Russian Brewers: Tradition, Revival, and the Global Challenge

November 1, 2003 By Roger Protz

When the Soviet Union collapsed and Winston Churchill’s famous Iron Curtain opened, observers of the brewing scene discovered that Russians drink beer as well as vodka. The country has a fascinating brewing tradition that was hidden from view for most of the 20th century.

A decade later, the concern now is whether that indigenous tradition can survive an assault from the global brewers of the West. Excluding the former Soviet republics, Russia itself had 300 breweries in the early 1990s. Within a decade, many have closed, and overseas brewers have bought nearly all of the rest. Only four or five remain in Russian hands.

The arrival of the free market in Russia has coincided with an explosion of beer drinking. Mikhail Gorbachev’s campaign to discourage the consumption of vodka prompted a switch to beer, a switch that has been boosted by the marketing techniques of Western companies in the 1990s and early 21st century. Today, Russia is the fastest-growing beer market in the world. Beer production has grown by 30 percent a year, from 28 million hectoliters in 1997 to 73 million in 2002. Growth is expected to be slower this year, but that is only because in previous years it has been so phenomenal.

That does not mean the country is satiated. Russians drink 40 liters of beer a year, compared to the Germans’ 128 liters and the Czechs’ 150 liters. There is still some catching up to be done, though national averages can be misleading. In Moscow and St. Petersburg, the country’s two major cities, the people manage a more respectable 100 liters per head a year.

All the usual big global companies— Heineken, Holsten, Interbrew/ Staropramen, SAB-Miller/Pilsner Urquell —are involved in the Russian market, either as importers or as owners of breweries. But far and away the biggest players are Carlsberg and Scottish & Newcastle. S&N, Britain’s biggest brewer, entered the Baltic and Russian markets by buying the Finnish brewer, Hartwall, while Carlsberg also moved east by buying Finland’s other major brewer, Synebrychoff. The two brewing giants have created a consortium known as Baltic Beverages Holding (BBH).

As a result, Carlsberg independently or with S&N via BBH now dominates the Russian beer scene. BBH alone owns 16 breweries in the former USSR and accounts for 21 percent of the Russian beer market. In the early 1990s, it built the Baltika Brewery on a greenfield site near St. Petersburg and it is now Russia’s biggest supplier of beer. Baltika has built a second plant at Rostov-on-Don.

Nowhere is the contrast between old and modern Russian brewing more glaring and fascinating than in St. Petersburg, the country’s second city, founded 300 years ago by Czar Peter the First—Peter the Great—as an opulent, architecturally stunning, Western-style city on the Bay of Finland. Peter encouraged the development of modern industry and decreed that beer should be made available for hospitals and the navy. Brewing, which along with hop growing, had been a domestic enterprise for centuries, began to blossom commer-cially. Thus it is no accident that Russia’s two oldest breweries are based in St. Petersburg.

Commercial beer at first was made by warm fermentation. English ales, such as Burton brown beers and London stout and porter, were prized and replicated. The climate, an inexhaustible supply of ice, and the influence of events in Bavaria and Bohemia prompted a switch to cold fermentation in the 19th century. Dark beers remain popular, however, and account for 10 percent of the beer market. These include imperial stouts and porters, though they are made by cold fermentation today. Dark beers are especially popular with women drinkers, who consider them to have important benefits during and after pregnancy.

A Brewery for the Czar’s Court

A visit to the Stepan Razin Brewery, the oldest and biggest in St. Petersburg, is a step back in time in many ways. In the old Soviet manner, visitors must pass through security turnstiles, be booked in and have a pass studied at frequent intervals by young men sitting forlornly on chairs in corridors. The history of the company and the quality of the beer, however, outweigh the inconvenience.

Stepan Razin has opened a museum on the site dedicated to the history of brewing in Russia, which remained a domestic industry until the 18th and 19th centuries. Ancient brewing artifacts are on view, along with photographs that trace the history of the brewery. Old advertisements and promotions inter-mingle with flags, banners and Orders of Lenin from the Soviet period.

A Swede, Abraham Krohn, founded the brewery in 1795. He brewed English-style ales and porters, which he delivered to the czar’s court. The products were known as Krohn until the company merged with a rival brewery run by an Englishman called Noah Kazalet. The new company was called Kalinkin after a major bridge across the Neva river, and its beers won prestigious prizes at Great Exhibitions held in St. Petersburg in the 1870s and again in 1909.

By the mid-19th century, Kalinkin moved from ale to lager, using decoction mashing and cold maturation, and began to sell its beer throughout Russia. The site of the brewery had been chosen due to its proximity to the Neva and a plentiful supply of soft water that was ideal for lager brewing. In the early 20th century it produced Pilsner, Export, Bavarian Dark and Pale, Pale Ale, Porter and Imperial Extra Double Stout.

In 1922 the name of the brewery was changed to Stepan Razin, in memory of a 17th-century Cossack leader who was put to death in 1671 for leading an insur-rection against the czar. The new title was part of a government policy of renaming many Soviet enterprises after revolutionary heroes.

Leon Trotsky encouraged the brewery to expand. The former commissar for war threw himself, with his renowned vitality, into the government’s new economic policy (NEP) that allowed a limited free market to develop in order that peasants and urban capitalists could supply basic goods to the people. It may have been Trotsky’s influence that allowed a new German brewhouse to be installed in 1925. By that time the brands on offer included Pilsner, Porter, Marzen, Leningrad Beer (to reflect the new name for St. Petersburg) and Red Bavarian.

With Trotsky expelled from the Soviet Union and his supporters crushed, Stalin killed NEP and moved to a rigid centralized economy. Stepan Razin’s main function was to supply beer to party bosses, their special shops, and Intourist hotels. During World War II, brewing stopped due to lack of materials. The plant was reduced to making bread and paper.

Today’s Stepan Razin

In the 1960s the brewery was allowed to develop new sales by delivering bottled beer to people’s homes. Gradually it moved back into the limelight and its products became more widely available. The Gorbachev era allowed further expansion, and then came privatization and separation from Vena.

Today, Stepan Razin accounts for 30 percent of the St. Petersburg market and proudly proclaims that it is the only Russian-owned brewery in the city. It produced 1.6 million hectoliters in 2001, 1.7 million in 2002, and expects further growth this year. Its superb brewhouse, with classic burnished copper mashing, lautering and boiling kettles, produces a wide range of beers that includes its main brand, Petrovska (4.5 percent ABV), Student Beer (3.5 percent), Admiralty (4.5 percent), a 4 percent Special, 5.6 percent Gold, and an 8 percent Porter. It also brews a Bavarian-style Märzen and an “old recipe beer,” which is based on a Bavarian double bock. Lagering is in horizontal tanks that were installed between 40 and 50 years ago.

The beers are magnificent, rich in malt and hop character, with great depth and complexity. The porter, which is cold fermented, is one of the finest of the family, with a roasted grain, coffee, chocolate and vinous aroma and palate, underscored by generous hopping. It is brewed from pale, roast and caramalt, with Nugget and Goldings hops. Lagering lasts for an impressive 90 days. It has 35-40 units of bitterness. The Märzen uses pale and caramalt with Nugget hops and 40 IBUs.

Vena Brewery

The Vena (Vienna) Brewery is Russia’s second oldest plant. Leisinger Brauerei of Austria founded it in 1872. The brewing equipment was built in Austria and modern lagering technology was employed. In the 1880s, Vena made use of the new rail network to export its beers to Moscow. Its independence was short-lived, however. In 1889 it was sold to Kalinkin (now called Stepan Razin).

The Vena site has had a checkered history. Reopened and closed in both world wars of the 20th century, it was used mainly as a warehouse by Kalinkin but briefly made much-needed beer during the siege of the city in World War II.

In 1989 it was separated from Stepan Razin and privatized. A majority of its shares were bought by Synebrychoff of Helsinki, which later expanded its share ownership to 68 percent, with the remainder held by the European Bank of Reconstruction and Development. In 1999 Carlsberg acquired Synebrychoff and two years later evenly divided the spoils of Vena with BBH.

Peter Chernyshov, general director of Vena since February this year, previously worked for BBH in the Ukraine. In addition to the Vena products, marketed under the brand name Nevskoye, he produces Tuborg Gold under license. He says that vast amounts of investment have been poured into Vena: an initial investment of $35 million for a water treatment station and kegging and canning lines, followed in 1989 by $70 million for a new brewhouse, fermentation department and bottling line. In 2002, an additional $6 million was spent on further development of the canning facility. Sales of canned beer are growing at a frantic pace in Russia, where young people see it as a “cool” drink.

The modern Steinecker brewhouse employs just six people. All areas of production are computer controlled. The brewhouse and its systems are identical to those at Synebrychoff. Brewing liquid comes from the vast inland sea known as Lake Ladoga, the water purified through sand and charcoal filters. Malt is imported from Finland and stored in six giant silos; more Russian grain will be used in the future. Hops, in the form of pellets and extract, are derived from American and German varieties. Yeast for the Nevskoye brands comes from Finland, while Carlsberg supplies a Tuborg culture.

Mashing and wort filtration take 1.5 hours. The wort is then boiled in the brew kettle for an hour and clarified in a whirlpool. Primary fermentation takes between six and eight days in 33 combi tanks, followed by two weeks of cold maturation in conicals. The whole fermentation and maturation process takes just 21 days.

On a Growth Curve

With only 9 percent of beer consumed on draft in Russia—though a pub and bar trade is growing—canning and bottling at Vena are crucial parts of production. Two bottling halls produce a total of 80,000 bottles an hour, while two canning halls supply more than 70,000 packages every 60 minutes. Vena was the first Russian brewery to use kegs—in Soviet times, only a tiny amount of draft beer was produced and it was served from crude tanks at street stalls. Now it exports to Finland, Israel and Spain.

As a result of the hefty BBH investment, Vena has an annual capacity of more than 2 million hectoliters. In 2002 it produced 1.15 million hectos and expects to make 1.36 million this year. Peter Chernyshov said the brewery grew sales by 20 percent last year and is on course to grow by 16 percent year this year.

Vena brews only pale lagers. It has phased out its revered Imperial Russian Stout and a suggestion that it should import Synebrychoff’s Koff Porter was dismissed out of hand.

The main brands, all labeled Nevskoye after the Neva river that runs through St. Petersburg, are Lite (3.2 percent ABV), Nevskoye (4.6 percent), Classic (5 percent) and Original (5.7 percent). They are malt-accented beers, though Classic and Original have some light citrus notes from the hops and some bitterness in the finish. A touch of black malt is added to the grist for Original to give both a touch of color and perhaps a small genuflection in the direction of its Austrian origins.

Vena is a substantial brewery, but it’s a minnow compared to Baltika, which has grown in just 10 years to become Russia’s biggest beer producer. It produces 8,300,000 hectos a year in St. Petersburg, with a further 3 million at a second brewery in Rostov-on-Don. The Baltika beers are labeled “1” to “8.” Among the pale lagers, there is Baltika 6, a porter that pays homage to Russia’s brewing past. It’s pleasant and sweetish, but it lacks the complexity of the Stepan Razin Porter.

Restless for Success

BBH is restless for success. It’s investing between $150 and $200 million this year in its Russian and Ukranian breweries to boost market share by a further 4 percent. Baltika’s sales fell slightly last year and BBH feels under threat from its main competitor, Sun-Interbrew, a consortium set up by Sun of India and Belgian giant Interbrew. Sun, before merging with Interbrew, bought eight breweries in Russia, and the consortium now owns Klin, the biggest brewery in Moscow. Stella Artois will be brewed under license in Russia, a course that other Western breweries will follow. Heineken this year paid $400 million for the Bravo International Brewery in St. Petersburg and, as it’s the Dutch giant’s policy to replicate its main brands abroad, Amstel and Heineken will soon appear on the Russian market. Heineken inquired about a possible takeover of Stepan Razin and was rebuffed, but how long, one wonders, can this ancient and noble brewery remain independent?

SAB-Miller, a merger of South African Breweries and Miller of Milwaukee, operates under the name of Pilsner Urquell in Russia. It brews the Prague beer, Staropramen, under license and has reached an agreement with Holsten of Hamburg to make Holsten Pils as well. It will start to brew the Czech Kozel brands in Russia, too. Pilsner Urquell is already brewed in Poland and production will start in Russia in the near future, making nonsense of the fact that Urquell means “original source” and can only credibly be brewed in Pilsen.

As international beer brands begin to saturate the Russian market, beer lovers will watch with caution to see whether the country, in its breakneck rush to embrace both the positive and negative aspects of Western culture, will trample on its own rich brewing tradition.