Bloomberg News

Baltika Profit Rises 46% on Marketing, Distribution

August 24, 2005

OAO Baltika, Russia's biggest brewer, said first-half profit gained 46 percent on improved marketing and distribution. The shares surged 5.4 percent to a record.

Net income climbed to 81.4 million euros ($99.1 million) while sales increased 23.6 percent to 449.6 million euros, Baltika said on its Web site today. The results were to International Financial Reporting Standards. Baltika is majority-owned by Scottish & Newcastle Plc and Carlsberg A/S. (CARLA)

The market for beer in Russia, which has 144 million people, has doubled since 1999 as incomes rise and consumers switch to more expensive brews, UBS AG has said. Rivals including Heineken NV and InBev NV are snapping up smaller Russian brewers to benefit from the world's second-fastest growing beer market after China.

``Baltika is fully capitalizing on a balanced brand portfolio, including local premium brands, main stream, licensed and regional brands,'' said Natasha Zagvozdina, a consumer goods analyst at Moscow-based Renaissance Capital brokerage. ``The company is driving market growth.''

The St. Petersburg-based company, which makes foreign brands such as Foster's and Carlsberg as well as its Baltika line of beers, said sales by volume rose 22 percent to 1.08 billion liters, boosting its market share 3.6 percentage points to 24 percent. Russia's beer market grew 3.7 percent in the period, Baltika said.

`Anywhere You Go'

Baltika shares rose 5.4 percent to a record 980 rubles in Moscow, valuing the company at 115 billion rubles ($4.02 billion). They have doubled this year.

The company said its marketing was helped by promotional campaigns such as cash prizes in special capsules inside its cans. Distribution improved as the beer became more widely available.

``The level of our distribution has reached the maximum of 97 percent, anywhere in the country you can go into a store'' and find Baltika beer, President Anton Artemiev said in a statement on the company's Web site.

European brewers are seeking growth in emerging markets including Russia as demand ebbs at home. Russia drank 54 liters of beer per capita in 2004, a figure that may climb to 70 liters by the end of 2010, according to UBS.

Amsterdam-based Heineken earlier this month agreed to buy Ivan Taranov Breweries, bringing to nine the number of Russian breweries that Heineken has gained in the last year. Heineken agreed to pay $560 million for Ivan Taranov as it wraps up a yearlong spending spree in Russia, Kommersant newspaper reported on Aug. 16, citing unidentified Ivan Taranov employees.

Belgium's InBev, the world's second-largest brewer and Russia's No. 2, in July agreed to buy St. Petersburg beermaker Tinkoff.

To contact the reporter on this story: Michael Teagarden in Moscow at mteagarden@bloomberg.net; Bradley Cook in Moscow at bcook7@bloomberg.net.

To contact the editor responsible for this story: Chris Collins at collinsc@bloomberg.net.


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