E-Malt.com News article: 3744

Russia: Heineken, the world's No. 3 brewer, and SABMiller are among Western brewers who may step up acquisitions in Russia as consumption there surges, and sales in the West slow. Beer consumption in Western Europe may fall an average 3 % per year through 2010, compared with growth of 4 % both for Central and Eastern Europe and Asia, according to Canadean, a beverage market research firm based in Basingstoke, England.

SABMiller CEO Graham Mackay said in an interview last month that the London-based company, the maker of Miller Lite, is considering further acquisitions in Russia. And on Monday, November 29 Heineken said it is doing the same. Dutch Heineken, the world's third-largest brewer, is also No. 3 in Russia, behind St. Petersburg's Baltika and Belgium's InBev, according to Bloomberg. "Russia is absolutely one of our key markets because it's part of Europe and Europe is our home market," Hooft Graafland said.

The Amsterdam-based company will consider transactions to boost its market share from 7.5 % once it has absorbed recent purchases, CFO Rene Hooft Graafland said in an interview in London. Heineken has agreed to buy six companies this year, including two in Russia, and on November 29 said it would take a majority stake in a Nigerian brewer.

Heineken is expanding to help revive earnings, which fell 27 % in the first half, the most in at least five years, as sales declined in Western Europe. The $7 billion Russian beer market, the world's fifth-biggest, is forecast to grow at least 5 percent this year, compared with about 3 percent in Western Europe, Renaissance Capital said earlier this year.

"I don't exclude that in the future we will add another company to our Russian business because we want to further reinforce our position," Hooft Graafland said. Heineken ranks No. 3 in size in Russia behind Baltika Brewery, a unit of a Carlsberg and Scottish & Newcastle venture, and Leuven, Belgium-based InBev.

Six years of economic growth is driving up disposable incomes in Russia and fueling sales of high-end Russian and Western brews. Beer sales in Russia rose 14 % in the first half, while sales of vodka and other hard liquor rose 4.2 percent, according to the State Statistics Service.

Heineken is planning to increase distribution of its local brands and the company's namesake beer across Russia, Hooft Graafland said. "Russians have more and more money and they want to spend it," he said. "The younger generation are living completely different lives to the ones their parents led, and they want more and more to identify with national and international beers they like."

Heineken's shares have declined 0.3 percent this year, while shares of InBev have gained 31 %.

Beermakers are increasingly looking outside Western Europe for growth. InBev, the maker of Stella Artois and Rolling Rock, took control of Latin America's largest brewer in August, becoming the world's second-largest beermaker. St. Louis-based Anheuser-Busch, the world's No. 1 brewer, bought the rest of China's Harbin Brewer Group.

Heineken in August agreed to buy Central European Brewing to gain 95 percent of the Shikhan Brewery in Sterlitamak, eastern Russia, and all of the Volga Brewery in Nizhny Novgorod, the country's fourth-biggest city. Less than nine weeks later, it announced the purchase of a brewery in Novosibirsk.

In Russia, beer is growing in popularity so fast that the government has sought to curb excessive consumption -- the State Duma in August passed a law banning beer commercials on television and radio between 7 a.m. and 10 a.m. And on Friday, the Duma passed a bill that will outlaw selling and consuming beer on the street, in sports arenas and on public transportation.

SUN Interbrew, InBev's venture in Russia and Ukraine, said earlier this month that third-quarter profit climbed 46 percent. St. Petersburg-based Baltika in October said it had sold 31 percent more beer in the same quarter.

Heineken sold 40 % of its beer in the first half in Western Europe, where the company's sales declined 1 percent in volume terms. North and South America accounted for 13 % of its volumes, Africa and the Middle East made up 12 %, while Central and Eastern Europe generated 27 %.



01 December, 2004