Sun, Nov 14, 2004 - Page 11 News List

Russian federal legislators strike down beer ban

OUTDOOR DRINKINGThe country's lucrative brewing industry applauded the Federation Council's refusal to pass a bill which would have banned beer in most public places

NY TIMES NEWS SERVICE , MOSCOW

Beer companies toasted the upper house of Russia's federal legislature this week after lawmakers struck down a proposed law banning beer drinking in streets and other public places.

As beer swiftly catches up to vodka as the most popular alcoholic beverage here, Russians are drinking it everywhere -- in the morning on their way to work, in the subway, at the movies, in parks when the temperature is below zero.

The proposed new law would have banned beer drinking in some unexpected places -- schools, day care centers and hospitals -- as well as most public places, like streets, stadiums and parks and on public transportation. Only licensed restaurants and bars would be exempt.

The beer bill was wildly unpopular among local brewing companies. Russia's Duma, the lower house of the legislature, passed the bill on Oct. 29 and sent it to the upper house, the Federation Council, which struck it down 73-40, with five abstentions. The two houses will now go into conference to revise it and vote again later this year.

Beer's popularity here is helping make up for flat demand in the West.

"Our two biggest growth markets are China and Russia," Axel Gietz, senior vice president for corporate affairs for InBev, said at a news conference on Thursday. "This law may seem easy to pass, but instead it needs to be a good law."

InBev is now the world's largest beer company, formed when InterBrew and AmBev merged this year, and it also controls Sun Interbrew, Russia's second-largest beer company.

The Federation Council said in a statement that "from the moral point of view" members supported the bill, but feared it "would drive young people into staircases, and provoke clandestine beer sales for higher prices and massive bribe-taking by the police."

Russians consume on the spot 20 percent to 30 percent of the beer they buy, industry analysts say. About 67 percent of Sun Interbrew's Russian sales come from the country's half-million or so street kiosks and 30 percent is consumed right away. Only 6 percent of Sun Interbrew's sales are in restaurants, according to Aton Capital, an investment bank here.

The bill would also establish for the first time a minimum drinking age -- 18 -- in Russia. Beer companies were careful to say that while they supported any bill that would prevent minors from drinking, they were against restrictions on television advertising, promotions at sports events and sponsorships.

"We want the right to be able to advertise to our adult consumers," Gietz said.

Aleksei Krivoshapko, a consumer products analyst for UFG investment bank, wrote in a note to clients, "The revised law will most likely be reshaped to solely address underage drinking."

Russia's Beer Union and most brewers, as well as the government and presidential administration, all support keeping beer out of the hands of minors, he said.

Beer companies are reaping huge profits in Russia, and the industry is one of the few ways investors can get exposure to the boom in consumer goods in the former Soviet Union.

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