Brewers Dealing with Russian Ban

Brewers Dealing with Russian Ban

Beer is facing an uphill battle in Russia these days. While many brewing brands are feeling the loss of a decreasing Russian appetite for international brews, one of the biggest recently put a number to the pain—Heineken reported double-digit sales declines in Russia in 2016.

Russia is losing its taste for beer, and some of the world’s top breweries are suffering. Heineken is the latest to put a figure on the pain. It said Wednesday that the amount of beer it sold in Russia declined by double digits in 2016. They are not alone. CNN reports that Carlsberg is also hurting, seeing “weak sales” in a country responsible for at least 16 percent of its sales.

The issues are multiple. On one side companies are facing a general economic downturn. There’s less money for alcohol, and Russians are opting for local brews. Then there’s the pressure by the government to curb drinking entirely. As part of that because there have been a series of regulations aimed at reducing the consumption of alcohol across the country. Taxes have been raised on alcohol, advertising alcoholic beverages has been banned, and, last month, the size of plastic bottles was limited to no more than 1.5 liters. Other political leaders are working on legislation that would ban plastic bottled alcohol outright.

This move is a backdoor into reducing the production and consumption of alcoholic beverages. Because plastic is cheaper than glass or metal, it’s become the container of choice for many brands in many quantities. More than 40 percent of all beer sold in Russia is sold in plastic. A ban would drastically cut sales and revenue.

There are real issues being addressed in this situation, not just people playing political or economic gains. Russians are dying due to home brews containing poisons, and the WHO reports that one in three Russian men suffers from alcohol use disorder … one in six is dependent. So, while retailers and manufacturers are hurting and calling the measures drastic, there’s some support for the curtailing in the public.

Companies are dealing with the challenge in different ways. Heineken has come right out and said it has plans to focus more on booming beer markets in Brazil, Mexico, and South Africa while continuing to sell big in Britain and the United States.

Moving on to greener pastures is not the only option on the table. Some brands might benefit from taking a “drink responsibly” tactic in their marketing campaigns. Instead of advertising the beer, partnering with groups working to curb alcoholism. It’s a secondary advertising opportunity that shows good public stewardship while also keeping their name in front of the consumer public. While laws may not yet allow this or might tightly restrict it, some public relations work could put some pressure on a government looking for solutions to a very real problem without damaging an already hurting economy.

Daniel Palmier is a leading Boston CEO, Real Estate Investment Manager, and Founder of UC Funds.

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About Dan Palmier

The founder and CEO of UC Funding, LLC, a real estate financing company focused on asset management, underwriting, and loan structuring, Dan Palmier maintains affiliation with the Commercial Mortgage Securities Association and the National Multi-Housing Council.
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