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. Last Updated: 07/27/2016

New Brew Tactics for New Times

In the latter days of the Soviet Union, Moscow's Ochakovo brewery was the site of unthinkable cooperation between mortal enemies. Until 1990, orders from both Pepsi and Coca-Cola made up 80 percent of the output of the plant's bottling facility.

"I cannot think of another situation in which these competitors bottled their products at the same plant," said Vladimir Vinogradov, a specialist at the PRP-Group, which handles public relations for Pepsi-Cola.

After Coca-Cola opened its own production plant in Moscow, and quality beers from the Czech Republic, the Netherlands and Germany started filling the capital's kiosks and stores, Ochakovo looked for ways to maintain market share.

Deciding that the quality of the product needed to be improved, the brewery's directors began by enforcing proper production procedures.

"In and of itself, our beer brewing technology isn't bad. But the product can be spoiled at any stage of production. As a result the beer turns sour, and non-alcoholic beverages gain an aftertaste," Ochakovo president Alexei Kochetov said.

To raise worker morale and discipline, management fired the very worst employees, introduced a system of fines for poor work and raised salaries across the board. In Soviet days, the best workers were used in heavy industry and machine building. At that time, beer industry wages were some of the lowest in the country at 90 to 120 rubles a month. Labor quality matched the low pay levels. Today, the plant pays an average-for-Moscow salary of 2,000 rubles ($330) a month.

In 1993, plant brewers came up with several new types of the amber-colored beer: Ochakovo, Special and Light. To make the new beers, the plant spent more than $50 million refitting the brewery with new, imported equipment.

Ochakovo's marketing researchers discovered that Muscovites drink beer for the most part at home, and they drink a lot. For this very reason, the plant began bottling its beers in 2.25-liter plastic containers in 1994. Because they were lighter and more compact, the new containers proved convenient for retailers as well. Later, in 1995, Ochakovo began to package its beer in aluminum cans.

Production is now approximately double Soviet-era levels. Last year, Ochakovo turned out 110 million liters of beer and other beverages -- beer bottling accounted for 60 percent of that figure.

With some production improvements in the works, the brewery expects to turn out 300 million liters of beer in 1998.

Besides beer, Ochakovo also bottles nonalcoholic beverages. Last year, the plant's natural horseradish and cranberry-juice kvas were its best sellers.

Ochakovo has also begun to produce vodka. "We realize of course that we will never be able to compete with Kristall or Smirnov," Kochetov said. "But there was a certain level of demand among wholesalers, and we responded to it."

Ochakovo's primary competitor on the beer market, St. Petersburg's Baltika brewery, believes its Moscow rival still lags far behind.

"Baltika is becoming a national brand, due to our regional sales policy as well as our advertising," said Pavel Biryukov from Baltika's marketing department. "Ochakovo is more concentrated on Moscow, because they apparently cannot satisfy the growing Moscow market."

Ochakovo has smaller production volumes than its competitors on the Neva River. Last year, Baltika bottled 363 million liters of beer at a wholesale price lower than its Moscow competitor's: Baltika Original sells wholesale for 1.76 rubles a bottle, while Ochakovo Special sells for 2.3 rubles a bottle.

Figures from the Comcon 2 marketing agency show that last year 25 percent of Muscovites drank Ochakovo beer, with 23 percent drinking the St. Petersburg-based Baltika. An additional 16 percent drank the brewery's closest foreign competitor, Bavaria.

Ochakovo enjoys a good reputation among other beer makers. "The Ochakovo people are working very successfully on the Moscow market," said Pivoindustriya president Vladimir Shimin. "The capital's market is not developed completely. They sell everything they produce, and successfully. What is more, they'll be in an even stronger position in a year."