Brooklyn and Carlsberg’s brewery in Klaipeda open (of sorts)
Never trust a press release. Ring and inquire in person. It could save you a fool’s errand. When travelling around the Baltics in July, I decided to pay the new Brooklyn-Carlsberg venture at the Svyturys brewery in Klaipeda a visit. I even went so far as to promise my travel companions an evening of free beer and food. After all, the craft brewery’s opening had been confirmed by both Carlsberg and Brooklyn.
Carlsberg’s press release read that “on 28 June 2018, after a three-year reconstruction project, the Svyturys Brewery finally opened its doors in the Klaipeda port area in Lithuania. Here, beer enthusiasts can find a modern craft beer line, beer museum, gastrobar and shop, and conference and degustation halls – all under one roof.” To me this meant: punters welcome.
Perhaps I should have read Brooklyn’s blog more carefully. A few days before my visit on 16 July, the Americans posted: “Whether you’re in Lithuania in time for Brewmasters’ Day on Saturday, 14 July, or just hoping to visit at some point in the future, make sure Svyturys Brewery is on your must-visit list.” Here it was: “visit at some point in the future”. Ignoring the explicit vagueness, I stubbornly walked my thirsty companions to the brewery only to find the bar dark and closed. Ominously, there was no sign with opening hours.
Just to make sure we had not gone to the wrong entrance, the following morning, we walked around the whole brewery. This time we saw a group of builders milling around, operating heavy machinery to clad the building’s exterior with red bricks. It then dawned upon me that “open” can mean anything from “open daily” to “open eventually”.
I have since been told that, despite the official opening on 14 July, construction work is not quite finished yet and the new beers are still being trialled. If all goes according to plan, the beers will hit the market in September.
Plenty of folk will have been wondering why Carlsberg and Brooklyn chose to open a craft brewery in Klaipeda. Reportedly, the investment, their third in the Nordics after Stockholm (Sweden) and Trondheim (Norway), came to EUR five million. The port town on the Baltic Sea is the smallest of Lithuania’s major cities – the capital Vilnius has 550,000 inhabitants, Kaunas 300,000 and Klaipeda 150,000 – and in our view also the least charming in terms of tourist attractions.
But Carlsberg has a brewery there, the Svyturys brewery (meaning “Lighthouse”), which it acquired in 1999 and must have been reluctant to shut down. Had Carlsberg sought to consolidate the market aggressively, it could have produced all the volume required to serve the Lithuanian market at its Utenos Alus Brewery in Utena, 330 km to the east of Klaipeda near the Belarus border. In fact, during construction at Svyturys, beer production was temporarily farmed out to Utena and to Carlsberg’s Saku brewery in Tallinn, Estonia. Yet, Carlsberg decided to keep the Klaipeda plant open, where it had also installed a small batch brewery for the Raudonos Plytos brand, which was successfully launched a few years ago and translates as “red brick”. Now, thanks to the venture with Brooklyn, the Svyturys brewery’s future seems finally secure.
Of the three Baltic beer markets (Estonia, Latvia and Lithuania), Lithuania is the largest at 2.9 million hl beer production annually. All three markets are dominated by Carlsberg. In Lithuania, Carlsberg has an estimated market share of 40 percent. The number two brewer is Kalnapilio-Tauro Grupe, controlled by Denmark’s Royal Unibrew, at 20 percent. Finnish brewer Olvi, through its local subsidiary Volfas Engelman brewery, has ten percent, according to a 2017 paper by two academics, Vladislavas Petraskevicius and Zlatko Nedelko. Imports amount to say eight percent, leaving 22 percent of the market to local competitors, among whom you will find a growing number of Lithuanian craft brewers.
Although local craft brewers tend not to stray from the beaten track – US-style IPAs don’t meet locals’ tastes and all brewers go for sweetish, malty flavours – domestically produced craft beers represent a great challenge for Carlsberg as they hit a nerve with consumers elsewhere: national pride.
Counting 72 breweries, including the majors, and rising, Lithuanian consumers take great pride in their country’s rich tradition of brewing beer, but unfortunately, they have been unable to shake off the nasty Russian legacy when it comes to drinking vodka. A World Health Organization (WHO) representative reported that Lithuanians are among the highest alcohol consumers in the world with per capita consumption of pure alcohol reaching 16 litres in 2016. The ills of excessive alcohol consumption have not escaped the government which in 2017 introduced a blanket ban on alcohol advertising and raised the legal drinking age to 20 from 18 as of 1 January this year.
Since 2010, beer consumption in absolute volumes has declined to 2.5 million hl (2016) from 2.9 million hl in 2010, according to data by The Brewers of Europe. In 2016 the average Lithuanian consumed 88 litres of beer per year. While the health-conscious government may cheer this development, the real reason for the drop is emigration, not moderation. Lithuania is losing her people fast. Following the collapse of the Soviet Union, Lithuania has seen her population shrink to 2.8 million people (2017) from 3.7 million in 1990. Employment opportunities are far better elsewhere. Between 2010 and 2017, an estimated 190,000 Lithuanians have moved to the UK alone, doubtlessly doing their bit to prevent beer sales there from dropping further.
Lithuanian beer consumption may continue its downward course, but there is hope for the market leader. Craft beer drinkers are amongst the least parochial. And profits from craft beer are far higher than those from mainstream brands. Of course, there are higher costs associated with producing, selling and distributing high-end beers, but their pricing more than offset this. As a result, premium beers are about 50 percent more profitable than mainstream beers while superpremium beers (mostly craft beers) are nearly four times more profitable, argue analysts at Bryan, Garnier & Co.
Once the Brooklyn-masterminded beers from Klaipeda start flowing, Carlsberg will have filled a hole in its brand portfolio and will be in a better position to capitalise on its predominance of the domestic on-premise sector. Not a bad tactic to keep local competitors at bay, I’d say.
