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Beer, Free Speech and Homegrown Hip

Oleg Tinkov sees himself as something more than Russia's "beer oligarch," as he has been called.

The 36-year-old founder of Tinkoff Private Brewery sells no ordinary proletarian suds, but premium-priced brews, as well as a sense of homegrown hip, to Russia's growing class of young professionals. (Using the two-F French spelling of his name for the beer is meant to accentuate that.)

Vodka may forever be identified as Russia's national drink, but Tinkov has been capitalizing on beer's increasing popularity here. In 2003, Russians drank 53.4 liters per person, up from 36.6 in 2000, and consumption is expected to keep growing around 4 percent to 6 percent annually. Last year, the British drank 99 liters per person and Czechs, 160 liters.

Tinkov has also been capitalizing on his sometimes shocking irreverence. His provocative opinions show up even in the company's stated mission: "Propagate liberal values and respect freedom of choice."

While other wealthy Russian businessmen have toed the Kremlin line after the arrest and jailing of one of their own, the oil billionaire Mikhail Khodorkovsky, Tinkov is having serious fun with the fortune he made, mixing free speech and free enterprise.

"Oil and freedom, maybe they don't go well together," Tinkov said with a chuckle in an interview earlier this year, alluding to Khodorkovsky, whose trial on tax evasion is scheduled to begin Wednesday. "Beer and freedom do go together!"

So do beer and food, judging by the success of the chain of microbrewery restaurants Tinkov also runs. Bounding out of his softly lit, gray-painted Soho-style office in central Moscow after the interview, he looked in on one located just down the street, where business lunch crowds stream in by day and loud bands prompt patrons to pack in at night.

A recent Tinkoff beer commercial made the most of this freedom. It begins with two leggy young Russian beauties gliding up to a lingerie shop. Amid a flash of panties, the two women alight from a canary yellow Mercedes, link arms and float smiling into the dressing room. A pat on the rump here, a bump there, and they lean in to kiss. An Italian aria swells, and a Tinkoff beer pops its bottle cap.

The ad scandalized Russian audiences.

"It's a fantasy, it's a peep show," Tinkov explained without apology. "Men like that. We're going after a look like Polanski's 'Bitter Moon' or 'Lolita,' but in 30 seconds.

"Besides," he added, "everyone knows all women are bisexual!"

Then Tinkov grew serious. "No, really, people who are scandalized by this are stupid and narrow-minded."

And by the way, he said, the two women "go home to their husbands, everything is fine."

An earlier ad, featuring a smiling young man stretched out on a yacht between two naked women, one black and one white, under the slogan "freedom of choice," was deemed so offensive it was ultimately banned.

Tinkov more or less created the premium beer category in Russia, and feels a need to heighten the contrast between his product and the beer consumers remember from Soviet times, stuff of such poor quality that brewers had to add shampoo to get it to form a head. When the 1998 financial crisis made imported products, including beer, much harder for most people to afford, domestic production got a lift.

"We brew high-quality beer for young people with money, people under 40, bankers, white-collar workers who have good jobs and like to go out," he said. "They don't want to drink bad Russian beer, some of which, excuse me, is practically malt liquor."

Comparing Tinkoff to American beers like Samuel Adams in price, quality and target market, he said, "For that, why should I have a boring ad with a babushka?"

Several other brewers in Russia have followed Tinkoff's success.

But ultimately, "that is a niche product," said Alexei Yazykov, a consumer goods analyst at Aton Capital. "His microbrewery restaurants in Moscow and other cities are a good idea," Yazykov said. "The beers are quite fresh, although in these restaurants half a liter of beer costs 90 rubles," about $3.09 -- more than three times the price of an average beer at a Moscow kiosk.

The average Russian earns about $250 per month.

Tinkov's is a comrade-to-Casanova story. He grew up in Siberia, the son of a coal miner, and worked a year in the mines himself before Army service in the Far East. In 1990, when he was in his early 20s, he traveled across the country to enroll in a mining institute in St. Petersburg, and promptly fell in love with the second city.

"There was culture, there were hippies -- great Russian bands like DDT and Kino," he recalled, likening St. Petersburg to San Francisco in the 1960s. "It was free -- freer than Moscow ever will be."

But business was always on his mind. Even in college, he sold jeans and other goods to fellow students. After graduation, he forgot about mining and started a successful pelmeni, or ravioli, business. He sold it after a few years and moved to the United States, where he met and befriended Dan Gordon, one of the founders of Gordon Biersch, a California microbrewery, and took some marketing classes at the University of California at Berkeley.

He returned to Russia and opened his first microbrewery restaurant in St. Petersburg in 1998. Today he is expanding the chain to 15 outlets nationwide, and going international with his brew, introducing Tinkov beer -- back to the V spelling, he said, to sound more Russian -- in the U.S. market this year.

Tinkov said his company, which recorded about $35 million in sales in 2003, is expecting to reach $200 million in sales in 2005, when a $75 million brewery plant under construction in the historic town of Pushkin near St. Petersburg will be on stream. The company, now closely held, could go public in a few years, Tinkov said.

Some in the industry said they doubt whether Tinkoff can get much bigger than about double or triple its current sales, especially if it sticks to the top of the price spectrum.

"These beer markets are bloody and competitive," said Alexei Krivoshapko, a retail and consumer goods analyst with United Financial Group.

Much of the beer industry is controlled by multinationals, including Baltic Beverages Holding, a joint venture of Scottish & Newcastle of Britain and Carlsberg of Denmark. Heineken of the Netherlands bought the Bravo Brewery in St. Petersburg for $400 million in 2002; SABMiller bought the Kaluga Brewing Co. in 1998; and Interbrew of Belgium operates in Russia in a joint venture with SUN of India.

Baltic Beverages Holding's Baltika brands are the market leaders, with about one-third of total sales, followed by Interbrew, whose popular low-priced brands like Sibirskaya Korona and Klinskoye have about 13 percent.

In third place is Ochakova, the biggest brand still entirely in Russian hands, though there is speculation that it too may be acquired by a foreign company.

"A lot of the growth is in the cheaper brands, as brewers expand into Russia's regions," Yazykov of Aton Capital said.

Back at the Tinkoff restaurant, Tinkov drew a fresh beer as the brewing equipment, encased in glass, gleamed behind the bar. A television tuned to a new Russian business-news channel competed for the lunch crowd's attention with music by Groove Collective, the acid-jazz band, on the restaurant's sound system.

Despite a decade of transition to capitalism, Tinkov said, successful Russian businesses are still at odds with Russia's retro-statist government. The arrest of Khodorkovsky, the former chief executive of Yukos and Russia's richest man, was "a bad sign," Tinkov said.

Even so, he said, capitalism in some form is in Russia to stay, though mixed with heavy doses of red tape and cynicism.

"Politicians don't want to lose power," Tinkov said. "They have to buy votes, they need money, and business has to pay. That's capitalism. Unfortunately, no one has figured out a better system. But capitalism is still better than communism. That was horrible."

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