Russian water bottler set for growth

Related tags Mineral water Bottled water

Narzan, one of Russia's best-known mineral water companies, has
received a loan for $12.25 million from the European Bank for
Reconstruction and Development as part of a combined equity
investment scheme.

Nazran will use the financing package to expand its bottling capacity, develop new products and provide it with working capital.

The Narzan spring at Kislovodsk, in Russia's southern Stavropol region, was documented for the first time in the early 18th century and its mineral water has been bottled since 1894. A household name during the Soviet era, Narzan is today widely available in retail outlets throughout the country and is a leader in the sparkling mineral water sector.

"Narzan is a traditional Russian mineral water, which we believe has good potential to capture a growing share of the booming Russian beverage market,"​ said Hans Christian Jacobsen, Director of the EBRD Agribusiness Team.

The company is also a high-profile business in the Northern Caucasus', a region which has so far seen only limited foreign and domestic investment, and Jacobsen feels that this project will send an important signal to those thinking of doing business in the area.

Narzan is now entering a new phase of its development, said Viacheslav Sinadski, Managing Director and member of the Company's Board. The managers and owners of Narzan believe that the EBRD financing will help form the basis of the company's long-term expansion and growth.

Currently the Russian market for mineral water is rapidly developing, with consumption being matched by a plethora of new players on the market. Only last year, leading dairy player Wimm-Bill-Dann announced that it was about to move into the mineral water market, when it launched its Sanctuary Valdai brand and bought up the acquisition of the Healing Springs company.

Also last year, Russia's largest beer brewer, Baltika, began production of bottled water at its breweries in Tula and Khabarovsk. At the time the company said it was aiming to push the water in the main metropolitan areas of St. Petersburg and Moscow.

The bottled water market clearly has significant potential in Russia, where the quality of tap water is often poor, but the problem has always been distributing brands throughout such a large country.

However, the emergence of a number of truly national players in the food and drink sector is making nationwide distribution much easier, providing the opportunity, not only to extend sales of what were once simply brands, but to create new brands which can be rolled out across the country from the outset.

With Russian incomes increasing, and consumer aspirations growing, the potential for bottled water sales growth is substantial, and this is becoming evident by increased investment by producers in the segment.

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