Baltika Breweries, part of the Carlsberg Group, presented its expertise on strategic planning within the development of "Strategy 2030" planning at the Krasnoyarsk Economical Forum

february 24, 2016

"Russia: Strategy 2030" being the subject of the Krasnoyarsk Economical Forum 2016, gave its participants a chance to discuss prospects of national economic growth in all aspects in next 15 years. An example of brewing industry represented at the forum by Baltika Company proved the importance of national strategic planning for ensuring economic stability.

Business climate in the country is influenced by many negative factors, including unreasonable legislative initiatives, whereas growth targets and successful modernization of economy are made possible only by efficient interaction between business and state. This is the opinion expressed by Alexey Minakov, Strategy Development Director of Baltika Breweries, part of the Carlsberg Group, during the brainstorm "Building an Efficient State Strategic Planning":

“Our country currently lacks a mechanism of integrating business strategies into the strategy of the state, and it has never been needed more to build an efficient economy. Our business today is forming middle-term and short-term investment and operations plans based on its own analytics and macroeconomic indicators. These plans have a high margin of error, especially in Russia, because state legislative regulations are too unpredictable. The situation needs to be harmonized; it is business that acts as the main driver of economic development. This needs to be taken into account by state strategic planning.”

Changes to the law “On State Regulation of Production and Distribution of Ethyl Alcohol, Alcohol-Containing Products, and on Limiting Use (Consumption) of Alcohol” No. 171-FZ serves as an example of overly strict and ill-conceived limitations. The law was passed without the necessary assessment of economic and social efficiency causing, in particular, a highly unfavorable situation in brewing industry while failing its original purpose of fighting alcoholism. Applying the same approach to all types of alcohol resulted negatively influencing brewing industry through more than 120 federal laws; 70 constituent entities of Russia introduced additional, even more severe limitations on distribution of beer products.

Unreasonable regulations, in brewing industry alone, caused decrease in number of jobs by 61 thousand (adding 1.51 percent to the unemployment rate); slowed GDP growth by RUB 59 billion; indirect negative impact on related industries amounted to approximately RUB 38 billion.

Baltika Company expert confirmed that this negative effect was based primarily on the fact that the decision to treat beer products same as strong alcohol was not sufficiently analyzed and passed outside of the framework of state strategic planning. Tightened excise policy added to the stress: excise rate for beer grew 9 times between 2007 and 2015. Production of beer in Russia between 2007 and 2014 decreased by 40 percent. And the tendency remains. Unfortunately, this also causes significant losses for the regional budgets. Russian constituent entities previously creating positive investment climate lose their major investors due to the unpredictable regulations and, consequently, lose ability to plan their budgets long-term. For Baltika, mentioned above factors caused, among other things, restructuring of production capacity: in early 2015, two breweries were closed, 560 employees fired, other breweries reorganized capacity according to the actual business needs.

To stabilize the situation, it is important to ensure that planned legislative changes correlated, at least in middle-term (5–7 years), with regional plans of economic development and were based on industrial growth strategies, such as brewing industry, for example. This will help avoid losing significant portions of budget and ensure positive dynamics in the economic growth.

Summarizing the brainstorm "Building an Efficient State Strategic Planning," Mikhail Pryadilnikov, Vice Director of Analytical Center of the Russian Federation Government, mentioned:

“Organizing a dialog between business and government poses many questions, and improvement of the process is obviously needed. Mutual openness is crucial in such a dialog, but we should not cross the line and violate any rights of business. To avoid unnecessary administrative barriers, our country introduced a process of assessment of draft law regulatory impact. This is important, for example, to coordinate strategic priorities of business and government. Implementation of legislative changes requires longer transitory period, time to adapt to the new conditions. Business regulation process generally needs to be organized and the number of changes to the legislation decreased.”

Constructive dialog during different sessions of the Krasnoyarsk Economical Forum proved that business strategy could be integrated into the government strategy if we take the latest challenges as a possibility to rethink old forms of interaction between business and government. Systemic introduction of the process of assessment of regulatory impact is especially urgent now, to counteract spontaneous legislative initiatives. Actual effect of the already approved legislative changes to the condition of business and economy is also important to assess. The systemic assessment of legislation in middle-term will allow business to play its part in building national economic stability.

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Baltika Breweries, part of the Carlsberg Group, is one of the largest Russian producers of consumer goods since 1996, is No. 1 in the Russian beer market. 8 plants in Russia and a broad portfolio of brands belong to Baltika. The company is a significant part of Carlsberg Group and its region Eastern Europe, which includes Azerbaijan, Belarus, Kazakhstan, Ukraine, and Uzbekistan. Baltika Breweries is a leading exporter of the Russian beer: Baltika products are represented in more than 75 countries worldwide, the share of the company accounts for 48 percent of all the export supplies of Russian beer. Company brands won more than 670 Russian and international awards in professional and amateur competitions.

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