More beer on the Latvian market

  • 2000-05-11
  • Valters Medenis
RIGA - Rigas Originalais has bought shares in Riga brewer Rigas Alus and sees the opportunity to increase business in the Latvian beer market. The company Rigas Originalais was formed especially to purchase 94 percent of Rigas Alus and is looking to increase its 7 percent market share.

"The management at Rigas Alus saw the chance to buy controlling shares in the brewery and increase the brewery's production through relocation," said Girts Ancaskis, Rigas Alus board chairman.

Latvijas Balzams sold 54 percent of its shares in Rigas Alus, and New Technology and Business Development Corporation, formerly Ave Lat Grupa, sold its 40 percent of shares in the brewery.

NTBD said it will be concentrating on information technology and Rigas Alus was not part of their strategy for the future.

"Latvijas Balzams is concentrating its resources in the hard liquor and light alcohol market and did not want to channel its resources into the beer market," said Raimonds Locmelons, spokesman from Latvijas Balzams.

The general director of Latvijas Balzams, Aleksandrs Ivanovs, also said the small part of the beer market Rigas Alus has is not interesting to the company.

"The hindrance of the small brewery in the city center is too much trouble to redevelop and capital is needed to increase brewing capacity," said Ivanovs. "This is the reason why we have sold our shares for a good price to the investor. They now can develop the brewery further."

Talks in March among the board of Rigas Alus, NTBDC and Latvijas Balzams started the ball rolling for the 94 percent sale of Rigas Alus.

"The board of Rigas Alus saw an excellent opportunity to redevelop Rigas Alus into a successful beer brewery," said Ancaskis. "The process of buying the shares happened very quickly and the price of the purchase was well worth it for all parties involved."

Rigas Originalais is now organizing a move of the brewery to a site more advantageous for beer production. The site has not been chosen, but it will be outside Riga's center.

Ancaskis said Rigas Alus can satisfy only 60 percent of beer orders because of outdated technology at the brewery.

"We need to buy new equipment and expand our brewing capacity so we can compete in the Latvian summer beer market," said Ancaskis.

Rigas Alus is not able to meet its demand. Ancaskis said Rigas Alus does not want to release beer that has not fully matured to meet the demand by retail outlets.

"The only alternative we see is to relocate and expand our production. A new site has to be found that will replace the old one at 2 Bruninieku Street. This is imperative if the brewery is to succeed," said Ancaskis.

A new advertising campaign for the production of mineral water in conjunction with the company Rasa is another strategy the board of Rigas Originalais is working on. Rigas Alus currently sells two liter bottles of carbonated mineral water. The company's next step is a plan to make carbonated mineral water, have it retailed in smaller containers and flavored.

Rigas Originalais took out a loan to buy the Rigas Alus shares. The actual price of the deal will not be released by any party involved. Ancaskis said the company has to operate quickly in the relocation of the brewery and implement a strategic advertising plan to compete against Aldaris, the giant of the Latvian beer market.

"We have a lot of work ahead of us but we are very confident we will increase our market share by next summer and be able to supply the demand for our product," said Ancaskis.

The new owners will retain production of the five beers on the market and possibly introduce new beers in the future.