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. Last Updated: 07/27/2016

Baltika Leaps and Bounds Eastward

Having conquered western Russia, the nation's largest brewery is looking to the east.

Baltika is preparing its invasion of beer markets in the Far East of the country and has no intention of stopping there. The St. Petersburg-based brewery has its sights set on China — and now even North Korea.

On Monday, during his visit to St. Petersburg, North Korean leader Kim Jong-il was so impressed by Baltika that he overstayed a scheduled 20-minute visit to the brewery by about an hour. Kim and Baltika's general director Taimuraz Bolloyev reached a verbal agreement on Baltika becoming the consultant for brewery construction in North Korea.

After a plant excursion and beer-tasting, Kim said he was planning to buy British brewing equipment and asked if Baltika would be willing to give advice.

"We consider it as a great honor," said Baltika vice president Adam Tlekhurai.

The company has been conducting negotiations for the construction of a new plant in the Far Eastern city of Khabarovsk — and when Kim found out about it "he was very inspired," another Baltika spokesperson said.

"Thus, you will be closer to us," said Kim, Baltika reported.

Tlekhurai said Baltika plans to invest from $50 million to $60 million to build the new brewery, which is to produce 100 million liters of beer a year.

"The local market is very interesting for Baltika," said another Baltika spokesperson. "A part of the production might be exported to the north of China."

Andrei Ivanov, an analyst at Troika Dialog, said Baltika was forced to move to the East "because the European market was growing very fast and is now close to saturation."

Baltika, which is 75 percent owned by the Scandinavian-controlled Baltic Beverages Holding, has three plants in Russia, in St. Petersburg, Rostov-on-Don and Tula. In July, Baltika announced plans to invest about $360 million building six new breweries in the former Soviet Union, including the one in Khabarovsk. According to research agency Business Analytica's data from April, BBH controls 32.6 percent of the national beer market.

Baltika already has a strong position in the Far East, leading that market with a 20 percent share. Its closest competitors are Khabarovsk's Amurpivo with 13.2 percent, Vladivostok's Pivoindustriya Primoriya with 9 percent and Bravo International with 8.5 percent, according to Business Analytica.

After his visit to Baltika's St. Petersburg brewery, the North Korean leader took away a five-liter keg in memory of the tasting. Of all Baltika's offerings, Kim's favorites were the premium brew No. 5 "Parnas" and No. 7 "Export," a Baltika official said.