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Sore heads woke up on new year's day in Russia to new restrictions on beer sales. No more booze runs after 11 p.m., and kiosks are now subject to limits on how much beer they can sell. Russia has to do something to curb the alcoholism that claims the life of one in five of its males, according to the World Health Organization. These measures will not be welcomed by brewers, however. The big four – AB InBev, SABMiller, Heineken and Carlsberg – all rely on growth in beer drinking in emerging markets to help offset declining sales in Western Europe.

Carlsberg has made the biggest bet among peers on Russia's love affair with pivo. After all, Russia is the world's fourth largest beer market by volume. Last year, the Danish brewer paid $1.2-billion (U.S.) to buy the 15 per cent of its Russian unit Baltika that it did not already own – a one-quarter premium to the undisturbed share price. That followed its $15-billion acquisition in 2008 of assets in Scottish & Newcastle, its joint venture partner in the region. Carlsberg now leads Russian beer drinking by far with a two-fifths share of sales volume; it derives an equal proportion of earnings before interest and tax from the country.

That means Carlsberg remains vulnerable. On top of selling restrictions, Russia is also curbing advertising and slapping on higher taxes. Tax on beer is up by a quarter this year on top of a 20-per-cent rise in 2012. A further one-fifth hike is due next year. Carlsberg's hope, therefore, that growing incomes in Russia will boost beer sales volume by 3 to 5 per cent each year in the long term looks more like wishful thinking. In fact volumes fell 3 per cent in the country in 2011 and could be flat for 2012, Bernstein notes. Little wonder the Danish brewer's revenue growth in the third quarter was the lowest of the big four. Carlsberg's focus on Russia has the makings of a lingering headache.

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