Heineken positive on its activities in Russia
Sometimes it pays not to listen to your critics. In the case of Heineken, financial analysts and other armchair strategists have complained for years that Heineken was too cautious and too tardy when it came to entering the Russian beer market. While International brewers like Baltika (jointly owned by Carlsberg and Scottish & Newcastle), SABMiller and Efes were busy securing market share, Heineken preferred to stay on the side lines watching. In a market as large and heterogeneous as the Russian, Heineken could afford to wait until the early rounds of consolidation were completed. Because being tops in St. Petersburg or Moscow does not mean you are set and done.
After a quick succession of acquisitions between 2002 and 2005, when six local brewers came into the Heineken fold, Heineken now owns 10 breweries and is the country’s third
largest beer producer with a market share of 16 percent.
Heineken hopes to increase its share in Russia, its single largest market, to 20 percent in five to six years through organic growth.
“Our investment in Russia is a cornerstone of Heineken’s development,” Chairman Jean-Francois van Boxmeer was quoted as saying, referring to the company’s EUR 1.2 billion investment in the world’s fifth largest beer market.
Heineken, which produces local beers such as Three Bears, Ohota, Bochkarev and PIT, feels it is under-represented in premium brands which make the highest profit and is now pushing forward with licensed beers. It launched several premium beers, including an international version of Amstel, last year and will start selling Budweiser under licence from U.S. brewer Anheuser-Busch under the “Bud” trademark.
Heineken is gradually raising output in Russia with volumes increasing to an expected 13 million hl beer this year from 2.8 million hl in 2002. Heineken expects the EUR 4 billion Russian beer market to be one of the in few Europe to grow this year – by 4.4 percent – as Russia’s oil boom, benefiting from high oil prices, feeds through into the pockets of consumers. Heineken Brewery in Russia has reduced the headcount by 500 employees as a result of integration activities and efficiency improvements. Based on the current positive developments Heineken confirms its expectation that its Russian acquisitions will become value enhancing in five years’ time.
Heineken also reported that group beer volume in the first six months of 2006 totalled 62.7 million hl (+11.6%).
