ST PETERSBURG (Reuters) - Carlsberg (CARLb.CO) said a recovery in its crucial Russian market was well under way, helped by consumers willing to dig deeper into their pockets for more heavily taxed beer.
The Danish brewer said two to three years of shrinkage in Russia had ended and its market share rose in the second quarter to 37.9 percent, slightly better than earlier estimates.
That compared with 36.7 percent in the first quarter, as the market adjusted to beer tax hikes meant to curb alcoholism.
“I think we are quite advanced,” Isaac Sheps, the head of Carlsberg’s Russian subsidiary Baltika, told Reuters on the sidelines of an investor meeting on Thursday.
“Everything we do is about changing the trend we have had for about two or three years now, of a small declining trend and getting it back to growth,” Sheps said.
Carlsberg said new second-quarter market share data from research firm Nielsen came in ahead of the 37.3 percent figure given in the brewer’s half-year report last month.
But the first-quarter Russian market share was revised down by three tenths of a point from 37.0 percent, Carlsberg said.
Carlsberg generated 33 percent of its total revenue in Eastern Europe, including Russia, in the second quarter of this year, while Western Europe accounted for 55 percent.
“We believe that the Russian market will be flattish or show a little growth this year,” Sheps said. “It will not fall. The trend has changed, and that is the most important thing.”
The Russian market has shrunk since 2008 in volume terms but Russians have spent more money on beer, though the increase has gone to taxes.
“They are willing to spend more money on beer,” Sheps said. “Otherwise, the market would have fallen even more.”
Chief Executive Jorgen Buhl Rasmussen told investors Carlsberg stood by its medium-term target for an operating profit margin of 26-29 percent for its East European markets. The target has been steady since it was set in February 2010.
Rasmussen also said 2013 would be a challenging year in the West European beer markets, but not tougher than 2012.
In the first six months of this year, Carlsberg’s Northern and Western Europe markets declined by an estimated 3-4 percent, with beer demand hit by bad weather, the company said in its second-quarter report last month.
Shares in Carlsberg fell 2.4 percent by 10:29 a.m. EDT (1429 GMT), underperforming a 0.8 percent drop in the Copenhagen bourse's benchmark index .OMXC20.
Reporting by Teis Jensen via Copenhagen newsroom; Editing by David Cowell