Author:www.theage.com.au

IN RUSSIA, beer is regarded as a soft drink and China is now the world’s largest market for it, evidence that brewing executives are looking further afield for sales as the West’s beer consumption declines as drinkers turn to wine and spirits. The smoking ban that starts in English pubs and clubs on Sunday is expected to further hit sales.

But business in emerging markets is booming — with Russians, Chinese and Indians among those thirsty for Western-style beer. Scottish & Newcastle, Britain’s biggest brewer, has already gone East. It formed a joint venture with the Danish giant Carlsberg in Russia — BBH in St Petersburg — and its brew, Baltika, is the market leader and inching closer to replacing Heineken as Europe’s No. 1 beer. Just five years on, BBH accounts for 40 per cent of Carlsberg’s profits and nearly 30 per cent at S&N.

The change is indicative of the shifts in the $US450 billion ($A535 billion) global beer industry. SABMiller’s Chinese beer, Snow, has become its biggest brand, ahead of Miller Lite, brewed in the US. The world’s second-largest brewer brews most of China’s beer, moving ahead of the previous market leader Tsingtao (in which SABMiller’s US rival Anheuser-Busch holds a large stake). Analysts expect Snow to shoot into the world’s top brands behind Budweiser, Skol and Corona.

S&N believes the smoking ban will hit sales by 5 per cent and cut operating profits by £10 million ($A23.7 million). Bans in Ireland and Scotland hit sales by up to 7 per cent.

Market researchers predict that more than a third of the global beer consumption will move to Russia and China. Based on population, China is the world’s largest beer market by volume after overtaking the US in 2002, according to Euromonitor data. Russia leapfrogged Germany last year with 10 per cent market growth that took it to fourth place.

In Russia, beer is regarded as a soft drink and is sold at street kiosks that do not need a licence. “People will drink a beer on the metro on the way to work,” said Nigel Fairbrass at SABMiller. Beer was lightly regulated until recently. Its growing popularity was seen as aiding government efforts in weaning Russians off vodka. Now there are restrictions on advertising, and drinking in public is about to be banned. Carlsberg executive vice-president Jorgen Buhl Rasmussen says: “Russia has a long way to go before it’s like a Western European market.”

Russians drink, on average, about 70 litres each a year. They are vastly outdrunk by the Czechs, who guzzle 160 litres each; the Irish at 124 litres and Germans’ 110 litres. Even Britain is benefiting from the Eastern European thirst for beer. The influx of Polish workers to Britain since the country’s admission to the EU in 2004 has sparked sales of Polish beer. Others are trying to revive Britain’s beer market.

There have been several brewery closures in Britain and family-owned brewers have been sold to bigger companies.

As in Russia and India, there has been a big shift from spirits to beer in China and the big brewers are battling it out. But Euromonitor alcoholic drinks manager Anne Nugent said distribution to China’s far-flung regions was problematic. She said it was going to take some time before Chinese consumption caught up with the West. In Russia, consumption per head jumped from 18 litres in 1997 to 69 litres last year while China went from 14 to 24 litres.

In India, people drink less than a litre of beer a head a year, so the potential for growth is huge. But foreign investors face problems such as electricity shortages and transport delays.

GUARDIAN