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Beerworkers Archive


Post date: 06/23/2014 - 19:21

Carlsberg claims to stay the course in Russia

Denmark's Carlsberg announced that the company plans to keep its breweries in Russia running even though most are operating at reduced capacity, despite other brewers closing plants as Western sanctions over Ukraine hamper an already faltering economy.

Once a safe bet in a country where beer was considered a soft drink, the Russian market has been hit by new regulations, tax hikes and the economic downturn that has seen a growing middle class turn away from buying extras such as beer.

Denmark's Carlsberg announced that the company plans to keep its breweries in Russia running even though most are operating at reduced capacity, despite other brewers closing plants as Western sanctions over Ukraine hamper an already faltering economy.

Once a safe bet in a country where beer was considered a soft drink, the Russian market has been hit by new regulations, tax hikes and the economic downturn that has seen a growing middle class turn away from buying extras such as beer.

Tighter rules intended to curb alcoholism, and the economic slowdown, have already prompted the world's largest brewer, Anheuser-Busch InBev, to shut its third Russian plant in less than two years, but Carlsberg's senior vice president said his company believed in a turnaround.

Sheps, president of Carlsberg's Russian unit Baltika, said almost none of its 10 Russian breweries were operating at full capacity but the maker of Baltika and Tuborg beer had faith that Russians would soon return to beer when they had got used to the new regulations and the economic crisis had eased.

"If you had in 2008 77 litres-per-capita consumption and we ended 2013 with 59 litres, this is a gap which cannot come from the change of behaviour or attitude towards beer, it's coming from different external pressures, so when these pressures are eased, we do believe that these numbers will go back," he said.

In May the world's fourth-largest brewer cut its outlook for the Russian market and now expects it to decline by mid-single-digit percentages in beer volume in 2014, compared with the earlier guidance for a low-single-digit decline.

Like any corporate, Carlsberg would seek to maximize its profit and if the beer market fell at the same pace for another year or two, Carlsberg would close some breweries although the company claims it would do all it could to prevent that from happening.

The company confesse that it is still a profitable company in Russia and they are not in a disastrous position.

HEALTHY LIFESTYLES

The beer market in Russia fell by 8 percent last year and 5 percent in the first quarter, hurt by restrictions on sales put in place as part of Russian President Vladimir Putin's drive to curb drinking and promote healthy lifestyles.

His efforts, intended to stem a demographic crisis in Russia, have worked. A ban on beer sales in street kiosks and time restrictions on when it can be bought have helped to reduce beer sales by 25 percent since 2008.

To make up for a lack of impulse buying, brewers use multipacks to encourage consumers to stock up at home while also focusing more on premium brands to attract high-income consumers, usually the last to be hurt when the economy falters.

The company is using about 70 percent of its capacity and the rest have to recover by efficiency or by growing the top line in more premium and super premium brands, which are more profitable, according to the Carlsberg.