Russia makes moves on Belarus beer market
about to move into the Belarusian market after taking over control
of the Bobruisk factory from Pivoraren Ivan Taranova and is now
planning a major investment programme.
DCB says it is planning to invest $30 million in the development of the business and its production facilities, a move which many industry observers consider to be brave, especially given the prevailing market conditions.
Historically the Belarusian beer market has been difficult to break into, with both Baltika and Ochakovo failing to make significant impact on the market. Furthermore, the local authorities have often proved a stumbling block to outside investors wanting to create an impact on the market.
Known as the Detroit-Belarus Brewing Company, the company was formed after DCB took a 50 per cent plus one share stake in the Belarus Brewing Company. In exchange for the control of the company, DCB has agreed to take on the company's debts, which currently amount to approximately $3 million.
DCB also says that as part of the investment in the production facilities it will be increasing production capacity of the facility to 20 million decalitres a year, a huge jump compared 2003's total production of 500,000 decalitres. The first part of the upgrade, which is said to have already begun, is expected to cost around $10-12.5 million and the second part to be $20 million.
Russian beer market leader Baltika invested $10.5 million in upgrading the Minsk-based Krinitsa brewery in 2001. However, promises made by the Belarusian government were not kept, according to a Russian national newspaper, and the project folded. Shortly afterwards, the Ochakovo brewing company ended a similar investment.
Analyst Alexander Svinov of Alfa-bank said: "The investor is given a formal permit to control the brewery. If the Belarusian party is against it, Detroit Brewing will have problems at once."
Analysts also say that the unpredictability of local authorities is a problem, but what makes the situation particularly interesting is the need for high quality beer in that market. Presently, average per capita beer consumption in Belarus is 26-28 litres per person in a market where there are no dominant brewers. However, all indications are that this figure is set to grow in parallel to the growth of beer in Russia, where consumption currently stands at 51 litres per person each year.
