just On Call - Carlsberg "not behaving like market leader" in Russia - Heineken
Heineken has once again locked horns with Carlsberg in Russia
Both Carlsberg and Heineken have been hit by rising raw material costs and a stricter excise environment in Russia, as the authorities look to combat alcohol abuse in the country. Two years ago, the Government introduced a 200% increase in excise tax on beer. Meanwhile, a poor malting barley harvest in Russia in 2010 led to the country banning all wheat exports. As a result, brewers in the country have had to deal with a tough trading environment.
Speaking in the brewer's Q1 trading update conference call earlier this morning (18 April), René Hooft Graafland said that he felt Carlsberg, which owns Russian market leader Baltic Beverages Holding (BBH), is not passing on price rises in Russia sufficiently for the beer market as a whole to weather the ongoing storm.
“It's time to focus on profitability (in Russia), and that means passing on increased input costs and excise rises,” said Hooft Graafland. “The brewers should realise that market growth is probably not there. The current excise regime has made vodka a favourite over beer in regulatory treatment. Don't expect too much growth from that market.
“One of the things to manage for profitability is that you pass on rising input costs and increased excise,” Hooft Graafland continued. “Luckily, we've seen (some) pricing movements from BBH, but still not enough to cover the full excise increase. Personally, I don't find that the right behaviour from the market leader.
“Everybody is blaming everybody, he added. “We are to blame too, as we are not rising (prices) sufficiently. Someone has to take the responsibility, and one is tremendously bigger than the others, and they should lead. The Russian market today is not going in the right direction.”
The comments echo a similar attack in late-2010, when Hooft Graafland said he was "heavily disappointed" with Carlsberg for not passing on the excise rise to Russia's consumers.
In the first three months of this year, Heineken said it saw volumes in Central & Eastern Europe rise by 6.7% on an organic basis. However, profitability declined, due to the impact of lower revenue per hectolitre, and higher fixed & input costs.
To read just-drinks'coverage of Heineken's Q1 update, click here.
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