Carlsberg upbeat despite eastern finance fears

By Neil Merrett

- Last updated on GMT

Related tags: Europe, Economics, European union

Eastern European markets like Russia have been a key driver for brewers’ sales in recent years, though as governments in the West look to help prop up some economies in the region, beer is one area that may lose its fizz for multinationals.

Carlsberg, which estimates that half its net sales now come from Eastern Europe, says that although it expects business to be flat in the coming year, it remains committed to its growth strategies in these markets.

Although the brewer claims to be gaining market share in the area and expects to weather the economic downturn through subsidiaries like Baltic Beverage Holdings (BBH), one analyst group believes short term loss should be expected at the very least by the industry.

Declines in 2009

In looking ahead at predictions for 2009, the financial analyst suggested that some industry claims that Eastern European demand for beer would remain flat seemed ambitious. By comparison it claimed that single digit falls in sales were more likely to occur during the next nine to 12 months.

The analyst group, which asked not to be named due to its work with the brewing industry, told BeverageDaily.com that slowing demand was being felt across the region in relation to a falling gross domestic product (GDP) in certain markets.

Loan package

The claims come as the predicted high growth markets of Eastern Europe begin to struggle in the economic downturn, leading some Western European neighbours to consider further financial support to protect their interests.

On Saturday, Agence France Presse reported that some EU leaders had agreed to a package that would double the potential amount of loans being offered to Eastern Europe to €50bn in a bid to keep markets afloat.

Although the analyst said that concerns over beer growth could potentially reflect the seasonal nature of the market, the impacts of the economic downturn were expected to continue through the current year.

The group said that a number of markets linked to strong growth in beer sales during recent years, such as Romania and Hungary, were recording demand declines, along with Russia and potentially Poland in the future.

Russia, which along with Poland are seen as the two most significant markets in the region regarding size, had seen background inflation that has led to brewers passing on increased costs to consumers and stakeholders, said the analyst.

The group added that this problem had been further compounded by a difficult Russian wholesale market, where suppliers were unwilling to offer credit to secure increased beer volumes on the market.

While the difficulties on the Eastern European financial market could discourage multinationals investing further in the region, the analyst claimed that brewers were expected to sit out short-term difficulties before considering drastic policy changes.

Carlsberg

Carlsberg, which, according to the group’s own figures, holds the largest market share in Russia through the Baltika brand of beer, accounting for 38.3 per cent of national beer sales in 2008, matched these sentiments.

With the company expecting to strengthen its presence in Russia in coming years, the brewer said it was preparing to last out the potential impacts of the economic downturn in the region and had strategies in place.

During its financial reporting for the 2008 fiscal year, the company said that sales in the region had increased by 20 per cent on an organic basis, due predominantly to its operations in Russia.

Although the company conceded at the time that beer was resilient to economic downturns, it was not completely immune to the impacts of pour economic conditions.

In looking ahead though, Carlsberg said that premiumisation towards higher-end brands was expected to continue.

Related topics: Carlsberg, Manufacturers

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