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Business news, 18.05.2004 13:48

Baltika takes Russian beer market to heady heights

Baltika logo Europe's biggest brewery in Russia's second city has created the continent's number two beer brand in just 12 years as it tries to meet the almost insatiable thirst of Europe's fastest-growing beer market.

The Baltika brewery in the sprawling northern suburbs of St Petersburg started brewing the Baltika brand only in 1992 and said on Friday that it outsells beers in Europe with hundreds of years of history like Carlsberg, Kronenbourg and Stella Artois.

Baltika's success has mirrored the remarkable growth of the Russian beer market. Ten years ago it was half the size of the UK market, now it has leapfrogged ahead and is the world's fifth largest after China, the United States, Germany and Brazil.

The St Petersburg brewery has been virtually rebuilt over the last 10 years to make it Europe's biggest and its top brand Baltika now has Europe's top brand Heineken in its sights. British-Danish Baltic Beverages Holding (BBH) which controls Baltika says it aims to be the "Anheuser-Busch" of Russia, and mirror the world number's one brewer which has a half-share of the giant U.S. market led by its Budweiser brand. But the remarkable growth of the Russian market has attracted other big beer players, increasing competition for market share and putting pressure on beer prices.

After six years of 20 percent per annum volume growth, the Russian beer market stumbled to mere 6.5 percent growth in 2003 and for 2004 BBH is seeing some pain with loss of market share, margin erosion and prices failing to keep pace with inflation.

A market which increases by the size of the Danish beer market each year has already attracted brewers such as Interbrew, Heineken NV and SABMiller -- all the big names except the biggest of all -- Anheuser-Busch (nyse: BUD - news - people), but even it is rumoured to be eyeing Russia.

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