Bloomberg News

Russia Proposes Tripling Beer Tax, Carlsberg Says

October 02, 2009

Carlsberg A/S, (CARLB) Russia’s biggest brewer, said the country’s government proposed tripling the excise duty on beer in 2010, sending its shares tumbling.

A draft bill, which would increase beer excise by a further 11 percent in 2011 and 20 percent in 2012, must be discussed in the State Duma and then the Council of Federation before it can be referred to President Dmitry Medvedev for “final approval and signing,” the Copenhagen-based brewer said today in a statement. A press official at the Russian government declined to comment.

“It’s not good news for the total beer market in Russia and as such not good news for Carlsberg,” Chief Executive Officer Joergen Buhl Rasmussensaid today by phone. “But this is still a long process. It’s not a given that the proposal will pass looking like this. We’ll still make our voice heard.”

Carlsberg, whose Russian brands include Baltika, slid as much as 8 percent in Copenhagen trading, reaching a two-month low. Russia is raising taxes on beer and clamping down on its availability to curb what Medvedev has called the country’s “colossal” alcohol consumption.

“This is negative for Carlsberg,” Jyske Bank A/S analyst Jens H. Thomsen said by phone. “It could hurt the size of the Russian beer market and Carlsberg’s earnings on that market. It will be hard to pass the added costs on to the consumers.”

‘Negative Impact’

Carlsberg shares were down 29 kroner, or 8 percent, to 333 kroner at 4:56 p.m. in Copenhagen, the day’s lowest price. That was the steepest decline in Denmark’s benchmark stock index.

Deutsche Bank AG analysts recommended selling the stock, saying investors are “overly sanguine” about Russia’s anti- alcohol campaign. Carlsberg gets a greater proportion of its profit from Russia than any other international brewer.

“Russia seems to be gearing up for a battle against alcohol, a major cause of relatively low-life expectancy and a declining population,” Deutsche Bank analysts wrote as they cut Carlsberg to “sell” from a “hold” rating in a note dated yesterday. “In the worst case, there could be a significant decline in beer volumes in the next few years, and a severe reduction in the industry’s ability to take price increases.”

Carlsberg said today it will “continue to argue for a more balanced increase of excise duty” and “encourage the involved politicians in Russia to pay attention to the arguments.”

“If the duty rise is dramatic, it will have a negative impact on the market and on Carlsberg,” said Anton Artemiev, chief executive officer of the brewer’s Baltika unit. “I wouldn’t speculate on the impact, but it’s negative.”

Konstantin Tarasov, head of the Duma’s press service, wasn’t able to comment on the matter when called by Bloomberg.

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To contact the reporter on this story: Andrew Cleary in London at

To contact the editor responsible for this story: Keith Campbell at

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