New life for oldest beer

This summer's unseasonably warm weather coupled with a brand makeover to target a burgeoning middle class has helped save Latvia's oldest brewery.

Cesu Alus, which has been producing beer in the northern Latvia town of Cesis since 1590, doubled its sales during the last six months compared with the same period last year, the company announced on Aug. 8.

Cesu's sales between January and June totaled 2.78 million euros, a 94.4 percent increase over the first half of last year. The company sold 5.6 million liters during the period, just shy of the total sales for 2001.

Cesu has taken advantage of the briskest beer sales in Latvia's history, which have followed some of the hottest weather in recent memory.

Total beer sales increased 35 percent in the first six months of this year, totaling 62.76 million liters, according to the Latvian Brewer's Association.

Beer flew out of the taps and coolers between April and June, when sales nearly doubled last year's figures, and industry observers expect third-quarter sales to be at least as strong.

Baltic Beverage Holding, the parent company of Latvia's leading brewery Aldaris, also posted impressive sales figures.

But despite the sales upswing, Aldaris lost a piece of its commanding 45 percent market share over the first half of this year due in part to Cesu's resurgence.

Cesu's market share currently stands at about 9 percent, up from 5.5 percent from last year. It has pulled even with the Lacplesa brewery as Latvia's second most popular producer.

Cesu sold 1.1 million liters during an unusually warm May, obliterating its single-month sales record. The record lasted exactly a month. In June the brewery sold 1.7 million liters.

"Our main problem now is capacity," said company Director Edgars Stelmahars. "We're selling more than we can produce."

The company's turnaround since the late 1990s has been remarkable and is mostly a result of stepped up investment by its parent company - Finland's Olvi OY.

The beer is the same, Stelmahars said, but it's image and distribution have changed.

Olvi OY poured 6 million lats (10.34 million euros) into a new brewery last year that immediately increased monthly production capacity from 800,000 liters per month to 1 million liters.

To get the beer into mugs, Cesu has also invested in 200 additional tap and cooling systems that it has placed in pubs and beer gardens mostly in Riga. With the production, sales and distribution infrastructure in place, Cesu began the largest marketing blitz in the company's long history.

The goal is to convince twenty- and thirtysomethings to change their brand, which means going after Aldaris.

"These people increasingly have more money, and it is easier to convince a young person to switch brands than it is older people, whose habits are usually set," he said.

But Stelmahars is realistic. He doesn't expect Cesu to break Aldaris' headlock on the beer market in the near future.

"Our target is second place by ourselves," he said.