Insight - DENMARK: Carlsberg lobbies hard on Russia tax rise
Carlsberg is lobbying hard to dissuade Russia's Government from tripling excise tax on beer, ahead of a debate on the proposal in the country's parliament this week.
Members of Russia's State Duma are set to discuss alcoholic drinks tax on Friday (6 November), Carlsberg CEO Jorgen Buhl Rasmussen said in the brewer's third quarter results conference call today (4 November).
Russia's proposal to raise tax on beer from RUB3 per litre to RUB9 per litre from January 2010 dominated the conference call.
Carlsberg, which owns leading Russian brewer Baltika Breweries, has joined with other brewers to lobby against the plan, which it said today would "clearly affect the beer market negatively".
Analysts believe a beer tax hike could significantly hamper earnings for brewers in the country.
Rasmussen said Carlsberg has "detailed scenario planning in place", adding: "During the quarter the group has invested significant resources on the proposed excise tax increase."
A decision is expected by early December, and until that time Rasmussen said it is "too early to comment on the size of the impact".
He added: "Other alcohol restrictions are [also] currently being discussed in Russia, but what measures may be proposed, what for and the timing of them remains very unclear."
Russia's beer market is on-course to shrink by 10% in volume in 2010, due to poor economic conditions, according to Carlsberg.
Despite the fall, and the prospect of higher taxes on beer, Rasmussen reaffirmed Carlsberg's commitment to the market.
"We still believe that medium to long-term this is going to be a growth market," he said. He added that a beer tax rise, whatever the final outcome, will still "likely bring opportunities to further strengthen our position on the Russian market".
Russia's beer market decline has had a mixed effect on Carlsberg so far in 2009. The group has increased Baltika's market share, from 38% in the third quarter of 2008 to nearly 41% in the same period of this year.
Analyst group Sanford C Bernstein said today that, as consumers traded down on beer in Russia, Carlsberg has "expanded margins significantly" due to synergies and lower costs.
Elsewhere in the business, Carlsberg reaffirmed its full-year profits target of DKK3.5bn today, after earnings in the third quarter were boosted by efficiency savings across Northern and Western Europe.
Net profits for the three months to the end of September rose to DKK1.49bn (US$295m), compared to DKK1.2bn for the same period a year earlier.
The firm has also benefited from an average 10-15% drop in media rates across its markets.
Net sales for the year are likely to be DK59bn, compared to a previously predicted DKK60bn-DKK61bn.
There was positive news from France, where the group said: "For the first time in several years we have seen a clear stabilisation in market share of [our] two main brands, Kronenbourg and Kronenbourg 1664."
Kronenbourg in France was acquired as part of Carlsberg's role in the takeover and carve-up of Scottish & Newcastle last year.
The wave of major consolidation activity in the beer market over 2008 was followed by weakening volume growth in 2009 as the economic downturn put a dampener on bullish tactics. With the global beer l...
Carlsberg-owned Baltika Breweries has said that beer will remain its core business, despite its plans to launch a new water product in Russia later this month....
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