OREANDA-NEWS. On 05 August 2008 Baltika Breweries, the leader on the Russian beer market, announced financial results for H1 2008.

The high rate of revenue growth in H1 2008 was primarily driven by portfolio premiumisation as consumers continued to trade up. This factor, together with cost management and agricultural and logistics projects implementation, enabled the Company to offset considerably the impact of input cost inflation, thus increasing operating profit by 11.9%.

In H1 2008, Baltika total sales volume amounted to 23.2 mln hl (+6.1% compared to H1 2007), of which 22.8 mln hl was beer sold – 6.0% more than last year.

In July 2008, the Financial Times 500 ranking for the second time in a row listed Baltika Breweries as the largest FMCG company in Eastern Europe in terms of market capital.

1. THE COMPANY’S SUCCESS ON THE RUSSIAN BEER MARKET AND ABROAD

According to Company estimates, the Russian beer market grew by 2.4% in H1 2008.

This development should be seen in light of the strong performance enjoyed by the market in the first half of 2007. Growth was especially strong for the licensed and premium beer, whereas demand for beer in the economy segment declined. Growing category inflation driven by excise and input prices growth significantly influenced the beer market.

Nevertheless, during H1 2008 Baltika grew ahead of the market and increased market share by +0.5% compared to H1 2007 to 38.1%.

Export sales grew by +32.4% in H1 2008 and reached 1.2 mln hl. With licensed beer sales in Ukraine and in the UK, sales abroad increased by +38.8% compared to previous year.

In May 2008, an agreement was signed in Baku, Azerbaijan whereby Baltika Breweries for the first time in its history acquires assets abroad – the brewery of Baku-Castel Ltd.

Baltika also signed a license agreement with the JV Sarbast Plus. The contract provides for the production and sale of the Baltika sub-brands Baltika №3 Classicheskoye and Baltika №9 Krepkoye in the Republic of Uzbekistan.

Baltika added four new markets to its geography of sales abroad, and today Baltika beer is exported to 50 countries in the world.

In June 2008, the RF Ministry of Economic Development and Trade named the Company ‘Best Russian Exporter’ for the seventh time in recognition of the contribution to expansion of foreign economic ties and development of export.

2. BRAND PORTFOLIO PREMIUMISATION CONTINUES

During H1 2008, Baltika brand sales grew by +25.2% particularly due to the growth of the sub-brands Baltika №7 (+40.9%) and Baltika Cooler (+63.6%). Baltika brand market share increased by +2.1% up to 13.9% (internal estimates). Furthermore, in H1 the Company introduced a new premium sub-brand, Baltika LITE positioned in the fast growing light beer segment.

Sales of Tuborg,  the №1 licensed brand in Russia, grew in H1 2008 by +33%.  The brand increased its mаrket share in the segment by +2.6% up to 19.3% in June (according to Business Analytica). Another licensed brand, Kronenbourg 1664, performed excellent with sales growth of +55%. The Company’s share in the licensed segment reached 28.4% (Business Analytica, 6 moths 2008).

In H1 2008, the Company signed a license agreement with Asahi Breweries Ltd. for the production of Asahi Super Dry beer, thereby expanding its licensed brands portfolio.

Baltika Breweries keeps the leadership in all price segments. The impressive growth of the Baltika brand sales, as well as the successful development of the licensed brands, confirm the effectiveness of Company’s strategy with focus on portfolio premiumisation.

3.    BALTIKA INVESTS IN THE COMPANY’S FURTHER DEVELOPMENT

In H1 2008, Baltika Breweries made investments amounting to 151 million Euros. The Company opened a new brewery, Baltika-Novosibirsk, successfully completed a project involving doubling of the production capacity at the Baltika-Voronezh brewery and invested in sales and marketing.

In order to develop its own agricultural programme further, the Company decided to increase the capacity of the malt house in Yaroslavl. The processing capacity will be doubled to 105,000 tonnes of malt per year thanks to an investment of more than 17 million Euros.

Anton Artemiev, President of Baltika Breweries: ‘Thanks to effective implementation of the cost-saving, agricultural and logistics projects Baltika considerably reduces the influence of unfavorable external factors and continues successful development growing ahead of the market’. 

Baltika Breweries is the largest FMCG producer in Russia.  Ever since 1996, it has been the leader on the Russian market.  The Company comprises 11 breweries situated in all of Russia. Its broad portfolio of more than 40 brands includes such well known brands as Baltika, Nevskoye, Yarpivo, Arsenalnoye, Tuborg and Carlsberg. The Company has more than 12,000 employees.