New Foreign Brews Enter Market
As foreign brewers seek larger shares in a Russian beer market that producers and experts claim is still far from saturated, St. Petersburg brewers have begun production of at least two major foreign beer brands this month.
The mid-November launch of Scottish & Newcastle's Kronenbourg 1664 brand, brewed by Vena, has been followed by Foster's lager, produced by Baltika Brewers under license from Australian drinks company Foster's Group Ltd.
"It's a huge market and it's fast-growing", Rick Scully, managing director of Foster's Brewing International, told Dow Jones Newswires. "Just on basic volumes, you've got be in Russia".
Baltika began production of Foster's beer at the end of October and the first consignment totaling 300,000 liters is already available across Russia, Baltika's press-service said.
The brand's official launch is planned for Dec. 9 in Moscow, and in St. Petersburg on Dec. 17.
Local prodcution of foreign brands under license is nothing new.
Advantages for Russian brewers, which take care of marketing and distributing foreign brands across Russia, lie not only in percentages of sales but in "strengthening the company's presence in the license segment of the market," said Baltika's press-service in a telephone interview.
"The Russian beer market is still gathering its speed, and it's not overloaded with products yet," the brewer's press service added.
Vena said it plans to produce 400,000 decaliters of Kronenbourg 1664 beer in 2005.
Despite recent federal legislation to curb beer promotion, the domestic market has doubled to $7 billion in the last five years. It ranks as the world's fifth-largest, and this year alone is forecast to grow by at least 5 percent, several percent higher than in Western Europe, noted Moscow-based brokerage Renaissance Capital, as reported by Bloomberg.
The international premium beer segment as yet represents about 5 percent of the overall Russian market but this is set to double in the next three years. While both Foster's and Baltika declined to comment on their royalty/sales agreement, Scully said Foster's viewed the deal as "a big opportunity," and that the partners aimed to sell 400,000 hectoliters, or four million cases of Foster's within three years, as reported Dow Jones.
"Russian companies are seeking to offer a larger variety on the market, and that includes through foreign brands brewed under license," said Vyacheslav Mamontov, executive director of the Russian Brewer's Union. "And naturally, Baltika is interested in promoting foreign brands as much as its own – after all it is to their profit.
"There is still potential for the Russian beer market to develop and the foreign brand sector especially. If we're talking about the number of brands, the German market has over 1,400".
Mamontov does not exclude the possibility that as more international brands enter the domestic market Russian brewers' cooperation with foreign companies could help domestic brands.
The Australian beer, "mainly aimed at 20- and 30-somethings with good incomes," is the second foreign brand after Carlsberg to be brewed by Baltika for the Russian market, said Baltika's press-service. The company added that the appearance of new beer brands on the Russian market is conditioned by the quick and successful development of this segment in Russia.
Per capita beer consumption in Russia has quadrupled in the last decade to 53 liters a year, according to brewers' data. That is still about half of that in the U.K., U.S., Australia, and Eastern Europe; for instance, in the Czech Republic per capita annual beer consumption is almost twice that as in Russia at about 90 liters.
