Russia: Complete ban on beer in plastic containers expected

Russia is willing to fight abuse of alcohol and is putting even more pressure on the beer industry. After limiting the size of plastic beer bottles to a maximum of 1.5 liters in January, Russian officials now discuss the complete ban on alcohol sold in plastic bottles starting in July.

Industry observers believe this could lead to another decline in beer sales by at least 5% because 42% of all beer is sold in Russia in plastic containers and only 12% in glass bottles and another 6% in aluminum or tin cans. A ban on plastic bottles would for sure lead to shortages in the supply of packed beer in the short run because of limited manufacturing capacities of glass bottles and cans. It would also cause a price hike of packed beer and reduced consumption because of higher packaging costs. The sale of unpacked beer, which is mainly draught beer and accounts for already 40% of the market, could also benefit from the measure.

The planned ban is one more step in Russia’s fight against alcohol. In 2012, Russia banned drinking in public places and limited advertising for beer and alcoholic drinks on television, the internet and outdoors. One year later the advertising ban was extended to printed media, beer sales from street kiosks were no longer allowed and beer sales from 11 p.m. to 8 a.m. were banned in grocery stores and elsewhere, except bars and night-clubs.

According to a study of the World Health Organization, one in three Russian men suffers from an alcohol use disorder, and about one in six is dependent on alcohol. Another study found that every fourth Russian man dies before the age of 55, mostly because alcohol abuse.

The Russian beer production, which is highly consolidated and dominated by 4 international players has steadily decreased in recent years. Carlsberg, which generates 16% of its profit in Russia and which holds the No. 1 position with a 39% market share in 2015 mainly through its subsidiary Baltika, suffers most:

"The (Russian) market went down significantly over a couple of years – so three, four years ago the decline was double-digit, a year ago it was single digit and in 2016 it was more or less flattish. So in that respect you could argue that the market is bottoming out. We think that and estimate that the impact on the ban will be a minus five percent on volume in 2017," said Carlsberg CEO's Cees 't Hart.

Heineken, which is number 3 in the market with a 15% market share in 2015 behind SunInBev (17%) but ahead of Efes Rus (14%), has released its latest figures on Wednesday.  "We have had very difficult few years in Russia," CEO Jean-Francois van Boxmeer said in an interview. "It's a market that is going down. I think one day the Russian market will grow better ...the only thing is, I don't know when," he added. In anticipation, the company has closed its 1 million hl brewery in Kaliningrad by the end of last year.

Most people related to the industry believe, that restrictions on beer sales will not help abuse of alcohol. On the contrary, recent incidents in Siberia, where dozens of people were killed by drinking poisoned alcohol, show that people try to avoid public restrictions. Experts advise to promote beer and to put pressure only on vodka and other high alcohol drinks to make people turn to beer and other drinks with moderate alcohol content, because negative health aspects associated with those drinks are much lower. 

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