Russia: The history of beer acquisitions in Russia

The first big deal in the Russian brewing market was concluded in 2002 when Dutch brewing force Heineken bought Bravo International factory in St. Petersburg. Heineken paid some $350 million for the business found by Thor Björgólfsson and Magnus Thorsteinsson, the richest people in Iceland.

Three years after there were no deals whatsoever in the brewing market until Alfa Eko investment company started buying in shares of Sun Interbrew. The latter spent over $1 billion in order to buy out its stocks from Alfa Eko and other minority shareholders.

Heineken has become active again in late 2004. It bought four regional breweries within a few minutes. These are Shikhan (in Sterlitamak), Volga (in Nizhny Novgorod), Sobol Beer (in Novorossiysk) and Patra (Ekaterinburg). These purchases cost over $200 million. Most analysts believe that there are bigger deals yet to come. Having bought up small regional breweries, the holding will start absorbing big market players, as Ochakovo or Krasny Vostok. According to unofficial reports, the owners of these enterprises are willing to sell them for at least $1 billion.

Last month, when Heineken agreed to buy Patra, it boosted its market share in Russia to 8.3 %. But it still ranks behind InBev, which through Sun Interbrew holds a market share of more than 15 percent.

Russia's top three brewers -- Baltika, Sun and Heineken -- control slightly more than 50 percent of the country's market, according to Business Analytica. Meanwhile, the top three brewers in France control nearly 90 percent of the local market and Britain's top three brewers control 65 percent, said Troika Dialog's consumer goods analyst Victoria Grankina.

Russia's beer market growth is poised to slow to 5 percent this year, compared to 12 percent volume growth in 2004, according to Business Analytica estimates.

The Russian beer market, which 10 years ago was half the size of the UK market, has raced ahead in recent years to become the world's fifth largest after China, the United States, Germany and Brazil.

Beer consumption for Russia's nearly 150 million people is about 51 litres per person per year, ahead of Ukraine at 31 and Kazakhstan at 20, but below the EU average of 76 and the 100 litres drunk in Germany and the Czech Republic. Consumption of Russia's traditional tipple, vodka, is around 15 litres a year.

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