United Romanian Breweries Bereprod (URBB), the bottler of Tuborg and Carlsberg beer brands on the Romanian market, is expected to make investments worth between 60 and 90 million euros, in order to double the production capacity of its plant, to 4 million hectolitres per year, i.e. just under a quarter of the total capacity of the Romanian beer market (20 million hectolitres).
The company made this decision after the beer market experienced growth in the first 9 months of the year, which was strongly boosted by recent high temperatures, and exceeded major players' expectations.
Company representatives have not decided on the location of the new production facility, which could be connected to the Bucharest-based plant, entailing the relocation of the distribution centre, or built in the Western part of the country, enabling better market coverage.
"If the investment is made at the Bucharest plant, its value will stand at around 40 euros per hectolitre, i.e. approximately 60 million euros, but if we decide to build outside the Capital, i.e. in the Western part of the country, investments could reach as much as 60 euros per hectolitre, i.e. 90 million euros," said Shane Shachar, president of URBB.
The beer market has experienced growth above the expectations of the major players in the industry, registering an over 20% turnover increase in the first six months alone. Initial estimates, made by the major domestic beer producers, pointed to a maximum 5-7% growth.
The growth of the beer market, aided among other things by this year's high temperatures, has persuaded leading market players to invest in boosting their production capacities. Heineken is carrying out investments worth around 40 million euros to increase its production capacity, from around 5 million hectolitres to 6 million hectolitres, whilst Ursus is investing 50 million euros in its Timisoara-based plant in order to reach a total annual production of 6.3 million hectolitres by the end of 2008.
It is not only multinationals that have made similar decisions, but also Romanian producers, with European Drinks increasing its production capacity to around 5 million hectolitres, whilst Bere Mures intends to reach an over 2 million-hectolitre capacity next year, which would surpass the current capacity of the Carlsberg branch on the Romanian market.
On a market where major players conduct total investments worth over 100 million euros to boost their production capacities and cover demand, URBB's limited capacity caused sales to drop, even though the Tuborg bottler had invested over 20 million dollars (14.4 million euros) over the course of the year in the plant's expansion, which will ultimately enable it to achieve a 2 million-hectolitre output.
"The new production facility will be completed later than expected, in September or October, because we didn't want to temporarily break the production cycle during the summer, and this will show in this year's results, which will be 10% higher than initial estimates," said URBB's president.
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