BBC News - Russia tensions hit Carlsberg sales

20 August 2014 Last updated at 09:19 ET

Sales at the Danish brewer Carlsberg have been hit by falling consumption in Russia and Ukraine.

Russia beer volumes declined by between 6% and 7% in the second quarter due to the "uncertain macroenvironment" and "weak economic development", Carlsberg said.

Ukrainian beer consumption dropped 10% amid the crisis in Eastern Europe.

Carlsberg warned that its yearly profits would be likely to decline as a result.

"In Eastern Europe, our teams are doing an excellent job mitigating the impact of the current market challenges," said Carlsberg chief executive Jorgen Buhl Rasmussen.

"Unfortunately, we believe the Eastern European beer markets will be impacted further as consumers are facing increased challenges and this will impact the group's profits negatively this year," he added.

Carlsberg's Baltika beer brand has the largest chunk of the Russian beer market. However, its market share declined by 1.2% in the quarter to 37.4%, after the brewer introduced smaller pack sizes.

World Cup benefits

In Ukraine, sales were affected by a beer tax increase of 43%, Carlsberg added.

Morten Imsgard, an analyst from Sydbank said: "The overall performance in the second quarter looks fine, but they [Carlsberg] are downgrading their guidance due to the macroeconomic uncertainty in the Eastern European region. So it is a mixed bag."

Russia and the West have implemented sanctions against each other over the Ukraine crisis. The West has accused Russia of supporting pro-Russian separatists in Ukraine.

Despite the tensions, Carlsberg's rival Heineken reported "strong brand growth" in Russia in the first half of the year.

Its premium Heineken brand grew by more than 5% in central and eastern Europe in the period.

Nevertheless, the Russian beer market remained "quite challenging" due to yearly tax increases, a Heineken spokesperson said. Heineken has a 12% share of the Russian beer market.

In Russia, Heineken's group beer sales fell by 4.2% in the half-year.

"Beer market conditions in Russia remain challenging reflecting the impact of weaker economic growth, lower consumer confidence and adverse legislation," Heineken said.

Overall, Heineken said its sales volumes had benefitted from the effect of the World Cup.

However, Heineken's net profit dropped 1.3% to 631m euros (£504m) in the first half.

Profits were affected by the cost of business reorganisation in Western Europe, changes to Nigerian brewing operations, and an erosion in the value of acquisition-related assets.