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. Last Updated: 07/27/2016

EBRD Praises Beer as The 'Safest Investment'

Forget oil, the largest investor in the country says the best business bet in Russia is ... beer.

The EBRD, set up in 1991 by the Group of Seven industrialized nations to ease Eastern Europe's transition to a market economy, said Wednesday that of all the industries it has invested in its favorite is brewing.

The European Bank for Reconstruction and Development has invested more than $4 billion in Russian projects ranging from power generation to construction, but arguably has had the most profound effect on the beer market, claiming to be financially involved in every fifth beer produced here.

"Across the emerging markets for the last 20 years beer has probably been one of the safest investments one could make," EBRD first vice president Noreen Doyle said Wednesday at the Moscow presentation of the bank's annual transition report.

"In good times or in bad, no matter what oil prices are, people will always drink beer," EBRD chief economist Willem Buiter added. "Also, it is a very liquid investment," he said, without a trace of irony.

"There is hardly any large foreign brewery left in Russia, with the exception of Sun Interbrew, which has not yet received money from the EBRD," said Alexei Krivoshapko, consumer goods analyst at United Financial Group. "And all of them have a potential to increase their sales by 15 percent to 17 percent annually in the next five years."

Beer consumption has more than doubled in the last five years, hitting 5.2 billion liters in 2000 and making Russia the No. 6 beer market in the world, according to official statistics. And it is expected to grow nearly 10 percent this year, with per capita consumption estimated to reach 37 liters.

The market is booming and competition is fierce, with no single brewer holding a dominant position. The biggest producer, Baltika, is estimated to have 20 percent of the market, with No. 2 Sun Interbrew at about 15 percent. The rest is split between hundreds of breweries.

The brewing industry has one of the highest concentrations of foreign capital of any sector. More than 50 percent of the Russian beer market is controlled by foreigners -- a figure unmatched in any other industry save confectionary.

Baltika, which, is 75 percent owned by Scandinavian-controlled Baltic Beverages Holding, was the first company in Russia to receive a loan from the EBRD, worth $40 million, after the 1998 crisis. The company said Wednesday its 2001 production grew 29 percent year on year to 106.4 million decaliters over the first nine months. And total sales for January to September amounted to 11.6 billion rubles ($387 million).

The EBRD has also provided $56 million to the Turkish-owned Efes Beverage Group in two separate deals. The latest was a $17 million credit this summer to help it double annual production capacity to 300 million liters. Efes is expecting sales volumes to exceed 150 million liters in 2001, a five-fold increase over 1999, its first year of operations.

The EBRD this year also signed a $10.2 million equity investment to finance the modernization and expansion of A/O Vena, one of St. Petersburg's leading breweries, majority owned by Finland's Oy Sinebrychoff Ab.