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Abstract:

Traditionally, beer consumption in Russia fluctuated around 20 litres per capita. However in 1996 acreeping decline in beer consumption halted and made way for spectacular double-digit growth. In ten years, per capita consumption quadrupled, brining Russian consumption levels in line with the European average. Thanks to this impressive growth, Russia has become the world's third largest beer market, with Carlsberg's Baltika brand firmly dominating the Russian market. This is remarkable since Russia was traditionally a "vodka-drinking nation". As recently as 1995, surveys showed that 78% of Russians identified themselves as vodka-drinkers whereas only 23%reported drinking beer. By 2003, the proportion of beer drinkers(57%) had overtaken the share of vodka drinkers(53%). This major shift is explained as the result of improvements in quality (due to FDI), advertising regulations and price changes, all of which combined into a "perfect storm" that made beer a more attractive drink to Russian consumers. We argue that consumers' choice of beverage is heavily influenced by their peers' behavior. After a critical mass of consumers adopted beer, these network effects led to more and more people drinking beer in subsequent years. Survey data supports the claim that, through a combination of "pull" and "push"-factors which combined into a "perfect storm" around 1996, beer is now replacing vodka as the typical social drink in Russia.