Although still tiny compared to the vodka market, Russia's beer market has become increasingly important for both the major international brewers and their local rivals, and sales have grown exponentially over the last few years.
The recent government decision to ban advertising of beer - ostensibly to protect the health of the nation - is expected to take some of the momentum out of the market, but for the time being at least the industry is still bullish about its performance.
For example, one local brewer, Moscow-based Ochakovo, recently reported sales of 57.5 million decilitres for January-September 2004, a 3.9 per cent increase on the same period a year earlier.
Beer remains the company's most important business stream, accounting for 42 million decilitres in the first nine months. Viacheslav Merkulov, head of sales at Ochakovo, told CEE-foodindustry.com that the company had worked hard in a number of areas. "Our main efforts have been focused on improving the quality of our products, but we have also carried out a review of our distribution network in Moscow and the surrounding region, and we are now doing the same thing in the other regions. Our main goal, given these circumstances, was to maintain the volume of beer sales at the 2003 level, which we are achieving."
Ochakovo has also continued to develop new beer products to consolidate its position in the market. The third quarter of the year saw the launch of two new beers under the Ochakovo Premium brand (a lager and a special, low-alcohol porter), marking its entry into a sector of the beer market traditionally dominated by imported brands or locally-made premium beers owned by the major international brewing groups.
As Russian players strengthen their market positions, they are increasingly keen to take on the major international players with premium brands of their own. For example, Krasnoyarsk-based Pikra has introduced Legenda Krasnoe, while Yarpivo will begin bottling a new Irish-style ale at the end of this month.
Yarpivo's spokesperson Marina Kiseleva said that there was a growing trend towards ale consumption in Russia - volumes have increased by 129 per cent in 2004 compared to the previous year, albeit from a low base - as Russian beer drinkers look to experiment with beers which are more colourful and flavoursome than the ubiquitous lagers.
Yarpivo is certainly confident about the prospects for its beer - it aims to corner 20 per cent of the Russian ale market within two months of the brand's launch.
Moving into the premium segment is likely to be worth the effort, according to market analysts Business Analytica. The mid-priced beer segment - where most of the brands are focused - has seen its share of sales eroded steadily both by cheaper brews and by the more expensive premium variants. In the past two years, the market share of mid-priced beer has dropped by 10.2 per cent, compared to gains of 6.5 and 3.7 per cent respectively for premium and low-cost brands.
Sun Interbrew's premium brand, Sibirskaya Korona, lifted its sales by 90 per cent in the first six months of this year compared to the same period in 2003.
Strong performance from market leader
Meanwhile, BBH, Russia's biggest brewer, has reported strong growth for the third quarter of the year, helped by investments in sales, distribution and marketing.
Russian beer volumes were up 20 per cent in the quarter, double the rate of growth in the market as a whole, taking the company's Russian market share to 35.9 per cent. In value terms, sales rose 27 per cent to $527 million for the quarter, and by 29 per cent to $1.3 billion for the first nine months.
BBH, which is owned by the UK's Scottish & Newcastle group and Denmark's Carlsberg, also reported solid gains in Ukraine, where it has a 20.6 per cent market share. In the Baltic states, the company's performance was hampered by price competition in Latvia, where beer in PET bottles has been aggressively promoted, pushing down BBH's market share in the region to 42.8 per cent.