Russian wheat woes unlikely to have big impact on European beer market

By Guy Montague-Jones

- Last updated on GMT

Related tags Beer market Russia

Russian wheat woes unlikely to have big impact on European beer market
A poor Russian wheat harvest and a ban on grain exports are unlikely to have a major impact on the European beer market, but could represent another setback for the home market, according to a Canadean analyst.

Last week Russian prime minister Vladimir Putin announced a temporary ban on grain exports as hot weather, drought and wildfires conspire to put the wheat harvest in jeopardy.

Fears of a squeeze in supplies from Russia, which was the fourth largest wheat exporter, hit shares in the biggest brewers at the end of last week.

Wheat price impact

However, Kevin Baker, a beverage analyst at Canadean, told that the Russian situation is unlikely to have a major impact on the beer market in Western Europe. This is because very little of the wheat needed for brewing in the region comes from Russia.

However, Baker said: “The wheat harvest problems are certainly not going to aid any recovery in the Russian beer market, which has already taken a massive hit with excise duty.”

The Russian government implemented a big hike in excise duty at the beginning of the year, which increased prices in what is a very price sensitive market.

Baker said: “In general people only drink beer because it is cheaper than vodka… the Russian market is really all about alcohol delivery and nothing else.”

Russian beer market

Another price increase from higher raw material prices is therefore the last thing that the market needs.

Although the wheat price situation will be a serious concern for international brewers with a big footprint in Russia, it is likely to hit the bottom end of the market much higher than the premium side.

Baker said a company like Carlsberg, which has a big presence in the country, has weathered the existing price storm better than many people thought by some careful management of its brands. Its strategy has been to focus on developing its premium brands which can absorb cost increases more easily and are less sensitive price changes.

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