Comment - Beer - Brewers Must Ride Out Russian Rumpus

How ruptured is Russia's beer market?

//i2.aroq.com/1/101172404.jpg

More evidence came yesterday of the tough times that global brewers are facing in the region. Anheuser-Busch InBev reported that its third-quarter beer volumes in the country fell by 13.4%, meaning in the year-to-date volumes are down by 13.4%.

On top of this, the company revealed it is merging its Central & Eastern European division, which also comprises Ukraine, with its Western Europe unit. CEO Carlos Brito insisted this was not a cost-cutting exercise, but designed to reduce “complexity and improve efficiency”. However, with talk of A-B InBev reviewing its structure it sounds like job cuts cannot be ruled out. The company has already been forced to close one of its Russian breweries. 

Earlier this month, Heineken reported similarly dismal figures for Russia, with volumes down double digits. While, in its last set of results, Carlsberg, the country's biggest brewer by footprint, pointed to a 7% decline in the country's beer market. 

Three key factors have hampered growth in the world's fifth-largest beer market by volume: the state of the economy, tax hikes and legislation introduced this year banning beer sales from “non-stationary” outlets, as well as the outlawing of print media alcohol advertising. 

But how long will it be before Russia recovers for brewers? A-B InBev's Brito yesterday warned it could take years, but has insisted the company will stick it out there, even though the region is less than 2% of its global profits pot. Brito has suggested that the premium market is where it could be at. 

Heineken has indicated it expects the market to be down 10% this year. 

Meanwhile, a glimmer of light has come from the fact the Government has voted to ease back on beer taxes from 2015. 

Being the market leader, Carlsberg clearly has the most to lose and equally gain. But, evidenced by the fact A-B InBev wants to keep its toe in the water, there's clearly still much to play for in the long-term. 

Among the big beasts of the brewing world, nobody likes to lose. 

---