Anadolu Efes Biracilik & Malt Sanayii AS, (AEFES) Turkey’s dominant beer producer, is seeking acquisitions in former-Soviet and eastern European markets after becoming Russia’s second-largest brewer in a $1.9 billion deal.
Anadolu Efes, which bought SABMiller Plc’s (SAB) Russian and Ukrainian business last year, also plans to either build a new brewery in Turkey or expand one of five existing manufacturing sites in the country over the next three years, Alejandro Jimenez, president for beer operations, said in an interview at the company’s Istanbul head office yesterday.
Expansion outside of Turkey is a priority for Anadolu Efes, which controls about 85 percent of the country’s beer market. In Russia, where the brewer trails only Carlsberg A/S, (CARLB) the company is relying on a rebound in beer consumption, which has been declining because of a 200 percent tax increase at the start of 2010 and restrictions on alcohol advertising.
“We are continuously looking for opportunities to grow inorganically in the countries that we operate in or in nearby countries,” Jimenez said. “We are especially interested in CIS countries because we have been operating there for nearly 20 years. There is no timetable for the moment.”
Anadolu Efes considered bidding for StarBev LP, a Central European brewer bought by Molson Coors Brewing Co. (TAP), though the $3.5 billion price tag was too expensive, Jimenez said.
SABMiller, the world’s second-largest brewer by volume, has a 24 percent stake in Anadolu Efes after transferring its eastern European beer businesses to the Turkish company. The London-based company may increase its stake in future, Jimenez said, though control will remain with the Ozilhan and Yazici families that founded the brewer in the 1950s and still own 43 percent.
About three-quarters of the beer produced by the company will be sold outside of Turkey, mostly in Russia, after the SABMiller transaction, Jimenez said. Previously, the proportion of non-Turkish volume was more than 60 percent, he said.
Anadolu Efes has about 20 percent of the Russian market by revenue and 18 percent by volume, the executive said. Per-capita consumption in Russia of about 70 liters of beer a year on average is higher than about 13 liters in Turkey, he said.
The Russian beer market will probably decline in “low-single digits” this year, while the company expects the volume of beer sold in the country to be unchanged, Jimenez said.
Russian consumers are expected to turn to beer from high-alcohol spirits such as vodka and the beer market there will likely begin growing from next year, Jimenez said.
Anadolu Efes expects sales volume in Turkey to grow 1 percent to 2 percent this year, parallel to the market, Jimenez said. The company began introducing new premium beer brands including Peroni there and will introduce more this year.
Turkey, which banned television and radio advertising of alcoholic beverages nearly two decades ago, also has a draft law pending parliament’s approval to increase tax on alcoholic beverages and tobacco every six months in line with inflation.
Overwhelmingly Muslim Turkey, run by Prime Minister Recep Tayyip Erdogan’s Islamic-rooted Justice and Development Party, has the third-highest excise tax in Europe after Finland and Russia, according to a research note by Istanbul-based Is Investment, citing an Ernst & Young report.
“We can deal with the restrictions by means of the very strong brand portfolio that we have,” Jimenez said. Anadolu Efes’s mainstream brands and premium brands from SABMiller will “have a better penetration to customers in Russia,” he said.
Tax increase plans by the Turkish and Russian governments “give us some visibility that we can deal with them,” he said.
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