Russia & Netherlands: Heineken aims for 20% Russian market share in 5 years

Heineken NV Chairman of the Executive Board & CEO, Jean Francois Van Boxmeer has stated July 03 during an official meeting with Saint Petersburg Governor Valentina Matvienko that Heineken plans to re-enlarge its Russian business, The Union of Russian Brewers communicated July 04. Heineken started in 2002 in Russia by purchasing “Bravo International” (presently “Heineken Brewery”).

Heineken has been criticized in the past for not moving quickly enough in the strong growing Russian market and when it did, paying a high price for the acquisitions it made.

"We were in time," said Van Boxmeer, who took over the helm at Heineken in October 2005. "We entered in Russia when we thought it was most appropriate. But first, we had to prove ourselves and put one toe in the water."

Heineken group in Russia connects 10 brewing plants located in different regions of Russia. “Heineken Brewery” and “Stepan Razin Kombinat” are the group’s Saint Petersburg affiliates. Heineken’s share of Russia beer market is about 16%, Saint Petersburg market share is around 36%. The group has invested EUR1.2 billion in the Russian market ever since 2002 and until 2006.

"It will take another five years before we've reached the desired return on investment of 7-8%. However, most important is to accelerate top-line growth, sell more beer and gain market share," he said.

Russia's beer market expanded by around 5.5% last year to 89.3 million hectoliters, Heineken said. It expects that the market will grow to more than 100 million hectoliters in 2008. Analysts put growth over the coming years at 3-5%, which makes it one of the strongest growing markets, behind the Asia Pacific region.

Heineken is currently focusing on integrating its Russian buys. This process will be finished at the end of 2006. In the meantime, Heineken conducted a revaluation of its Russian product portfolio of 36 brands.

The Western-European beer market is mature and faces tough competition from wine and spirits. So brewers are looking to Russia and China for sales growth. "Beer in Russia is getting more affordable and there's room for growth," said Roland Pirmez, CEO of Heineken Russia. He added that Russians only consumed 62 liters of beer per capita in 2005, compared with around 100 liters per capita in western European countries. Heineken predicts that in 2008 Russians will drink 71 liters of beer per capita.

Heineken is the world's fourth-largest brewer by volume after InBev SA (INTB.BT), Anheuser-Busch Cos. Inc. (BUD) and SABMiller PLC (SAB.JO). In Russia, Heineken is third, behind Baltic Beverages Holdings, a joint venture of Scottish & Newcastle PLC (SCTN.LN) and Copenhagen-based Carlsberg AS (CARL-A.KO) and Belgian InBev SA's (INB.BT) subsidiary Sun Interbrew.

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