InBev and Carlsberg Say Russian Sales Drooping

LONDON -- Brewing giants InBev and Carlsberg on Friday reported weakening sales in Russia as cold weather and turmoil in financial markets affect demand for beer in one of their fastest-growing consumer markets.

Carlsberg, the Nordic region's largest beer maker, fell 6.2 percent in Copenhagen trading, while InBev dropped 4 percent in Brussels. Third-quarter volume sales in Russia declined "slightly" because of cool weather, according to Carlsberg, the country's market leader. InBev said Friday that Russian demand was slowing as drinkers shun lower-priced brews.

Growth in Russia will be weaker in 2008 than in coming years, according to Carlsberg, which gained full control of Baltika Breweries in April as part of the takeover of Scottish & Newcastle. Coca-Cola Hellenic Bottling cut forecasts Thursday on weaker consumer confidence in the country. West European beer makers have acquired Russian brewers in recent years to spur growth as their domestic markets have stagnated.

The "Russian market has matured, so weather conditions have a larger impact on it now," said Victor Dima, an analyst at Renaissance Capital. "High inflation could also have some effect," he said.

Coca-Cola HBC said Thursday that "sustained high inflation and recent volatility in the financial markets are weighing on consumer confidence," in Russia.

The Russian beer market shrank "slightly" in the third quarter, mostly because of "exceptionally poor weather," Carlsberg said Friday. August temperatures in the country were 1.09 degrees Celsius lower than a year earlier, according to a report from Weather Trends International. A one degree Celsius change is "very significant" and will have an impact on a country's retail and economic performance, the report shows.

Carlsberg fell 21.50 kroner to 325 kroner in Copenhagen. InBev, which has the second-largest Russian market share, slid 1.67 euros, to 40 euros in Brussels trading.

Carlsberg controls 37 percent of the market in Russia.

Recent financial-market volatility that required the temporary closing of the local stock market has hurt consumer confidence.

Central and Eastern Europe are growing "modestly, contrary to the market's original expectations of strong growth," InBev said Friday. More profitable premium brands, such as Sibirskaya Korona, have not offset sliding sales of more affordable labels in Russia and Ukraine, the brewer said. InBev was already losing market share in Russia to Carlsberg.

Carlsberg said net revenue climbed at a "double-digit" pace in rubles because of its focus on premium brands. The Russian beer market will expand this year by 1 percent to 2 percent, less than the Danish brewer's "medium-term" forecast of 3 percent to 5 percent, it added.

"In Russia, credit has been slowing, real wages have been slowing and growth has been slowing as well," said Joao Valli, an analyst at Sanford C. Bernstein & Co. in London, referring to household consumption growth.