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. Last Updated: 07/27/2016

Wimm-Bill-Dann to Spin Off Beer Unit

Beverage giant Wimm-Bill-Dann this week will officially announce the purchase of its third brewery and the spinning off of its beer holdings into a separate company, WBD-Beer director Mikhail Kozlov said in a telephone interview Monday.

Kozlov said the new company, called Central European Brewery Co., will unite the breweries Pivoindustria Primorya in Vladivostok, Nizhny Novgorod-based Volga and Moscow's Moskvoretsky, Wimm-Bill-Dann's latest acquisition.

Kozlov said he wouldn't comment on the details of the Moskvoretsky purchase until it is officially announced, but said that as far as the new company goes, "it won't be WBD anymore, it will be an absolutely independent legal entity."

Kozlov also said that the new company intends to acquire at least one more brewery this year. He declined to name which one.

United Financial Group analyst Alexei Krivoshapko said the value of the Moskvoretsky brewery is between $10 million and $12 million. He said the addition of Moskvoretsky will boost the new company's brewing capacity by 50 percent to 210 million liters a year.

WBD, Russia's largest producer of milk and juice, began moving into beer early last year with the purchase of a 52 percent stake in Pivoindustria Primorya for $4 million. Later in the year it bought 63 percent of the bankrupt Volga brewery for an undisclosed sum.

WBD's beer arm accounts for about 2 percent of the national market. No. 1 Baltic Beverages Holding of St. Petersburg, maker of several popular brands of beer, has about 26 percent, while No. 2 Sun Interbrew, which makes Klinskoye and Sibirskaya Korona, has 14 percent, according to UFG estimates.

Kozlov said that his company's holdings are developing, and it intends to make a "very serious" move at gaining market share.

That could be a problem, however, as industry watchers expect a slowdown in the industry, which is already highly competitive at the premium end.

Business Analytica research company head Andrei Sterlin said that the market should slow down to between 5 percent and 7 percent this year, after growing about 20 percent last year.

Sterling said that because Central European Brewery Co. doesn't have a widely recognized brand it will have to spend millions of dollars to develop and promote a new one. He said that while he doubted that a company as respected as WBD would aim for the bottom end of the market, the premium segment is "already quite tight."

Over the past five years, WBD has been one of the nation's most aggressive competitors in any sector, investing over $78 million, according to the company, in becoming a dairy and drinks powerhouse.

Combined sales last year of WMB's 149 kinds of juice and 266 different dairy products topped $460 million, the company said.

When asked about the company's prospects in the beer market, Comcon research agency's business development director, Maria Vakatova, said, "it's extremely competitive, [but] why not, they have a lot of experience organizing a successful marketing strategy and they have a lot of money."