Cheer for S&N`s Baltic Beverages joint venture as Russians drink more beer
SCOTTISH & Newcastle, Britain's biggest brewer, yesterday said that its 50 per cent-owned joint venture in
eastern Europe, Baltic Beverages Holdings, had seen first-quarter beer volumes rise 10 per cent.
BBH, which S&N owns with Carlsberg and which is the Russian market leader with a one-third market share, saw Q1
sales increase by 12 per cent to 242 million (GBP 163.8m).
S&N said BBH's underlying earnings before interest, tax, depreciation and amortisation, (EBITDA) lifted 8
per cent to 54m (GBP 36.6m), while underlying profit margins eased down 0.8 points to 22.3 per cent.
S&N said BBH's Russian beer volumes in the quarter rose 7 per cent in an overall Russian market up 15 per
cent.
In Ukraine, another key market, BBH pushed up volumes 29 per cent against an overall market up 20 per cent.
S&N said in a statement: "The Russian market, in its quietest quarter, grew more quickly on the back of good
consumer demand and a marked increase in channel-stocking activity."
Channel-stocking is when brewers judge their sales on production for drinks wholesalers rather than consumers. An
S&N spokesman said: "The overall Russian market has been buoyed by a number of (brewing) companies putting a
large amount of stock into trade.
"However, we feel this may come back to haunt them if they later trigger no-sale agreements with the
wholesalers."
The Scottish group has been trialling BBH's flagship product, Baltika beer, in bottled form in selected outlets
in Britain as a cool, trendy drink.
It hopes to start selling two of its own core brands, Foster's and Kronenbourg, in Russia from next October.
The solid growth in Ukraine led to a market share increase for BBH of 1.7 percentage points.
Ebitda margins, it said, had been partly depressed by "much higher levels of advertising costs in the
quarter".
Yesterday's growth figures came after BBH reported in 2003 that its key Russian beer volumes rose 9 per cent in
an overall Russian market up 7 per cent, and that it expected the fast-growing market to grow volumes about 5 per cent
in 2004.
S&N said BBH had "continued confidence that it is well placed for profitable growth in 2004".
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RUSSIA IN FACTS
