Big brewers fight over Eastern Russian brewer

- Last updated on GMT

Related tags: Beer market, Beer, Russia

Three major European brewing companies are competing to purchase a
small brewery in the previously unexplored region of Russia's far
east, as the scrap to profit from one of the world's
fastest-growing beer markets hots up.

Between 1996 and 2003, the Russian beer market grew by 18 per cent, making it the fastest growing in Europe and the fifth largest beer market in the world - something which has not been lost on Europe's big brewers, who all see the potential of tapping further into this trend.

The latest stake on offer is the Pivoindustriya Primorya brewery in Vladivostok and three companies are reported to have shown an interest: Moscow-based Efes brewery, a subsidiary of Turkish beverage giant Efes, the Baltika brewery, owned by the Russian Baltic Beverage Holdings, and Sun Interbrew, jointly controlled by Belgian group Interbrew (now InBev) and India-based Sun group.

These three already have strong ties with Russia. Baltika is the number one player, supplying more than 30 per cent of the Russian beer market, while Sun Interbrew is the second-largest beer producer. Moscow Efes, meanwhile, owns the country's third largest brewery.

But of the big players, only Baltika currently has a brewery in Russia's far east, which may leave good potential for expansion in an area of the country where beer consumption is still relatively low.

Efes was recently rumoured to be closest to a deal to buy the Vladivostok brewery for around €16 million but a company spokesperson played down the claims, saying that no detailed negotiations had taken place.

"We are always looking for new opportunities and we are always trying to expand our operations. We think it is normal to see these rumours but it is not much more than that at this stage. There is nothing that we have to take public,"​ he said.

Anyone who does invest in Pivoindustriya Primoriya, currently owned by shareholders of Russian dairy and juice company Wimm-Bill-Dann (WBD), will have to invest extra money in order to expand its capacity, but if the far east beer market grows like its counterpart in the European part of the country then the move could be extremely profitable.

Dutch company Heineken has already upped its presence in Russia, stating that it expects the Russian beer market as a whole to grow by a further seven per cent during 2004.

In August this year, Heineken became the third biggest company in Russia's beer market after acquiring WBD shareholders' controlling stake in the Volga and Shikhan breweries making up the Central European Brewing Company (CEBCO), which used to include Pivoindustriya Primoriya.

"These acquisitions extend our presence and participation in one of the world's largest and rapidly growing beer markets,"​ said Heineken executive board member, Jean François van Boxmeer.

A Heineken press spokesperson told Cee-FoodIndustry.com​ that the company intends to acquire more plants in Russia over the next few years - which could, perhaps, make it a fourth rival bidder for the Vladivostock plant.

EBRD reacts to Russian beverage market growth

The speed at which the Russian beverage market is growing, especially in beer, has led the European Bank for Reconstruction and Development (EBRD) to lend €7.9 million to a Turkish-owned bottling plant in the country to try and satisfy an increased demand for glass containers.

Turkey's Anadolu Cam, part of the Anadolu group which also owns the Efes brewing business, will use the loan to improve product quality and efficiency by providing more training for employees and upgrading its production systems at the company's glass plant in Pokrov, northwest Russia.

Anadolu Cam hopes that this, plus the installation of a second furnace, will increase production capacity at the plant. The company is also hoping to introduce new lightweight bottles onto the market - a reaction to the growing popularity of PET bottles in Russia.

Chairman of Anadolu Cam's board of directors, Teoman Yenigun, welcomed the loan to help the company take advantage of the rapidly growing demand for beer bottles in Russia.

EBRD's director of Agribusiness, Hans Jacobsen, said: "This project should provide the Russian food processing industry with greater choice and better quality on a stable basis, and will thus ultimately benefit the consumer."

Anadolu Cam only acquired the Pokrov plant in March this year, but has worked with the EBRD before when they, together with the International Finance Corporation, bought a glass bottling plant in Georgia in 1997.

Related topics: Market Trends

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