BUDWEISER IS ENJOYING an unlikely source of growth in Russia鈥檚 declining beer market, even as the all-American brand continues to struggle at home.
In a country where brewing output has fallen more than 30% since 2008, the self-proclaimed King of Beers is growing sales at a double-digit pace, according to the head of owner Anheuser-Busch InBev NV鈥檚 Russian unit.
What鈥檚 the deal? Unlike in the US and western Europe, Budweiser is pitched as a premium brand, boosting its appeal to a younger, more discerning Russian drinker, yet it isn鈥檛 as expensive as some imported equivalents. By producing locally, ABI has been able to avoid the impact of the ruble鈥檚 drop against the dollar on the price of imported beers. Bud became Russia鈥檚 third-largest premium beer brand by volume last year, according to Nielsen estimates, placing it ahead of Heineken.
鈥淏ud is a truly premium brand in Russia in terms of both pricing and user perception,鈥 ABI country head Dmitry Shpakov said in an interview in his Moscow office.
INCREASED PRODUCTION
ABI鈥檚 fourth-quarter results showed how the growth of premium brands such as Bud are helping its performance in Russia. Its beer volumes there declined by mid-single-digits in 2015 but rose by mid-single-digits in the final three months. By contrast, Budweiser lost share in the US amid the growing popularity of craft brews.
Since choosing Russia as Bud鈥檚 first market for international expansion in 2010, ABI has ramped up production at a factory near Moscow. That鈥檚 enabled it to avoid increasing prices by as much as imported brews. At 61 rubles ($0.87) a bottle, Bud is less than half the price of ABI鈥檚 imported Spaten brand, which costs 175 rubles. Yet Bud still retains its international prestige, being priced about 30% higher than ABI鈥檚 best-selling mass-market brand Klinskoe.
MORE SPONSORSHIP
鈥淪everal years ago, production volumes of Klinskoe used to be several times higher than Bud in Russia,鈥 Mr. Shpakov said. 鈥淪ince then, Bud has caught up, and now the difference is not that big.鈥
Key to Bud鈥檚 growth has been its increased sponsorship of sporting events after the country eased advertising limits for brewers last year. The brand is sponsoring the 2018 soccer World Cup and the preceding 2017 Confederation Cup. In addition, many Russians have a preference for a global brand as part of their lifestyle, Mr. Shpakov said.
Yet, Russia remains a tough place to do business, as AB InBev and Carlsberg A/S have shown by closing plants in response to falling consumption. The industry is calling for at least a partial reversal of the increased taxes that have hurt it over the last eight years.
鈥淭his would be mutually beneficial as breweries would be able to boost output, ultimately paying more in excises,鈥 Mr. Shpakov said. 鈥 Bloomberg
