OREANDA-NEWS. Amid the continuing general decline of the beer market related to the challenging macroeconomic situation and unbalanced taxation and regulation of the industry in Russia, Baltika Breweries has thoroughly studied its operating activities and production structure and made a decision about termination of subsidiaries in Chelyabinsk and Krasnoyarsk. The key task of the company at this stage is to minimize the consequences of this decision for about 560 employees.

Being a socially responsible company, Baltika guarantees strict observance of the labour legislation regarding the employees affected by this decision and does its best for affected employees: relocates to other sites within Russia and Eastern Europe, supports in future employment, offers a favourable severance pay significantly exceeding the one stipulated by law. According to company estimates, as a result of the termination of two breweries Baltika will be forced to part with around 560 employees, the total cost of the compensation package and support programs which reach more than 300 million rubles. Total quantity of employees of two breweries at the moment is 766 people.

In the recent years the brewing industry of Russia has experienced substantial pressure: the legislative restrictions and tax regulation of the beer industry in Russia are among the most disproportionate in the world now. The growing legislative restrictions, such as beer sales in nonstationary trade outlets, as well as the disproportionally increasing tax burden have resulted in the inevitable market decline. According to Rosstat data, in the period 2008 - 2014 the beer market in Russia dropped by more than 30%. This negative dynamics can be changed only by predictable regulation of the industry in Russia.

Due to the economy of scale, balance of protection of revenues and investments in long-term sound business development Baltika Company has succeeded in keeping all its production sites the longest while 10 large breweries of other market players have been closed in the recent years.

This decision about termination of two subsidiaries Baltika-Pikra and Baltika-Chelyabinsk since 30th of April 2015 has been the result of thorough technical, logistic and financial analysis of Baltika’s production and logistics structure of the Company. Baltika’s production network has required optimization for several years already but the Company was doing everything possible to increase its efficiency and to avoid brewery closures. Nevertheless, the existing market situation forces Baltika to take measures to optimize its business and to close 2 of its 10 breweries to maintain the competitiveness and leadership on the Russian market. As a result, the total production capacity of the Company’s breweries in Russia will reduce by approximately 15%.

The output volume formerly produced at Baltika-Chelyabinsk and Baltika-Pikra will be redistributed to other breweries of the Company preserving the wide assortment and high quality standards. Thus, the decision will not affect the consumers of the Company’s products. The employees responsible for sales and logistics to trade outlets and distributors will continue working in both cities.

Vladislav Erkin, Chairman of the Employees' Council of Baltika-Chelyabinsk branch:
- This solution is a heavy blow for employees. We hope that the company, as before, with all the responsibility will be complied with all the commitments made in relation to employees. One of these commitments, in addition to payments is complex support in the future employment of staff, most of whom are true professionals and will be able realize themselves in another area.

Yury Bykoriz, Vice President Production:
- Unfortunately, the market decline in Russia in the recent years and the uncertainty of the macro environment have brought us to this hard decision which will affect many employees. Although Baltika has succeeded in maintaining its market positions in the very challenging conditions, we are to correct our production structure and adapt our business to the changes in order to ensure acceptable profitability of the company and further sustainable development. In the period ahead we will do everything we can to support our employees affected by this decision.

Baltika is carrying on a constructive dialogue with the local administration of Chelyabinsk and Krasnoyarsk so as to find a good solution for future use of the sites and to help the employees to solve the employment problem.