LLC Baltika Baku about Reasons for Suspension of Beer Production

The reason for the temporary suspension of Baltika Baku beer production, along with the fall in sales, is due to lower purchasing power of the population and a change in the legislation. Turan was told by the corporate relations manager of LLC Baltika-Baku, Nadezhda Ovsyannikova, commenting on the reasons for stopping the production.

In particular, the negative impact on the company's business was a change in the water tariff from May 16 and the establishment of a single rate for water used as a raw material, and process water.

Thus, the cost of a cubic meter of water for consumers using water as raw material has been reduced from 12 to 8 AZN. But the cost of one cubic meter of process water has been increased from 1 to 8 AZN.

In the production of beer, water is used as feedstock, but process water is also used for washing and pasteurization. Ovsyannikova said, to produce 1 liter of beer about 4.5-5 liters of process water is used.

Therefore, harmonization of tariffs for water will lead to raising the company's production costs to 500,000 AZN in 2016.

In addition, the company forecasts a reduction in beer purchases in connection with the introduction from 1 September of the law prohibiting turnover of excise goods for cash and mandatory prepayment.

These amendments require exercising all beer sales chain (from manufacturer through distributors to the end-points of sales) to by bank transfer.

However, many small shops do not have POS terminals, bank accounts or others. Therefore, they will not buy beer.

On the other hand, many commercial properties are not likely to buy beer prepaid, increasing their commercial risks.

Products of Baltika Baku are sold in more than 10 thousand points and a most of them are small trade outlets.

Baltika-Baku occupying 75% of the country's beer market today announced its decision to suspend the production and bottling of beer at Baltika-Baku from August 15, 2016 for two months, with the transfer of the employees to the idle mode.

In turn, JSC Azersu told Turan the lack of differentiation in the water used as raw material and process water.

The company confirmed that from 16 May the water tariff for the producers was reduced from AZN 12 to AZN 8 for 1 cubic meter of water.

At the same time, from 0.30 manat to 1 manat increased tariff for wastewater.

The source in Azersu explained this with stimulation of manufacturers using water to move to the system of re-cycling of water. -06B--