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Russians Gulping More Beer

July 2, 1999

KLIN, Russia (AP) _ The Klinsky Beer Factory has all the attributes of a modern brewery: vast copper kettles, shiny, stainless steel fermentation tanks, a bustling, automated bottling line.

There’s just one thing missing: a warehouse.

But Klinsky doesn’t need a warehouse. It can’t make beer fast enough to fill one. Even though the brewery is expanding as fast as it possibly can, a motley fleet of battered trucks is lined up outside its brick walls every day to haul the beer off to market the minute it is bottled.

What’s happening in Klin, a sleepy, provincial town 55 miles north of Moscow, is typical of what’s happening throughout Russia. Russians, especially younger people, are drinking more beer. Breweries, scrambling to meet demand, are in a nearly unique position in Russia.

They constitute a growth industry, fueled by increased competition and better beer.

``Last year, the rate of growth of our brewery was 160 percent,″ said Olga Gulina, a spokeswoman for the Klinsky factory. Some other Russian breweries did even better _ and this in a year that saw Russia freefall into one of the deepest depressions ever seen in an industrial economy.

There is talk, perhaps premature, of a generational shift from vodka to beer. It’s hard to conceive of anything that could wean Russians off vodka. But just such a shift is occurring in Poland, another vodka swilling country, and some economists predict it will happen here too.

``It’s a natural progression,″ said Hans Christian Jacobsen, a director of agribusiness for the European Bank for Reconstruction and Development, which has invested nearly $100 million in Russian breweries. In emerging markets, Jacobsen said, consumers often switch from drinking hard liquor to beer.

All this bubbling fermentation has drawn international beer companies to Russia, where a battle is shaping up for shares of the growing market.

A Scandinavian consortium has a jump on the competition with Baltica, the country’s best selling beer, which is brewed in St. Petersburg and is the closest thing Russia has to a national brand.

SUN Interbrew, a recently formed alliance of Indian and Belgian interests, is challenging Baltica’s dominance through a chain of regional breweries _ soon to include Klinsky _ and is laying plans for a national brand of its own.

Other players include Turkey’s Efes brewery, which just opened its own factory in Moscow, and South Africa Breweries, which recently bought a brewery in the city of Kaluga.

The cutthroat competition, which also includes Russian-owned breweries such as Moscow’s giant Ochakovo, is bringing something new to Russian consumers: decent beer.

In the Soviet era, beer was unpasteurized, uninspiring and often unavailable. It was usually terrible _ and that was if you were lucky enough to find it.

It is no surprise, then, that Russians drink far less beer than most Europeans or Americans. Per capita beer consumption is 5 gallons per year, compared to 22 gallons per year in the United States and 34 gallons per year in Germany.

That could change as breweries expand their capacity and continue to improve their quality. At their best, the new Russian beers _ such as those produced by Siberia’s Pikra brewery _ are as good or better than most imports and cost a fraction of the price.

At Klinsky, most of the old Czech equipment has been scrapped in favor of German and Belgian machinery. Ingredients are imported, too _ malt from Finland, hops from Germany.

``Only the bottles are made in Russia,″ Gulina said. ``All the rest is foreign.″

The beer isn’t great yet. Klinsky’s six styles lack the depth and sophistication of great European beers, or the clean consistency of American brews. But they aren’t bad, either. And they are popular.

Already, Klinsky has expanded its production from 106 million gallons a year in the early 1990s to 290 million gallons a year today. Now, with an infusion of money from SUN Interbrew, Klinsky hopes to nearly triple its production over the next few years.

Klinsky has a small marketing department that has produced some billboards and market displays, but the company hasn’t done any television advertising and doesn’t plan any soon.

``The situation is such that we can’t meet the demand,″ Gulina explained. ``So to put our money into advertising makes no sense.″

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