More ill winds to come
Western brewers had better brace themselves for more restrictions and continuing struggles. As the President of the Barley, Malt and Beer Union, Alexander Mordovin, said at drinktec in Munich last month, it’s the explicit aim of his country’s government to bring the foreign brewers’ beer market share down to 50 percent to boost private Russian breweries. Five international brewers (Carlsberg/Baltika, Heineken, Efes, SABMiller and InBev) controlled 96 percent of the Russian beer market in 2006. Today the remaining three – Carlsberg/Baltika, Heineken and AB-InBev/Efes – share 72 percent.
It must be the first time a Russian official has publically explained the reasons for the government’s anti-beer policies, although Mr Mordovin’s position in this is somewhat strange. To all appearances, he serves as president of the brewers’ association, an industry body, whereas during his presentation at drinktec he came across like a spokesperson for the government.
Few would have thought that brewing was a strategic industry in Russia, but as Mr Mordovin pointed out, the government disapproved of the fact that the foreign brewers not only reaped nearly all of the profits from beer, they also expatriated them. Hence the government introduced various restrictions – from hiking taxation to banning advertising – in order to support the rise of local breweries.
Between 2009 and 2017, 800 small and medium-sized breweries have sprung up, bringing their number up to 1,100, while AB-InBev was forced to shutter five plants, Carlsberg two, Heineken three and Efes two.
In the years since 2008, market leader Carlsberg/Baltika has lost nearly 50 percent of its sales volume as has AB-InBev, whose beer volumes dropped to 8.9 million hl in 2016 from 17.4 million hl in 2008, according to Mr Mordovin.
In retrospect, it was the ban on advertising in 2012 that did the most for small breweries, Mr Mordovin said.
He left no doubt that there will be further restrictions, like a staggered excise rate, to reach the government’s ultimate goal of a 50 percent market share for local breweries.
Proudly, Mr Mordovin reported of two state-owned breweries being launched by the vodka distilleries Tatspiritprom and Mordovspirit. Tatspiritprom is said to be Russia’s largest distiller and resides in Kazan, Tatarstan, 600 km east of Moscow. It will build a two million hl state-of-the-art Krones brewery in Chistopol, 150 km southeast of Kazan, for the cost of EUR 30 million (USD 35 million).
It may be assumed that, after clamping down on domestic distilleries in recent years by revoking their licences, the government seeks to give the state-owned firms some breathing space by allowing them to diversify into beer.
Insiders say that, on the whole, locally-owned Russian breweries serve good quality all-malt beers as malt is cheap, thanks to the overall decline in beer production. Behind these start-up breweries are various types of investors: distributors, businessmen, farmers and not to forget all those brewers who lost their jobs when the international brewers introduced several rounds of redundancies.
All this does not bode well for international brewers if the Russian government is getting serious about throwing its weight behind the local small guys.
