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. Last Updated: 07/27/2016

St. Pete Brewery in Heineken's Sights

MTHeineken is seeking permission to buy Stepan Razin, one of Russia's last major brewers under local control.
Dutch beer giant Heineken is preparing to buy one of Russia's last major brewers under local control, the country's anti-monopoly watchdog said Thursday.

Heineken filed for permission to buy St. Petersburg-based brewery Stepan Razin on June 24, said Irina Kashunina, spokeswoman for the Federal Anti-Monopoly Service. She declined to give further details.

Heineken's request comes at a time when foreign brewing giants are moving swiftly to consolidate the remaining independent brewers in Russia's booming beer market. Last month, media reported that Sun Interbrew had made a bid for the Tinkoff brewery.

Heineken, the country's No. 3 brewer by sales, declined to comment on its request to the anti-monopoly service. Stepan Razin's management was unavailable for comment.

However, Vedomosti reported on Thursday that the two brewers were on the verge of sealing a deal, citing unidentified sources familiar with the negotiations.

The purchase, if completed, would be worth $138 million, according to Aton brokerage's estimates.

"This deal would give Heineken additional manufacturing capabilities and help the company increase its regional network," said Tatyana Kapustina, Aton's consumer goods analyst.

Stepan Razin, founded in 1795 under the name of Kalinkinsky brewery, has a production capacity of 20 million decaliters of beer per year. The brewer accounts for 2 percent of the domestic market by sales, according to Business Analytica.

Heineken already has a formidable network of local breweries, located in St. Petersburg, Nizhny Novgorod, Sterlitamak, Novosibirsk and Yekaterinburg.

Stepan Razin's branches in northwestern towns like Vyborg and Cherepovets would help Heineken tap additional consumers and keep down transportation costs, Kapustina said.

Heineken's interest in Stepan Razin shows that market consolidation is continuing, said Troika Dialog consumer goods analyst Victoria Grankina.

Few local breweries remain that have not been snapped up by foreign giants. They include the Krasny Vostok brewery in Tatarstan and the Moscow-based Ochakovo, Grankina said.

In the short term, the purchase of Stepan Razin would be unlikely to alter the market rankings, Grankina said.

Heineken's competitors are Russia's No. 1 brewery, Baltic Beverages Holding, or BBH, and No. 2 Sun Interbrew.

Danish-British BBH, which holds a controlling stake in Baltika, accounts for 37.4 percent of the national beer market by sales, according to Business Analytica figures for the first quarter of 2005. It is followed by Belgium-based InBev, which controls Sun Interbrew, with 15.5 percent, and Heineken, with 8.9 percent.

"In the longer term, we see Heineken becoming a serious threat to competitors," Grankina said.

Russia's beer market growth is poised to slow to 5 percent this year, compared with 12 percent volume growth in 2004, Business Analytica projected. Last year, the market was worth $8.2 billion.