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Business news, 18.04.2007 16:17

Baltika Starts North Korean Exports to Expand Abroad

baltika By Maria Ermakova

OAO Baltika Breweries, Russia's largest beer company, began exports to North Korea as it seeks to expand on international markets.

The first 72,000 bottles of Baltika No. 5 Gold were delivered to Korean Trade Co. on April 13, the Russian brewer said today in an e-mailed statement. Cooperation talks began in 2001, when North Korean leader Kim Jong Il visited Baltika's brewery in St. Petersburg and sent engineers to the plant to study brewing methods the following year. Reaching an accord on beer exports took more than three years afterward, Baltika said.

``The beginning of the company's product supplies to the Democratic People's Republic of Korea's market is one of the most unusual projects,'' Dmitry Kistev, head of Baltika's export sales, said in the statement. ``The foam drink brewed in the city that's the cradle of socialist revolution -- and that's how Baltika will be positioned in North Korea -- will be available for foreign tourists as well.''

North Korea is an isolated Stalinist state that was close to the Soviet Union until the union's breakup in 1991. The socialist republic is Russia's biggest debtor, owing $8 billion. The two countries' traditionally strong relationship has continued even after the collapse of the Soviet Union.

Growth Driver

``Exports and licensing outside of Russia could be a driver for future growth'' of Baltika's profit as expansion of the Russian beer market slows, Brady Martin, an analyst at Alfa Bank in Moscow who advises buying Baltika shares, said in an e- mail. ``We don't expect it to be a major contributor at the net level in the near term.''

Even with the Russian market expanding ``at an abnormal rate'' of 10 percent last year, Baltika's exports, including licensed production abroad, outpaced the market, rising 27 percent in 2006, Martin added.

North Korea will become the 41st export market for Baltika, which is jointly owned by Carlsberg A/S and Scottish & Newcastle Plc. Export sales including licensed production increased to 1.8 million hectoliters (1.5 million barrels) last year, according to today's statement. The company's total beer sales amounted to 36.6 million hectoliters in 2006, spokesman Alexei Kedrin said by telephone from St. Petersburg.

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