Although Russia has the world's highest alcohol consumption rate, its per capita consumption of beer is low, due in part to the traditional preference for vodka, but also to the poor state of most of the country's brewing industry. Most Russian breweries are relics of the Soviet Union's centrally planned economic system, and suffer from outdated equipment, a lack of management and marketing skills, and an inability to obtain the money needed to remedy these defects. Moreover, although imported beers sell well in those parts of Russia where there are sufficient numbers of consumers able to afford them, and despite the success of major international companies in other fields (including tobacco, "fast food", confectionery, soft drinks, etc.) which have established production and sales facilities in Russia, there has been little foreign investment in the Russian brewing industry and none from the really large multinational brewing companies. Beer quality is improving, but distribution is still largely confined to local markets, although one large company, the Sun Group, has begun to develop a modern large scale distribution system on the West European model. Beer is still fairly heavily taxed, but the burden was much heavier before excise duty was reduced in 1996. A greater problem for foreign companies is the Russian financial system, as accounting practices, tax assessment and collection procedures, etc., are very different from those used in most other countries. In addition, Russian consumers often treat beer as a generic commodity and have no particular preference for one brand over another, at least where beers with similar flavours and alcohol contents are concerned, so that building up distinctive brand images is difficult (especially since the advertising of alcoholic beverages on radio and television is illegal, as posters and other permitted media appear to have less consumer impact).
Keywords : beer brewing industry investment market prospect survey