Carlsberg will be crying into its beer – Comment

Russia’s beer market – a tale of woe. Heineken, SABMiller, Efes, Carlsberg: even without the rise in excise, brewers are already suffering from Russia’s economic slump. But Carlsberg, which has made a hefty bet on the beer markets of eastern Europe and spent about USD 12 billion buying and investing in Baltika Breweries, could be hit hardest.

Already this year Carlsberg has suffered a 10 percent drop in consumption of Baltika’s beers. With the higher duty it glumly estimates that consumption will plummet by 25 percent to 35 percent a year by 2012 rather than return to growth.

Given that Baltika produced an estimated 45 million hl last year, a decline in consumption within the expected range could easily wipe 10 million to 15 million hl off Baltika’s books. This prospect alone should give Carlsberg’s and Baltika’s executives some sleepless nights.

Of course, health officials say that the excise hike is good news for Russian livers, which must process on average of 18 litres of pure alcohol a year, twice the average in the European Union. But according to The Economist newspaper, Russia has no intention of putting up the price of the traditional source of hangovers: vodka.

The average Russian already drinks 30 litres of vodka a year, six times the amount in the EU, while imbibing a modest 77 litres of beer, a little less than a typical European. Pushing up beer prices is far more likely to encourage drinkers to swallow even more vodka or dodgy moonshine than to convince them to give up booze altogether.

Then again, it will give Russia’s huge – and largely locally owned – vodka industry reason to raise a glass.