Brewers give soft drinks the hard sell

RIGA - There's more to life than beer. There's also Pepsi.

At least, there is for Baltic Beverages Holding, the biggest beer manufacturer in Estonia, Latvia and Lithuania.

The company has reached an agreement with PepsiCo to market, distribute and produce the company's products in the Baltic states, starting Jan. 1.

While the name BBH probably does not register with many beer drinkers, they have probably gripped and sipped a Saku in Estonia, an Aldaris in Latvia and an Utenos or a Kalnapilis in Lithuania at one time or another. BBH puts out 48 percent of all beer produced in the Baltics.

Not surprisingly, representatives from Saku Brewery and Aldaris applauded the agreement with PepsiCo.

This is the first step for Saku to become more a beverage producer instead of just a brewery, Ruth Roht, Saku's spokeswoman, said.

In Latvia, Aldaris already has a stranglehold on the beer market, as it produces 55 percent of all beer in the country, according to its annual report.

Aldaris' spokesman Rolands Barenis said the agreement added another distinctive brand name to his company's portfolio of drinks.

"We have beautiful beer, including non-alcoholic beer. We have mineral water, yes. But we didn't have a soft drink. And I think with this new product, we practically complete our portfolio of brands," said Barenis.

"We, as I sometimes say, now have a product for people from children to old people in our portfolio. They can begin from mineral water and finish with mineral water."

Pepsi products were available in the Baltic states before the agreement with BBH was signed, but they were produced in Poland and distributed by local divisions of Pepsi Cola General Bottlers.

Companies like Aldaris already know they are expected to assume responsibility for marketing and distributing Pepsi products by including them in their distribution networks.

Production in Poland will continue for the time being, as BBH's companies do not know where the production and manufacturing will be in the Baltics.

Barenis and Antra Truksane, Aldaris' quality manager and leader of the Pepsi project in Latvia, said BBH will make that decision based on a number of factors including taxation levels and the political environment of each Baltic country.

While Barenis and Truksane appeared to embrace their new brand of soft drinks, they clearly stressed that the decision to market Pepsi products was made by their owners.

BBH's owners, Finland's Hartwall and Swedish-Norwegian Pripps Ringnes, have made prior agreements with PepsiCo in their own countries.

Pripps Ringnes started production, distribution and sales of Pepsi products in Norway in 1998, while similar operations are planned to start in Sweden in 2001, according to its most recent annual report.

"Pepsi is the favorite soft drink of the new generation. The brand is associated strongly with many of the world's leading artistes [sic], who are participating in Pepsi marketing. These include Hanson, the Spice Girls and Janet Jackson," the report said.

Of course internationally, many people are continuing to drink Coca-Cola products. More than 1 billion drinks are consumed per day, according to Coca-Cola's annual report.

The company can be also found in about 200 countries worldwide.

"I think we have taken note of their arrival here, but we believe in our strong plans. We don't spend time thinking what our competitors are doing," said Kadre Vaik, Coca-Cola Eesti AS spokeswoman.

Employees of BBH's beer companies even acknowledged that Coke and Coke products are far more popular than Pepsi's.

"For right now, I'd say that we'd like to reach a close second behind Coca-Cola [in market share]. Coke has been operating in the Baltics for so long already," said Roht.

In Latvia, Aldaris will soon distribute Pepsi, a product line that captures only 10 percent of the market.

"I don't think that, first of all, 10 percent is that small especially in the soft drinks. I think that is a good market share. But how to increase this market, I think that's a task for the new distributors, and we will try to manage and increase this part," said Barenis.

Still, neither Barenis or Truksane at Aldaris nor Roht at Saku said what kind of market share they are targeting for Pepsi products.

Truksane said per capita consumption is projected to grow slightly from year to year, at least in Latvia.

Before marketing plans can be made and production facilities can be decided, Barenis said there are a lot of questions to be answered, starting with distribution.

"It's not so easy to change distributors. That is a small revolution in the soft drinks market because from another aspect we have a very good distribution network as a company. And what will happen when we join this new brand with our distribution, maybe," he said.

These start-up problems notwithstanding, even non-Pepsi distributors saw room for optimism in the BBH and PepsiCo agreement.

"I think the market is quite underdeveloped. People don't have the tradition of drinking soft drinks," said Vaik. "It is good to have a strong competitor, it will expand the market."