A Change Brewing

It’s not quite time to yell, “Move over, Munich!” But a powerful thirst for beer is building throughout Russia, as many in this country of legendary vodka drinkers are coming to prefer a pleasant buzz to getting blotto.

Per-capita beer consumption has almost doubled in the past three years, and although it remains a fraction of that consumed by the average German, Czech or American, the outlook is blindingly bright for the lighter tipple--and brewing companies.

At the Klinskoye brewery in this provincial town two hours north of Moscow, the sounds of hammering builders and grinding gears herald one of dozens of expansion projects underway across Russia as brewers hustle to keep up with the beer-drinking boom.

“Growth is going to be huge because Russians have always had a taste for beer. There just wasn’t enough around in the Soviet era and times were such a few years ago that people turned more to vodka,” says Klinskoye marketing director Olga Gulina. “Young people nowadays want to drink with their friends after work but they want to feel clearheaded when they get up in the morning.”

Economists explain the generational shift away from vodka drinking as a consequence of the “hope factor.”

“Beer and vodka now cost about the same by volume, but vodka is obviously going to get you drunker. For those who are poor and despondent, beer just doesn’t do it for them,” said Vladimir Shishin, head of the Beer Industry Assn., within the federal government’s Ministry of Agriculture and Food.

But as the economy improves and Russia’s educated young professionals find promising jobs in the new markets, Shishin said, they have less need than their unfortunate forebears to blot out bleak realities with heavy drinking.

“More and more people are realizing you can’t be drinking 80-proof vodka every night of the year,” said Vladimir Mitrofanov, marketing director for St. Petersburg’s Baltika brewery, Russia’s largest. “There is demand for lighter drinks now, and this is where beer comes in.”

Russian per-capita beer consumption grew about 50% between 1995 and 1997, though it still trails other beer-drinking countries by a longshot. In the United States, consumption is about 105 quarts per capita a year, far behind the Czech Republic’s intake of 148 quarts and the globe-leading guzzlers of Germany, who drink about 170 quarts of beer each a year.

Reliable statistics on vodka consumption are harder to come by because of the epidemic of smuggling untaxed spirits into Russia and the lucrative black market that has sprung up to produce and sell bootleg vodka.

Still, the sudden growth in beer sales suggests that the lighter beverage is making inroads against vodka among younger drinkers and that the trend toward more moderate tippling is the way of Russia’s future.

Brewers and social analysts note that beer also is becoming popular among Russian women, especially young professionals joining male colleagues for drinks after work.

“Our women are beginning to drink beer, and this is a new thing for us,” said Sergei Polyakov, a leader of the Beer Lovers Party, which combines pub-level politics with industrial promotion. “Part of the change is the evolving role of women in society in general, but partly because domestic beers have greatly improved in quality.”

Beer production reached a high in 1985, when the Soviet Union, for the first time, managed to turn out 3.4 billion quarts, or the equivalent of more than 9 billion 12-ounce cans.

Soaring prices for ingredients and packaging, a loss of half the population with the breakup of the Soviet Union and a sharp drop in the average Russian family’s buying power combined to send production plummeting to a low of 1.8 billion quarts in 1995. But as the national economic crisis eased and domestic brewers woke up to the competition from imports, output has rebounded by 48% over the past two years to reach 2.7 billion quarts last year.

Imports also have grown to meet demand that exceeds domestic capacity, but sales of foreign beers are expected to taper off as Russian brewers expand to meet the market.

The preference for the fresher, unpasteurized domestic brands is obvious on the streets of any major city. Factory laborers and office workers can be seen sipping from bottles of Baltika and Ochakovskoye as they head to work in a country devoid of open-container prohibitions, where beer is generally considered a soft drink.

All brewers followed the same state-mandated recipe in the Communist era, but workers’ pilferage of ingredients and the slovenly habits of industry in that age without incentives resulted in abysmal concoctions that Russians drank only when they could find nothing else.

“In the Soviet era, there were only two kinds of beer: some and none,” joked Polyakov, a financial manager as well as a politician. “A few years ago, our brewers woke up to the new opportunities, and even though it took a while to get some quality brands, there are now some very good beers being sold in Russia.”

Beer’s popularity can only grow as entrepreneurs begin filling in Russia’s huge deficit of pubs, which has meant that people tend to drink on the streets.

“In Prague or Munich, you don’t see people drinking beer on the streets. They drink in taverns and in outdoor cafes,” said Polyakov. “Russia is still in dire need of places a guy can just drop into for a beer and snacks with his friends without having to spend $100 each. But more casual bars, and eventually microbreweries too, will appear in Russia as the beer-drinking public will demand it.”

Industry analysts point to the sudden surge of foreign capital in partnership with cash-strapped domestic brewers as evidence of a beer boom already in the making.

Aside from Klinskoye’s doubling of production capacity to 264 million quarts by the end of next year, Baltika has invested $105 million over the past five years in hopes of nearly tripling its current output to 845 million quarts by 2000. Sun Brewing, with seven breweries across Russia, plans to invest $150 million to boost production from about 350 million quarts to 1.2 billion quarts by 2002, and Moscow’s Ochakovskoye expects 528 million quarts of output when its new brewery is completed next year.

Baltika and Vena, St. Petersburg’s other major brewery, are backed by Scandinavian partners, and Sun Brewery is part of a British-American conglomerate. But industry analysts say there is broad opportunity for further foreign investment as Russia expands and improves its beer industry, as evidenced by the recent investment of $130 million by the Turkish brewing group Efes to build a new brewery that can produce 264 million quarts a year.

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Beer Boomsky

Beer consumption has rebounded with Russia’s economy. Some say it’s because Russians are more optimistic now, and thus aren’t as drawn to harder vodka.

Liters produced

(In billions)

1997: 2.6 billion

*

15-oz. bottles consumed

(per capita)

1997: 36

Source: Beer Industry Assn. of the Russian Federation Ministry of Agriculture and Food