Scottish & Newcastle bubbles at the prospect of selling Baltika in Britain

Russian success inspires UK deal

Scottish & Newcastle has pledged that its Russian business, BBH, currently little-known by drinkers outside the former Soviet Union, will overtake Europe's biggest brewing company, Heineken, in the next five years as it prepares to launch a major assault on the UK market.

BBH's family of Baltika beers are among the most popular in Russia, but just one, Baltika 3, is sold in the UK. It is only available on a limited basis as an imported brand.

But BBH's chairman, John Nicolson, confirmed that the group was looking to bolster its position in the UK.

"Driving a Russian brand, with all the imagery we can build round it, it should be very powerful," he said. "We're now looking at turning it from a seeding opportunity to a development opportunity. Russia is bigger on the world stage again; it's the right time to drive this brand. It's a great opportunity for S&N in the UK."

Mr Nicolson declined to comment further.

However, it is understood that the FTSE 100 giant is looking to start brewing Baltika 3 under licence from BBH in the UK.

Commercial details, such as marketing and royalties, are still under discussion, though insiders hope a deal will be struck by early next year.

S&N is having to hold discussions with BBH about brewing Baltika in the UK because it does not own the business outright: BBH is a joint venture between S&N and Carlsberg, the Danish brewer.

BBH has been a massive success for both companies. Sales have soared in recent years, as Russians turn away from vodka, valuing BBH at around £4.8bn. S&N's stake in BBH accounts for around 15 per cent of the group's total sales and 25 per cent of earnings. As well as operating 10 breweries in Russia, BBH is also expanding into the CIS countries. It already has a 30 per cent market share in Kazakhstan and is investing around €60m (£41m) in a brewery in Uzbekistan.

"There's still the gap with Heineken we want to close," said Anton Artemiev, the president of Baltika Breweries, BBH's main business. "The focus will remain on Russia: by growing volume in Russia, growing the Baltika brand, that should be enough.

"On top, though, we will be actively looking for export and licensing opportunities. The growth in exports is higher than your average business."