Investors climbed into a bottle

As Kommersant found out, a new large player may appear on the food glass container market in Russia. Former Phosagro CEO Maxim Volkov acquired one of the largest plants in the Russian Federation, Aleksinsky Plant in the Tula Region and is considering the purchase of several more assets.

Now the market is going through hard times amid falling consumption of beer products, experts say. The businessman admits that so far the margin of production is low, but, in his opinion, the restriction on plastic packaging, which is being discussed in the government, can support the sector.

As Kommersant learned, the former co-owner of the Alexinsky Glass Factory was the former general director of Fosagro Maxim Volkov. The deal was closed in August. Kommersant’s sources did not disclose its amount, but noted that, on average, such assets cost about 3 billion rubles in Russia. Mr. Volkov confirmed this information to Kommersant, explaining that he now owns 25% in the plant. The remaining shares were acquired by a private investor friendly to Maxim Volkov, whom the businessman did not disclose. Maxim Volkov explained that now he is considering the purchase of another glass factory in the north-west of the Russian Federation, without specifying which one.

According to him, the “economies of scale” and market share in glass containers play a key role in stabilizing the industry, which has survived more than one wave of bankruptcies over the past ten years.

The volume of the glass packaging market in Russia is estimated at 10.2 billion units, it has been declining in recent years. Aleksinsky Glass Factory, which reached full capacity in 2009, can produce over 1 billion units (three furnaces with 360 tons of glass mass per day). Until recently, according to SPARK, its sole owner was Strategy, which is owned by two Cypriot offshore companies. Anchor consumers of Alexinsky Plant products are the CSC group (Baltika, Carlberg), Russian Standard, Beluga Group, etc.

A Kommersant source in the industry notes that the change of ownership of the Aleksinsky plant poses risks to these manufacturers if they have problems with the purchase of containers. He recalls that Russian Standard exports its products to Europe, where there are high fines for violating terms of delivery. Maxim Volkov noted that the new owners "value the customer base and intend to satisfy the needs of each client as much as possible within our capabilities." In the “Rust” group, which includes “Russian Standard Vodka”, they confirmed that they did not see any risks for themselves due to a change in the owner of the plant, and “the increase in the cost of packaging may not be associated with a change in ownership, but with a reduction in the capacity of glass factories what has happened over the past six to seven years. "

The glass factory in the Tula region will be the second asset of Maxim Volkov in this area. Last year, its structure, Pikalevskaya Soda JSC, bought the Tver Glass Factory with a capacity of 240 tons of glass per day, which was then in pre-bankruptcy. As Mr. Volkov explained, the enterprise is undergoing modernization, investments in which will amount to 2.5 billion rubles.

In the early 2000s, new glass packaging capacities could be recouped in three years, the market says, but in recent years the situation has worsened. Director of the Center for Research on Federal and Regional Alcohol Markets Vadim Drobiz notes that in 2008, when the beer industry, which accounts for more than 70% of alcohol consumption in Russia, was actively developing, many glass factories were built, which caused overproduction. At the same time, in 2013-2014, when the sector experienced a decline due to reduced demand, these enterprises began to go bankrupt. According to the expert, the main reason for the failure of consumption is the demographic crisis and the increase in the average age of the population, since the main consumer of beer is youth. So, if in 2007 Russia consumed 12 billion liters of beer, in 2014 it was only 8 billion liters, and now consumption has fallen to 4-5 billion liters per year. Behind it went the production of beer bottles - from 6 to 2 billion units in 2007-2017. In 2018, according to the Union of Russian Brewers, the production of brewing products in Russia grew by 4.1%.

Now the production of food glass containers is a low-margin business, says Maxim Volkov. But, he says, the restriction on the use of PET containers in certain sectors is being discussed more and more actively, which in the future may support the industry. Since 2017, the Russian Federation already has restrictions on the allowable volume of plastic packaging for beer, which cannot be higher than 1.5 liters, and further reduction in the allowable capacity is being discussed.

Source: https://www.kommersant.ru