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Molson Coors enters Russia Add to ...

Molson Coors Brewing Co. is entering Russia with its Coors Light beer, as it seeks a piece of that $21-billion (U.S.) market and a greater footprint abroad.

Molson introduced Coors Light earlier this month in grocery stores, convenience stores and select bars in the Moscow region, but announced the move on Tuesday. It hopes to ultimately sell Coors Light across the country.

The world's sixth-largest brewer, which also makes Molson Canadian, Carling and Blue Moon, is trying to diversify beyond its core markets of Canada, Britain and the United States. It recently announced deals involving Spain, Vietnam and China.

Russia may be best known for vodka, but it is the world's fourth-largest beer market after China, the United States and Brazil. About 100 million hectolitres of beer were sold there last year, with the average person drinking about 71 litres, said Krishnan Anand, president of Molson Coors International.

"It is a market with great potential," Mr. Anand said. "Overall alcohol consumption in Russia is quite high, but beer's relative share of alcohol consumption is quite low ... If you look forward you will see that beer growth is likely to continue to be robust over time."

Molson will manage marketing and advertising of the Coors Light brand, while a local company, Moscow Brewing Co., will brew and distribute the beer.

That positions Coors Light as an imported brand that is brewed domestically - meaning it will cost more than the mainstream domestic brands that make up about 70 per cent of the market's overall volume, but less than the beers that are actually imported.

Mr. Anand declined to discuss specific sales targets, except to say Molson was aiming to capture at least a double-digit share of the premium segment of the Russian market within a few years.

That premium segment only makes up about 30 per cent of the total market, whose dollar value Molson Coors estimated to be worth $21-billion.

Molson Coors had 2009 sales of $4.43-billion, with the vast majority of that coming from the mature markets of Canada, Britain and the United States. That has put it at a disadvantage when competing with global giants such as Anheuser-Busch InBev and SABMiller Plc.

Molson hired Mr. Anand last November to lead its international expansion. He previously worked for Coca-Cola Co., leading its Philippines business.

Molson's international sales are currently very small, but Mr. Anand said the international growth strategy should impact the total company's growth within three to five years.

"Our goal is to keep the growth rate in the international business very high. As it gets more critical mass, it starts to move the needle," he said.

In five years, he expects a "significant" portion of Molson Coors' sales growth to come from international markets.

In its last big overseas investment, Molson bought Brazilian brewer Kaiser for $765-million in 2002, but after a tough time and following its 2005 merger with Coors, the brewer sold Kaiser to Mexico's FEMSA for a dramatically lower $68-million in 2006.

Its more recent moves involving Vietnam, Spain and Russia are smaller, calculated deals that involve local brewers and much less initial investment.

"That's the approach that's best-suited, given where we are in our evolution and where the markets are in their evolution," Mr. Anand said, characterizing those markets as being in the first phase of their development.

By contrast China - which the company first entered in 2003 - is in its second phase, Mr. Anand said, now that Molson agreed to buy a controlling interest in a joint venture with a Chinese brewer.

Still, entering new markets can be difficult and Russia is expected to be no different. The government recently tripled its beer excise tax as of Jan. 1 in an effort to combat alcoholism.

As a result, world No. 4 brewer Carlsberg, which controls about 40 per cent of the Russian market with its Baltika unit, said earlier this month it expects Russian beer sales to shrink between 10 per cent and 13 per cent this year.

Mr. Anand said that, while the overall market is expected to decline, the premium segment should grow slightly.

The overall beer market in Russia had a compound annual growth rate of 2.9 per cent from 2004 to 2009, according to Euromonitor International. The firm expects average growth to slow to about 0.7 per cent a year from 2010 through 2014.

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