The group, which already owns the Vilniaus Tauras brewery, said the acquisition should take effect in early November, doubling its local market share to over 30 percent.
The deal clarifies the contours of the Lithuanian beer market after long uncertainty. In June 2000, Norway's Orkla (50 percent owner of BBH) and Denmark's Carlsberg decided to merge their brewing activities to form Carlsberg Breweries. Lithuanian competition authorities ordered the parties to sell one of their three local breweries. Carlsberg Breweries and BBH decided to keep and merge Svyturys, by far the market leader, and Utenos Alus, Lithuania's second leading brewery.
Carlsberg said on Oct. 8 it hoped completion of the Kalnapilis sale would allow it to form a merged Svyturio-Utenos Alus by early 2002 with a market share of some 46 percent.
BBH officials said they were sorry to part with Kalnapilis, a well-equipped brewer with a strong brand. But they added the sale price had given BBH a return of "several hundred percent" on its 1995 purchase of Kalnapilis and later investments.
"As Carlsberg has a big head start, our objective for now is to be a strong second player, raising our share of the Lithuanian beer market to 35 percent in a reasonably short period of time," said Ulrik Sorensen, finance director at The Danish Brewery Group. He said the company could now offer beers for three market segments: the premium Kalnapilis, the less expensive Tauras and the Danish import Faxe.
Sorensen noted the Tauras brewery had been operating at full force since May, limiting its sales this summer. Excess production capacity at Kalnapilis facilities could now be tapped, making a 40 million litas expansion project at Tauras unnecessary.
Lithuania's beer market grew steadily throughout the 1990s. Per capita consumption of beer now stands at an annual 59 liters, comparable to levels in Norway or Sweden, and experts say Lithuania is still a growth market. Beer consumption predicted to increase 8 percent this year and an annual 5 percent to 7 percent for the next five years.
As required by Lithuanian law, The Danish Brewery Group intends to offer to buy all outstanding Kalnapilis shares at 6.14 litas per share, the price it paid BBH. The company is listed on the Lithuanian stock exchange.
The Danish Brewery Group is Denmark's second biggest supplier of beer and soft drinks, and the largest beer exporter in Scandinavia. It runs five breweries in Denmark and one in the United Kingdom, aside from operations in Lithuania. The company's Faxe brand is the leading import beer in Germany, Poland and Lithuania.
"It would be natural that our next step would be to look into the two other Baltic states," Sorensen told The Baltic Times, asked about the group's further expansion plans. "We are also looking to get our brand back in the Russian market," he added.
He said Faxe lost a strong foothold in Russia following that country's 1998 financial crisis but was still well-known by Russian consumers.
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