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  Gastronomy > Beer
Lankomumo reitingas Print version Print version
Lithuania braces for possible beer monopoly

Lithuania braces for possible beer monopoly

VILNIUS/COPENHAGEN - One Danish acquisition could see the three largest Lithuanian brewers under one roof.

Carlsberg, which owns the Klaipeda-based Svyturys brewery, wants to purchase the brewing capacity of Orkla, a Nordic-owned concern. Orkla owns Baltic Beverage Holding, which owns the controlling shares in Panevezys-based Kalnapilis and Utena-based Utenos.

Carlsberg, says Carlsberg spokesperson Margaret Skov, wants to buy Orkla's brewing activities and form a new company, Carlsberg Breweries A/S. (Orkla also owns Lithuania's second largest daily newspaper, Kauno Diena, which isn't on the table in this deal.)

In return for its brewing activities, Orkla would receive 40 percent of the shares in Carlsberg Breweries A/S. Carlsberg would own 60 percent of the new entity, plus take over the day-to-day management and control of the combined Orkla and Carlsberg brewing activities.

The acquisition, if approved, would give Carlsberg 70 percent of the domestic beer market - and, some fear, it would grant it monopolistic powers in a growing market.

"Monopolization of any market is not good. To have 70 percent of market in one hand is a risky thing for a good market," said Audrius Vidzys, president of the Lithuanian Brewers Association.

According to statistics from the Lithuanian Brewers Association, Svyturys, Carlsberg's first acquisition, is atop the Lithuanian beer market with 26.6 percent of total beer sales in the country. Utenos Alus is next, with 24.2 percent, and Kalnapilis is third, with 21.9 percent. Coming in after the big three are Vilniaus Tauras, with 10.1 percent, and Ragutis, with seven percent, and Gubernija with 4.9 percent. Foreign imports compose roughly 3 percent of the market.

However, recent comments from Kalnapilis' Director General Remigijus Sydeikis dispute the figures. He claims that Kalnapilis, which recently started exporting beer to the United States, has overtaken Svyturys and is currently leading the Lithuanian beer race.

The Carlsberg brand itself has been getting a lot more visibility in recent months. Carlsberg draught beer is brewed at the Svyturys brewery in Klaipeda and can be purchased in bars for the same price as domestic brews. In many Vilnius bars, its banners and logos are as common a sight as those for domestic brews. The company is currently doing heavy promotions during the Euro 2000 soccer tournament.

For the time being, Carlsberg is mum about its strategy should the acquisition succeed.

"The takeover is dependent on the approval by competition authorities and a satisfactory due diligence process, and until the deal is finalized we will not start making decisions with regard to futur strategies and plans," said Margaret Skov, a Carlsberg spokesperson.

However, Vidzys thinks a Carlsberg's prospective acquisition could mean the death knell for many of the country's small breweries, which are already hurting.

"I think the market share of small breweries will decrease and the number of small breweries will also decrease," he said. "Now we have about 70. I think it's maybe too many."

Currently, the government gives small breweries a 50 percent discount on the access tax for the first million liters of beer sold. However, Vidzys maintains the government will have to be more generous should Carlsberg take over Orkla.

"After the merger, the help that the government is providing won't be enough. Now it's maybe okay but after this merger, I don't think they will be able to defend themselves," he said.

Watching quietly from the sidelines is the Lithuanian Competition Council, which is also mum about the deal. While it can't influence European bodies investigating Carlsberg's acquisition request, it may be able to influence how such a merger will be carried out in Lithuania.

If it will increase the dominance of their position on the Lithuanian market, says Palmira Kvietkauskiene, the council's press attaché, the council could, theoretically, block such a merger as it pertains to Lithuania.

"It will depend on the market shares, on the position of dominance. We have such power according to our law," she said.

But Vidzys doubts the council has such power.

"What they can do in practice is exert more control on these three breweries - they can check prices, they can look at profit, but really I don't think it's practically possible not to let Carlsberg buy BBH," he said.

Meanwhile, the beer market in Lithuania has been seeing some of its best times yet. Last month, Vidzys reports, beer sales jumped by 36 percent. Comparing the first five months of this year to the same period last year, the increase was by 26 percent.

There are a lot of reasons for the growth, said Vidzys. One is hot weather. This spring was considerably warmer than last year's spring. Also, competition is increasing, breweries are lowering prices, adding new products to the shelves and introducing all kinds of new promotions.

Also, "the access tax for beer has been stable last five years, while taxes on wine and spirits were doubled. People have gotten used to drinking beer," Vidzys added.

"The consumption of beer was too small in Lithuania and now it's starting to become a normal euro country."

In Europe, he reports, average beer consumption is from 70 to 80 liters per capita. The Lithuanian average is 57 liters, which should increase to 60 by the end of the year, thanks in part to a sweltering summer and increasing number of outdoor beer gardens.

      
Lankomumo reitingas

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