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. Last Updated: 07/27/2016

Sun Interbrew Buys in Ukraine

The struggle for the lucrative beer market in the former Soviet Union is heating up south of the Russian border after leading producer Sun Interbrew bought a 51 percent stake in the Yantar brewery, a move that solidifies its position as the leading beer maker in Ukraine.

The deal concluded late last week with the Nikolayev-based Yantar brewery, which controls 9.4 percent of the Ukrainian beer market, gives Belgian-Turkish company Sun Interbrew a big boost in its expansion drive and brings to three the number of breweries it has in Ukraine.

"Sun Interbrew is looking to be the leading brewer in the CIS market," said G. Mitchell Krasny, vice president of finance at Sun Interbrew. "We already had an interest in two other Ukrainian breweries, so this really consolidates our market share."

Sun Interbrew became the Ukrainian market leader Sept. 30 when it took control of the Desna brewery in Chernigov. It also owns the Krym brewery in Simferopol as well as seven breweries in Russia.

Shares in Yantar are split between Sun Interbrew, the brewery's workers with 19 percent and three Western companies with 30 percent. Sun Interbrew bought the 51 percent stake from the three companies - Axis Investments Limited (Cyprus), EEDF Investments Limited (Cyprus) and The East Europe Frontiers Fund PLC (Ireland).

Krasny declined to give details of the purchase.

Operating at near full capacity, Yantar is expected to produce 75 million liters of beer this year, Sun Interbrew said in a statement. With the new brewery, Sun Interbrew expects to sell 185 million liters of beer in Ukraine this year, giving it 23.5 percent of the country's beer sales.

Sun Interbrew is seen by industry analysts as being caught in a tug of war with Baltic Beverages Holding, a Scandinavian firm, for leadership of the beer market. Both sides have been snapping up breweries throughout the Commonwealth of Independent States at a frantic pace over the past few years.

In Russia, Sun Interbrew is the second largest beer producer, trailing BBH's estimated 21 percent share with 17 percent of the market.

Analysts said Sun Interbrew's Ukrainian deal was the latest step in a battle for the CIS beer market and part of a general consolidation that is seeing smaller players being acquired by the leaguers.

"There's been a struggle between the two main competitors in the market," said Maria Tarulina, consumer goods analyst at Troika Dialog brokerage.

The Ukrainian beer market has a slower growth rate than Russia's, so Sun Interbrew was probably expanding to keep the lead as it puts its bets on the market's potential, she said.

Krasny, however, said the real struggle will probably not kick off until next year because in 1999 there was sufficient demand to cover the beer that was produced.

Analysts estimate that the Russian beer market grew 30 percent this year, but predict it will grow only 15 percent in 2000.

In a bid to perhaps hedge its bets, Sun Interbrew is preparing to launch an advertising campaign next spring to promote its brands.

"Historically, we did not spend as much on marketing as some other brewers," Krasny said, adding that funds have instead been allocated to raising capacity and quality at Sun's existing breweries.

While Krasny declined to give details about the drive, Euromarketing reported earlier this month that the plan was in response to aggressive marketing campaigns held by rivals such as Turkey's Efes and South African Breweries, which each spent about $2 million to support their brands in 1999.