Setting a signal

If Slavutich Carlsberg were to close the brewery, even if only temporarily, that would be a real blow to its employees. However, the price hike in water is only a pretext for a short-term shutdown direly needed by Slavutich to keep operational efficiencies at its other plants at reasonable levels.

Beer production in the Ukraine is still highly seasonal. In the summer months, Slavutich may be able to utilise its three plants properly. But in the long winter months, when Ukrainians keep themselves warm with a little vodka here and there, having two plants running will more than enough cover demand.

To cope with Russia’s likewise extreme seasonality in beer sales, A-B InBev has opted to do the same as Slavutich. In December 2008 it announced that it would shut down one of its Russian breweries to cut costs amid weaker sales. Production at the plant outside St. Petersburg was slated to cease mid-December, while A-B InBev would raise production at some of its nine other Russian plants to compensate.

In the Ukraine, Carlsberg says it employs more than 2000 people at its three breweries. The Kiev brewery was started as a green field project and opened in 2004.

The Ukrainian beer market is the second largest in the CIS, the former Soviet Union, and has still a great deal of undeveloped potential. From 1998 to 2004 the Ukrainian beer market grew by a total of 17 percent. Consumption of beer per capita was 61 litres in 2007.

In 2007, says Carlsberg, beer consumption went up a staggering 19.4 percent to 31 million hl. Slavutich’s sales rose 37 percent and its market share increased to 20.4 percent (or number three position).

For 2008, Ukrpyvo, the association of breweries in the Ukraine, forecasted a production increase of 14 percent to 36 million hl beer and a per capita consumption rate of 65 litres. But with the world’s economic crisis also affecting the Ukraine adversely, it is not certain yet if the estimated volumes have been sold.

With the exception of Kiev’s brewer Obolon, which is still controlled by local businessmen, the Ukraine’s other large breweries have in recent years been snapped up by international brewers, including InBev, Carlsberg and SABMiller.

Caption (below): Slavutich is the number four brand in the Ukrainian beer market according to Carlsberg. Photo: Carlsberg