Peroni Nastro Azzurro set for Turkish expansion?

Peroni Nastro Azzurro set for Turkish expansion?

SABMiller's tie-up with Anadaolu Efes looks like a shrewd move both in Russia and beyond.

SABMiller said today (19 October) that it will hand over its Russian and Ukrainian beer business to Anadolu Efes in return for a 24% stake in the Turkey-based drinks group. Given the furore around SABMiller's pursuit of Foster's Group, this is a deal that many may have overlooked in the pipeline. But, it makes a lot of sense, for two principal reasons.

The first has everything to do with Russia. Over the last couple of years, Russia has been a tough place to sell beer. A stumbling economy in 2009 fed into a three-fold hike in beer tax in 2010, erasing all but a flicker of the beer gold rush that swept the country in the early years of the 21st Century.

In 2011, beer sales in Russia have not rebounded as much as was initially hoped. Meanwhile, more regulation is set to hit the sector in 2012. Despite this, Russia is still broadly considered an emerging market, and one that most multinational brewers still want to be involved in. 

SABMiller is the fifth largest player in Russia in volume terms, with Anadolu Efes sitting at number four, according to share data published this year by Russia's leading brewer, Carlsberg-owned Baltika Breweries. However, a combined SABMiller-Efes would leapfrog Heineken and Anheuser-Busch InBev's Sun InBev to become the number two player. Both companies also said today that their deal will make them a "strong number two" on the market in value terms.

SABMiller will have representation on the Anadolu Efes board and so retain a say in decision-making on Russia, while at the same time gaining a share of Efes' greater scale in the country. The two firms estimate that they can achieve at least US$120m in annual synergies in the Russian market.

The second main reason for this deal, and possibly a bigger pull for SABMiller, is the position that the UK-based brewer will gain in Turkey. As part of the alliance, both companies will distribute each other's brands in their respective markets, where possible.

Anadolu Efes effectively runs Turkey's beer market, with a thumping 89% volume share. It also has strong positions in certain former Soviet nations, such as Georgia, and the Middle East. "The prospects for these markets are excellent," said SABMiller's CEO, Graham Mackay. The group can use Anadolu Efes' network to expand sales of international brands such as Peroni Nastro Azzurrro, which may go some way to offsetting tough conditions in SABMiller's main markets in Eastern Europe.

While this deal makes sense, though, could there be an endgame in sight? As the world's second largest brewer, one is not accustomed to seeing SABMiller accept minority shares in businesses. 

Interestingly, SABMiller added today that it has negotiated first refusal, at a fair market value price, on the Anadolu Efes business should its family holding companies want to sell. It could be a case of when, not if.