Carlsberg, which owns the Klaipeda-based Svyturys brewery, wants to
purchase the brewing capacity of Orkla, a Nordic-owned concern. Orkla
owns Baltic Beverage Holding, which owns the controlling shares in
Panevezys-based Kalnapilis and Utena-based Utenos.
Carlsberg, says Carlsberg spokesperson Margaret Skov, wants to buy
Orkla's brewing activities and form a new company, Carlsberg
Breweries A/S. (Orkla also owns Lithuania's second largest daily
newspaper, Kauno Diena, which isn't on the table in this deal.)
In return for its brewing activities, Orkla would receive 40 percent
of the shares in Carlsberg Breweries A/S. Carlsberg would own 60
percent of the new entity, plus take over the day-to-day management
and control of the combined Orkla and Carlsberg brewing activities.
The acquisition, if approved, would give Carlsberg 70 percent of the
domestic beer market - and, some fear, it would grant it monopolistic
powers in a growing market.
"Monopolization of any market is not good. To have 70 percent of
market in one hand is a risky thing for a good market," said Audrius
Vidzys, president of the Lithuanian Brewers Association.
According to statistics from the Lithuanian Brewers Association,
Svyturys, Carlsberg's first acquisition, is atop the Lithuanian beer
market with 26.6 percent of total beer sales in the country. Utenos
Alus is next, with 24.2 percent, and Kalnapilis is third, with 21.9
percent. Coming in after the big three are Vilniaus Tauras, with 10.1
percent, and Ragutis, with seven percent, and Gubernija with 4.9
percent. Foreign imports compose roughly 3 percent of the market.
However, recent comments from Kalnapilis' Director General Remigijus
Sydeikis dispute the figures. He claims that Kalnapilis, which
recently started exporting beer to the United States, has overtaken
Svyturys and is currently leading the Lithuanian beer race.
The Carlsberg brand itself has been getting a lot more visibility in
recent months. Carlsberg draught beer is brewed at the Svyturys
brewery in Klaipeda and can be purchased in bars for the same price
as domestic brews. In many Vilnius bars, its banners and logos are as
common a sight as those for domestic brews. The company is currently
doing heavy promotions during the Euro 2000 soccer tournament.
For the time being, Carlsberg is mum about its strategy should the
acquisition succeed.
"The takeover is dependent on the approval by competition authorities
and a satisfactory due diligence process, and until the deal is
finalized we will not start making decisions with regard to futur
strategies and plans," said Margaret Skov, a Carlsberg spokesperson.
However, Vidzys thinks a Carlsberg's prospective acquisition could
mean the death knell for many of the country's small breweries, which
are already hurting.
"I think the market share of small breweries will decrease and the
number of small breweries will also decrease," he said. "Now we have
about 70. I think it's maybe too many."
Currently, the government gives small breweries a 50 percent discount
on the access tax for the first million liters of beer sold. However,
Vidzys maintains the government will have to be more generous should
Carlsberg take over Orkla.
"After the merger, the help that the government is providing won't be
enough. Now it's maybe okay but after this merger, I don't think they
will be able to defend themselves," he said.
Watching quietly from the sidelines is the Lithuanian Competition
Council, which is also mum about the deal. While it can't influence
European bodies investigating Carlsberg's acquisition request, it may
be able to influence how such a merger will be carried out in
Lithuania.
If it will increase the dominance of their position on the Lithuanian
market, says Palmira Kvietkauskiene, the council's press attachŽ,
the council could, theoretically, block such a merger as it pertains
to Lithuania.
"It will depend on the market shares, on the position of dominance.
We have such power according to our law," she said.
But Vidzys doubts the council has such power.
"What they can do in practice is exert more control on these three
breweries - they can check prices, they can look at profit, but
really I don't think it's practically possible not to let Carlsberg
buy BBH," he said.
Meanwhile, the beer market in Lithuania has been seeing some of its
best times yet. Last month, Vidzys reports, beer sales jumped by 36
percent. Comparing the first five months of this year to the same
period last year, the increase was by 26 percent.
There are a lot of reasons for the growth, said Vidzys. One is hot
weather. This spring was considerably warmer than last year's spring.
Also, competition is increasing, breweries are lowering prices,
adding new products to the shelves and introducing all kinds of new
promotions.
Also, "the access tax for beer has been stable last five years, while
taxes on wine and spirits were doubled. People have gotten used to
drinking beer," Vidzys added.
"The consumption of beer was too small in Lithuania and now it's
starting to become a normal euro country."
In Europe, he reports, average beer consumption is from 70 to 80
liters per capita. The Lithuanian average is 57 liters, which should
increase to 60 by the end of the year, thanks in part to a sweltering
summer and increasing number of outdoor beer gardens.
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