For most of the Chelsea
supporters who travelled
to Russia in May for the
Champions League final, it
was the trip of a lifetime. But
one diehard fan and marketing
executive, Chris Taylor, may spend as much
time mid-air between London and Moscow
this year as Roman Abramovich.
While President Putin is keen for Russian
companies to expand abroad with as much
fanfare as the Chelsea owner, many more
international operators are still piling into
Russia. Moscow’s hotels are as crammed
with how-to shindigs for rouble-chasing
entrepreneurs as the city’s upscale shops are
with leather and scents from Paris and Milan.
But the profits to be made in Russia’s new
boutiques are small beer compared with
potential windfalls for international brewers.
Despite its modest 19% share of the country’s
alcohol consumption, Russia’s beer market is
one of the world’s fastest growing, fuelled
by higher wages and the West’s growing
influence. Compounded growth was 7.5%
between 2002 and 2006 and sales nudged
$3.4bn in 2007, placing the country behind
only the US and China. Premium-priced
Western brands comprise the market’s fastest
growing segment, beams Chris Taylor, who
is the international brand director of Italian
label Peroni Nastro Azzurro.
Peroni’s parent, South Africa’s SABMiller,
is eyeing Russia, and its 140 million
inhabitants, with Napoleonic lust– especially
since commodity costs continue to rise
and sales in Europe and North and South
America slow. The brewer is the world’s
largest, valued at €25bn, yet its share of
the Russian market is just 6%. Denmark’s
Carlsberg will account for 38% once the
$15.2bn joint takeover of UK’s Scottish &
Newcastle with the Netherlands’ Heineken is
completed. Carlsberg will then control Baltic
Beverages Holding, owner of Baltika, Russia’s
leading beer with a 10.5% market share.
Yet SABMiller, which recently has been
linked to a bid for Anheuser-Busch (famous
for Budweiser) is not aiming for volume
in Russia; it is gunning for the niches. The
premium sector represents just 10% of beer
sold in Russia yet accounts for 17% of its
value. Indeed, SABMiller which has just seen
full-year revenues rise 16% even though unit
growth is slowing, claims that the volume of
its premium beers in Russia – which include
Pilsner Urquell and Miller Genuine Draft –
rose 14% in the year to 31 March.
Peroni’s Russian launch is its highest profile launch in 2008, during which
SABMiller is spending $50m on marketing the
beer worldwide. As a new generation of high earning
25-35-year-old Russians is already
gaga over Italian fashion, food, motorcars and
ski resorts, this seems like a no-brainer. The
strategy is to focus on the first generation of
upscale bars where a bottle of Peroni will cost
RUB150-250 (€4-€6.75).
The challenge, notes Taylor, is to push the
product’s “heritage” and “exclusivity” – to
steal drinkers from other high-end brands
such as Corona – without overplaying the
“fashion” card. While Taylor enthuses that
“Russians who have drunk Peroni in London
or Milan associate it with sophistication”, he
is aware that in countries where there is no
beer-drinking tradition, there is fickleness.
SABMiller will later import other premium
brands into Russia, including its recent pick up
Grolsch (once it acquires the local licence),
and it aims to acquire and reposition local
brews. Although local brands dominate the
territory, all but one brewery belongs to
multinationals. SABMiller owns a brewery
outside Moscow and is building another near
the Urals. While this reduces shipping costs,
for now, extra cash is being spent on upping
production in Italy while “getting Peroni
served in the right bars”.
The campaign to crack Russia, however,
dovetails with Peroni’s one of aligning the
brand with aspirational Italians, such as chefs
or fashion designers – via product placements,
endorsements and other collaborations – and
with events deemed trendsetting such as
London Fashion Week. Other stunts have
included displaying the bottle on a plinth in
an otherwise empty boutique on London’s
Sloane Street. Such activity has paid off:
Peroni has performed well in both emerging
and mature beer markets and SAB says that
sales outside of Italy grew 72% in the last
year; sales were up between 20% and 30% in
the UK in the first three months of 2008.
Peroni’s latest collaborator is fashion
designer Antonio Berardi, British-born but
of Italian stock, who is developing a luggage
range. Obligingly, the designer appeared at
Peroni’s Russian April launch in Moscow’s
Arsenal Gallery, a cavernous, exposedbrickwork
venue. Guests, who could have
been Big Brother winners, whooped at the
floorshow that accompanied images such as
an Anita Ekberg lookalike cavorting in the
Trevi fountain, an homage to Fellini’s classic
film La Dolce Vita.
This iconography, successful in Peroni
marketing campaigns worldwide, is a godsend
for heavily regulated Russia, where people or
animals cannot appear in TV commercials.
SABMiller’s Redd’s, an apple-flavoured beer
aimed at women, is presented as a starbursting
fruit juice; Kozel, meaning ‘goat’– an imported
Czech brew, is a far flatter affair.
Speaking at the launch party, Berardi said
he is interested in designing glassware and
bar fittings for Peroni. He would also like a
shot at directing commercials: “Just about
everything is to play for really.” Which pretty
much sums up the Russian beer market.
GETTING A HEAD IN RUSSIA
Russia’s beer market consists of around
1,400 brands. Beers sell for around RUB30-
120 (€0.80-€3.25) from street kiosks and
supermarkets. At-home consumption
remains dominant, compared to Western
Europe but in big cities more “destination”
bars are opening, such as the one beneath
fashion designer Denis Simachev’s shop
(below). Rosstat, the Russian statistics
agency, says average real wages and
disposable income rose by 16.2% and 12.9%,
respectively during the first nine months
of 2007. Average monthly wages rose to
US$497 (a 31% leap) in the first nine months
of 2007, in part reflecting the rouble’s rise
against the dollar. The World Bank estimates
that Russian’s average monthly wages may
have topped $520. Though Russians are
drinking more, they are not spending more
on vodka. The cheapest half-litre bottle
sells for RUB70 (€1.90). Local wines cost
from RUB100 (€2.70) per 75cl bottle and
imported wine cost from RUB200 (€5.45).
Whisky is RUB800-1000 (€22-€27) a bottle.
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