Russia: Heineken is to acquire Stepan Razin Brewery

Dutch brewing force, Heineken N/V, is close to confirming its purchase of St Petersburg-based brewery Stepan Razin for over $100 million, the country's anti-monopoly watchdog announced on June 30.

The purchase would increase the world's fourth largest brewer's market share in one of the world's fastest growing beer markets to over 10 % and help consolidate its position as the third largest brewer in Russia. "Heineken is filing the details of the deal with the authorities and is due to announce the deal officially soon," one of the sources said.

The sources added this would be Heineken's fifth brewery in Russia and come hard on the heels of its purchase of the Petra brewery in the Urals region in May. It would boost its Russian market share by around 2 percentage points to 11 percent. The deal will reinforce its position in the St Petersburg area, where it bought the Bravo brewery back in 2001.

Heineken, the country's No. 3 brewer by sales, declined to comment on its request to the anti-monopoly service. Stepan Razin's management was unavailable for comment.

Heineken's competitors are Russia's No. 1 brewery, Baltic Beverages Holding, or BBH, and No. 2 Sun Interbrew. Heineken is looking to close the gap on Russian market leader Baltic Beverage Holding (BBH), which is jointly owned by Britain's Scottish & Newcastle and Denmark's Carlsberg, and number two Russian player InBev.

Danish-British BBH, which holds a controlling stake in Baltika, accounts for 37.4 percent of the national beer market by sales, according to Business Analytica figures for the first quarter of 2005. It is followed by Belgium-based InBev, which controls Sun Interbrew, with 15.5 percent, and Heineken, with 8.9 percent.

Stepan Razin, founded in 1795 under the name of Kalinkinsky brewery, has a production capacity of 20 million decaliters of beer per year. The brewer accounts for 2 percent of the domestic market by sales, according to Business Analytica. Stepan Razin's branches in northwestern towns like Vyborg and Cherepovets would help Heineken tap additional consumers and keep down transportation costs, Kapustina said.

Heineken already has a formidable network of local breweries, located in St. Petersburg, Nizhny Novgorod, Sterlitamak, Novosibirsk and Yekaterinburg.

Heineken's interest in Stepan Razin shows that market consolidation is continuing, said Troika Dialog consumer goods analyst Victoria Grankina. After the deal only a few local breweries remain not snapped up by foreign giants. They include Krasny Vostok brewery in Tatarstan and Moscow-based Ochakovo, Grankina said.

Russia's beer market growth is poised to slow to 5 percent this year, compared with 12 percent volume growth in 2004, Business Analytica projected. Last year, the market was worth $832 million.

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