BBH to build new brewery in Kazakhstan

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Baltic Beverages Holding, the 50-50 joint venture between Hartwall
and Carlsberg, has taken a 76 per cent stake in the Kazakhstan
brewery Irbis - a move which will help improve BBH's already
considerable influence on results at the two parent companies.

Baltic Beverages Holding (BBH), the brewing group owned jointly by Carlsberg of Denmark and Hartwall of Finland, is to further extend its presence in eastern Europe with the acquisition of a 76 per cent stake in the Kazakhstan brewery, Irbis.

The deal was carried out by BBH's Russian brewery Baltika, and will see the company enter the Kazakhstan market for the first time. Although Irbis is already well established there, BBH said there is still room for improvement, and will begin construction of a new brewery as soon as it can obtain the necessary approval.

The €45 million brewery will have an initial capacity of 75 million litres, and should begin production by the summer of 2004. In the meantime, BBH said it would invest in strengthening Irbis' brand portfolio and in introducing a number of new brands produced at its other breweries in Russia.

BBH has identified substantial potential for growth in Kazakhstan. The per capita consumption of beer in the country grew 20 per cent last year, reaching a level of 20 litres per head, just one quarter of the average in western countries. The market is fragmented among a large number of smaller players, offering further potential for rapid growth for a company with the money, and the will, to invest.

Kazakhstan has the fastest-growing economy among the former Soviet states in Eurasia, with gross national product growth of 13 per cent in 2001 and an estimated 8 per cent this year, BBH said.

BBH has 15 breweries throughout eastern Europe, eight of which are in Russia. Two more are based in the Ukraine, four in the Baltic States and one in Kazakhstan. An additional three breweries are currently under construction.

Driving growth

The BBH unit has also been a major driver of growth for both its parent companies in the first nine months of the year. Hartwall, which in turn is majority owned by the UK's Scottish & Newcastle group, said its net sales grew by 23.7 per cent in the January to September period to €763.2 million, due in no small part to a 27 per cent rise in sales volumes from BBH, in which it has a 50 per cent stake.

Hartwall said that turnover from BBH was up 33 per cent during the nine months, with Russia accounting for a major part out of that total. In fact, of total market growth in Russia of 570 million litres, BBH accounted for 72 per cent, resulting in a market share of 33 per cent.

But there was also growth in Hartwall's home market, with sales benefiting from both increased volumes and higher selling prices. Volumes were up 4 per cent, in turn lifting turnover by 9 per cent during the period and helping Hartwall maintain its leadership of the market with a 45 per cent share.

Hartwall said that it expected good growth for the year as a whole, despite signs of a slowdown in the Russian market in the fourth quarter.

For Carlsberg, meanwhile, BBH contributed sales of DKr3.7 billion (€0.5bn) in the third quarter of the year, up 34 per cent on the same period a year earlier, helping the company to a 5 per cent rise in overall turnover for the quarter to DKr26.9 billion.

BBH, and Carlsberg's other operations in eastern Europe, were in fact the main drivers of sales growth for the company during the third quarter.

Sales from western Europe were up 5 per cent to DKr20.1 billion, with the Nordic countries, the UK, Italy and Portugal all contributing to the growth, but this was swamped by a 35 per cent rise in turnover from eastern Europe, where revenues reached DKr6 billion, with new acquisitions in Turkey (Türk Tuborg) and Poland (Kasztelan and Bosman) adding to the already strong performance from BBH.

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