BBH, a joint venture between Denmark's Carlsberg group and the British brewer Scottish and Newcastle, reported turnover of €1.4 billion for 2004, up 19 per cent, helped by an 18 per cent increase in volume sales to 3.7 billion litres.
Russian volumes rose by 19 per cent for the year, ahead of total Russian market growth of 11 per cent, but BBH's good performance belies a less-than-spectacular first half for the brewer.
Increased competition, particularly in the lower-priced PET sector, led to BBH losing market share in the first half, but the company responded well with increased marketing expenditure and by completing the nationwide roll out of its distribution network, which not only helped it claw back the lost market share but build upon it - by the end of 2004, BBH's Russian market share was 34.2 per cent, up 1.2 per cent.
However, the increase in advertising expenditure (up €45 million to 2.5 per cent of sales) meant that pre-tax profit growth for the year was pegged back to just 5 per cent to €276 million.
In Ukraine, BBH is the number two brewer after InBev, and once again posted growth in excess of that of the market as a whole (16 per cent and 13 per cent respectively). However, the competition remains fierce in Ukraine, while the political instability following the re-run election meant that sales towards the end of the year were adversely affected.
In the Baltic countries, BBH is the market leader with 42 per cent market share, but the company's growth (1.2 per cent) was sluggish compared to the market as a whole (3.2 per cent), again due to higher competition from the lower-priced PET market. However, sales in Estonia benefited from EU accession and significant cross-border trade with Finland, resulting in total volume growth of 4 per cent for BBH Baltics.
In the newest and fastest growing of its international markets, Kazakhstan, BBH has established a strong position with a good brand portfolio and a wide distribution network. In 2004, BBH had an official market share of 23 per cent, although with the inclusion of unofficial Baltika brand imports from Russia, this figure rises to 27 per cent, making it the market leader.
"BBH's results demonstrate the strength of our brands and business model, particularly in Russia where the second half performance was very strong, with domestic beer volumes growing by 22 per cent," said Christian Ramm-Schmidt, BBH managing director. "In Russia, BBH has an excellent brand portfolio, brewery network and sales and distribution system. There is a considerable opportunity to operate the five BBH businesses more closely together, giving them greater operating authority to offer even more value to customers and consumers. In line with the long held vision, initiatives are being taken to develop a shared brand portfolio and sales and supply-chain structure leveraging the common strengths of our Russian operations."
Analysts Goldman Sachs were generally pleased with the BBH results, but said that it was surprised that price increases of 3.1 per cent during the year had come in at under the rate of inflation - a reflection of the strength of the competition in the low-cost PET sector, dominated by InBev.