Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Tightening Market Opens Advertising Flood Gates

There was a time when local breweries just didn't see much of a need to advertise, perhaps figuring that improved quality and word of mouth would do the trick.

Then along came upstart South African Breweries. In 1999, the brewery took all the steps it could to ensure its success: Surveys were conducted with thousands of Russians to formulate a recipe for the perfect beer, followed by a massive advertising campaign hailing the beverage as the people's drink.

Within two months of launching production, South African Breweries was selling more Zolotaya Bochka beer than its Kaluga brewery could produce.

Bravo, a St. Petersburg-based firm that attracted some foreign investment, had similar success with its Bochkaryov ad campaigns, which were splashed all over the nation's television screens. Catchy slogans such as, "We need to meet more often" and "Bochkaryov - the Right Beer" took the soft-drink company from nowhere to having a strong impact in Moscow and St. Petersburg. Bochkaryov, with a $35 million investment, was launched in March 1999 and in just two months had 6.6 percent of the St. Petersburg market, according to a study carried out by research company SNITs Ltd.

Just as early market leader Baltic Beverages Holding's successful strategies of quality beer and clear labeling soon spawned imitations, the success of these ad campaigns soon had other brewers knocking on the advertisers' doors.

Moscow's Ochakovo brewery mounted its own television campaign.

And BBH and No. 2 producer Sun Interbrew have both mounted ad drives this year, using mainly billboards, magazines and television.

"Previously, growth was only constrained by your capacity, so the faster you grew the faster you grew larger," says Maria Tarulina, consumer goods analyst at Troika Dialog. "Now marketing, distribution and brand awareness will be bigger issues than they were before."

"At this stage, given the competition, a brewery has to promote its brands and push them to the consumer if it wants to remain a leader," agrees Alexander Andreyev, consumer-goods analyst at Brunswick Warburg.

Jitters over tipping their hands to the competition have also made breweries tight-lipped about the size of their advertising budgets and what strategies they are following with their campaigns.

Sun Interbrew, for example, refused to discuss its planned advertising drive until it was launched this month and even now says merely that it is going to spend "several million dollars" in promoting its brands.

"Our main thrust is to focus on our brands and quality this year and get people to recognize the quality and brand name," said G. Mitchell Krasny, vice president of finance at Sun Interbrew.

Companies like South African Breweries and BBH say the same thing: Yes, ad drives are taking priority and, yes, several million dollars are being sunk into them.

"We made quite an impact on the market last year [with our ads]," says Alan Richards, head of South African Breweries for Russia. "We won some awards for that advertising. We'll do the same thing this year,but I'm not going to tell you exactly what because we don't want our competitors to know."

Beer producers are expressing more interest in marketing now than they have ever before, says Marina Malykhina, CEO and president of Magram Market Research, a primary data collector for consumer market research studies. Her agency has carried out a number of studies for leading breweries over the past year.

"Their attention to the beer market and their willingness to invest has increased tremendously," says Malykhina, who is also a co-chair of the consumer goods and agriculture committee at the American Chamber of Commerce.

"We have a lot of the biggies trying to develop their brands and brand portfolios," she says, while declining to identify which companies she is working with.

"The beer companies are really paying a lot of attention to consumer needs and their expectations and lifestyles in order to fit their brands not only into their tastes but also their lifestyles," Malykhina says.

The trend toward more advertising is expected to continue as producers scramble to get larger shares in the rapidly growing market, analysts say.

"They are willing to invest and take the market seriously," Malykhina says. "To make the consumer happy is what matters."

Richards at South African Breweries agrees that advertising has played an important role in Zolotaya Bochka's success, but says there is one thing more important at the end of the day: the beer itself.

"We put some exciting marketing around it [Zolotaya Bochka], but in the end people don't buy the marketing but the beer in the bottle," he says.