continues to develop and mature, therefore increasing investments can be expected.

Such investments will be a major factor in the strong sales growth analysts forecast for alcoholic drinks – 79.4% in value terms between 2007 and 2012, reaching US$1,225 mln by the end of the forecast period.

Per capita spending on alcoholic drinks will rise significantly by almost 77% to reach US$78.5 as disposable incomes rise, alcohol becomes more widely available, and consumers switch over to higher value drinks.

The beer market is expected to experience the strongest growth in terms of the alcoholic drinks sub-sector. Young consumers in particular are illustrating a preference for drinks with lower alcohol content, which is reflected in beer’s rising popularity at the expensive of more traditional spirits. The other major driving factor behind growth in all food and drink product categories will be the country’s economic performance.

19 September, 2008