BBH targets Belarus for beer growth

By Angela Drujinina

05/09/2005 - Russia's largest brewer, Baltic Beverage Holding (BBH), plans to take on tough market conditions to expand operations in Belarus as Russia's beer boom shows signs of slowing.

BBH,, a 50-50 joint-venture firm established by Scottish & Newcastle and Carlsberg, said it aimed to increase sales of its Arsenalinoe brand by 30-40 per cent in Belarus on the back of a new promotion push.

The brewer has been selling Arsenalinoe in Belarus since 2002, yet it now believes the country is one of the most interesting and high-potential markets in the region.

BBH has already performed extremely well in Russia, grabbing a 36 per cent market share and helping to holding up earnings for its international parents amid their slower performances and tough competition in Western Europe.

But, Russia's beer market growth, while still going well as the fifth biggest market in the world, has slowed in the last couple of years to under five per cent; perhaps persuading BBH to increase its focus in neighbouring areas.

And BBH already has a good foothold in Belarus with around a 13 per cent share of market volume.

Yet, authorities in Belarus have made the market a difficult one for foreign brewers to work in. A BBH spokesperson mentioned among them a lot of import limitations and a strong lobby for local products. Authorities say local products should make up 85 per cent of retailers' shelf offerings.

It is also difficult for suppliers to work with sub-distributors because of extra commercial charges imposed by authorities, and firms have complained that it takes a long time for money to make its way back from the retailers. According to the authorities' rules, money is first paid to local producers and then to importers.

So far BBH has done quite well. In the first 6 months of 2005 more than 3.5m litres of Arsenalinoe were sold.

The firm is also set to launch the Foster's beer brand in Belarus, already launched in Russia under a licence agreement with the Australian brewer. Foster's will be sold in glass bottles of 0.33l, aluminum cans of 0.5l and also in kegs for sale in cafes, bars and restaurants. Sales will begin in Minsk before moving in to other regions and cities.

Meanwhile, the brewer continues to make progress in other areas. It said Kazakhstan had been the biggest importer of its beer during 2004 and the first half of 2005, thanks to the "high loyalty level of the Kazakh inhabitants towards Baltica brand".

The firm said it benefited from good pricing, a developed distribution system and a high percentage of Russian speakers, which remained loyal to Russia and its products.

BBH is the biggest brewery in Russia and Western Europe. It owns five factories (in Saint Petersburg, Tula, Rostov, Samara, Habarovsk), malt-houses in Saint Petersburg and Tula, a network of logistics terminals in large Russian cities and two power stations in Saint Petersburg and Rostov na Donu.