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Baltika eyes Heineken’s No.1 spot in European beer

Russia’s largest brewer Baltika wants to dislodge Dutch rival Heineken from its dominant position on the European beer market, despite a slowdown in Russia, a company official said on Thursday.

"Baltika is confidently gaining ground on the market leader Heineken... In the near future we will be the No. 1 in Europe," Marketing Vice President Marcho Kuyumdzhiyev told reporters.

Baltika, which is controlled by Scottish & Newcastle and Carlsberg, sold 37.16 million hectolitres of beer in 2006, including 11.6 million hectolitres in Europe.

Russia is the world’s fifth largest beer market behind China, the United States, Germany and Brazil and together with China is one of the world’s fastest growing, boosted by rising real disposable incomes. Kuyumdzhiyev said Baltika planned to meet its target via sales on the domestic market and in the former Soviet Union.

But analysts believe that the world’s beer market is close to saturation, and say current double-digit growth rates are already slowing down.

Analysts had forecast Russia’s beer market would grow by 4.0-5.6 percent in 2006, but it soared by 10 percent due to an unusually warm summer.

The result was however, a slowdown compared to 2005, when the market grew by 12.5 percent.

Baltika forecasts the Russian market would grow 3-5 percent in 2007 and the next few years, but Kuyumdzhiyev said he believed the slowdown in domestic market growth would not prevent it from catching up with its Dutch competitor. "Even if growth slows down, we have a strong base in Russia, and we will reach Heineken’s volumes," he said.

In 2006, Baltika merged with three smaller Russian breweries, and reported a 42 percent rise in net profit to $442 million, citing synergy benefits, mainly cuts in distribution costs, and warm summer as the main reasons for the increase.

It has recently announced plans to more than triple the capacity of its brewery in Samara in central Russia to 6.5 million hectolitres and to build a 65 million euro brewery in Novosibirsk to start producing 2 million hectolitres in 2008.

Maria Kiselyova

Reuters - 6 April 2007
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