Belarus Food and Drink Report Q3 2008 - Companies and Markets adds new report

Belarus Food and Drink Report Q3 2008 - a new market research report on

Despite its reputation as a poor place to do business, the Belarusian food and drink sector has been catching the eye of foreign investors, as discussed in BMI's brand new quarterly Belarus Food & Drink Report. The beer market in particular has been attracting considerable attention, thanks to its strong growth potential. Like almost all industries in Belarus, there is considerable state involvement in the beer sector, with the President having described its control as a matter of 'food security.' Nevertheless, some companies have been dipping their toes in.

First, in January 2008, Baltic Beverages Holding (BBH) reported that it will invest around US$6mn throughout 2008 in the Belarusian brewery Olivaria, in which it holds a 30% stake. According to BBH these investments will primarily be in distribution, production development and staff training. BBH has said that its strategy for Belarus is to secure market leadership, as well as increasing exports, with Ukraine and Russia the main target countries. Then, in May 2008, Dutch brewing giant Heineken announced its acquisition of the Rechitsa brewery, which has now given it a production share of 24% in the local beer market. This deal represents a EUR6.4mn (US$9.9mn) investment by Heineken, which will eventually hold a 51% stake in the brewer. Located in the town of Rechitsa 280km from Minsk, the brewery has a technical capacity of 525,000hl and last year sold 285,000hl, representing a national production share of 8%. Rechitsa also operates a maltery with a 10,000- tonne capacity.

This followed Heineken?s acquisition of Syabar brewery in December 2007. The beer market is expected to experience the strongest growth in terms of the alcoholic drinks sub-sector. According to BMI forecasts, sales of alcoholic drinks are forecast to increase by 37.5% in value terms between 2007 and 2012, reaching US$426.9mn by the end of the forecast period. Per capita alcohol consumption will rise significantly by 41% to reach US$45.2, as disposable incomes rise and consumers switch over to higher value drinks. A move away from homemade and illegally produced drinks will also play a major role in this increase. With disposable incomes rising and more consumers switching from traditional spirits to beer, this will be a major driver behind the growth of this sub-sector. A major driver behind all growth in the food and drink sector will be the country's positive economic outlook.

Going forward, we anticipate that GDP growth will come in at 7.8% this year, down only slightly from 8.2% in 2007. We see growth remaining robust throughout our five-year forecast period, averaging 7.1%. During this period foreign investment is expected to be a major driver of growth, as the political leadership had adopted a more positive attitude towards foreign investors, and there have been amendments to legislation allowing for the opening of previously heavily state-controlled sectors. With international food and drink operators continuing to look for new emerging markets to invest in as a means of pursuing growth, the Belarusian market should continue to benefit from this trend.



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