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. Last Updated: 07/27/2016

Interbrew to Buy 75% of Klin

Belgian multinational beer giant Interbrew has agreed to buy a 75 percent stake in the Klin brewery, a Moscow region plant that is Russia's fourth-largest producer, Interbrew officials said Friday.

The purchase by Interbrew must still be approved by Russian regulatory authorities, company officials said. They declined to reveal financial details for the deal, while saying that it involved a sizable commitment.

"It is a very significant investment," Axel Cogels, executive vice president for corporate affairs, said in a telephone interview from Interbrew's headquarters in Leuven, Belgium.

Interbrew is likely to invest in expanding capacity at the brewery to produce more than 200 million liters of beer a year, Cogels said. The brewery is forecasting 140 million liters in sales of its Klinskoye beer this year, Interbrew said.

The Klin factory is the second strategic acquisition Interbrew has made in Russia after it bought the Rosar factory in the Ural Mountains last year.

The purchase will be a significant boost for Interbrew as it strives to compete with Russian market leader Baltika, a St. Petersburg-based brewer that is controlled by Baltic Beverages Holding, or BBH, a joint venture between Sweden's Pripps and Finland's Hartwall.

"This will certainly allow Interbrew to strengthen its positions on the Russian market," said Tatyana Kuznetsova, an analyst at Business Analytica Europe Ltd., a market research company. "The Klin brewery is a sound operation, it functions very well."

The acquisition is Interbrew's second major step after it joined forces with the Sun Brewing Co. to claim 15 percent of the market with eight factories in Russia.

With the addition of Klin, the joint venture will control 19 percent of the market. BBH controls about 22 percent of the market with its several brands, of which Baltika accounts for 15 percent.

But Interbrew and Klin are not the only breweries looking to pump out more amber fluid this year.

Baltika Brewing last month announced plans to boost production by 250 percent over three years with the help of a $40 million loan from the European Bank for Reconstruction and Development. The company hopes to sell 700 million liters in 1999.

Baltika's total sales in 1998 were 2.3 billion rubles, and its after-tax profits increased 47 percent in nominal terms over 1997 for a total of 662.13 million rubles.

While Baltika has a well functioning distribution network, Interbrew-Sun's strategy is to absorb breweries on the ground, which allows the joint venture to save on transportation costs, analysts said. It also will benefit from the fact people in provinces prefer local brands to those brought from elsewhere.

Meanwhile, Vena, a St. Petersburg brewery that produces premium brands among others, moved at the end of April to complete a $70 million investment program by the end of 1999 to boost production by 300 percent, to 120 million liters.

Vena's shareholders, chiefly Finnish brewery Sinebrychoff and the EBRD, previously decided to put the plan on the back burner because of the economic crisis.

Two other foreigners putting their toes into the Russian beer market are Scandinavian firm Bravo - which recently started producing Bochkaryov - while Efes of Turkey is on the brink of starting production at a Moscow-area factory it snapped up last year.

This rapid growth is explained by the rapid rise in beer consumption in Russia, starting from a low base that suggests a large potential for strong, long-term growth. Beer consumption in Russia is estimated at about 20 liters per capita, well shy of the 150 liters per capita in some European countries.