The Real Thing?

Coke cashes in by producing a nostalgic, Soviet-era drink.

By J. Michael Lyons

Vyacheslav Shamarin doesn’t like what mass-production has done to kvas, a cloudy brown yeast concoction that was a favorite soft drink in Latvia and elsewhere across the Soviet empire during communist rule.
Local companies have been challenging the giant Coca-Cola Company in recent years by making a new mass-produced kvas. Coke, the world’s largest soft drinks maker, is fighting back by mass-producing the centuries-old drink itself.

“Everything that has been made since the 1980s is not kvas. It’s nothing more than cola,” grumbles Shamarin, himself a brewer of kvas—which has a similar texture and taste of dark beer, minus the alcohol.
Kvas was made from locally grown rye, beet sugar, yeast and stale bread in Soviet days; it had a short shelf life, so wasn’t bottled and was sold by the glass from street vendors, often drawing long lines. (Kvas is called kali in Estonian, and gira in Lithuanian.)

Many connoisseurs of the drink say they preferred the Soviet-era kvas, which they say tasted fresher and more authentic. Today, kvas producers use a syrupy concentrate imported from Germany; kvas is now pasteurized and sold in bottles.
Whether it’s better or worse may be open to debate. What isn’t debatable is the impact kvas has made on the regional drinks market in recent years. Few would have predicted its resurgence right after the 1991 Soviet collapse.

New health laws banning its sale on city streets and post-Soviet economic disruptions forced kvas factories to close then. For most of the 1990s, kvas virtually disappeared from the market.
The multinational Coke moved in and quickly dominated the sector with its popular carbonated soft drinks, which include Coke and Sprite.
In 1998, however, local drinks makers struck back. Tearing a page from Coke’s book on marketing and production, they developed a kvas that could be bottled, came up with attractive labels and launched aggressive ad campaigns.

It was a hit.
In just three years, kvas came from virtually nowhere to grab over 30 percent of market today, according to the polling firm AC Nielsen Latvia.

It’s gain was Coke’s loss.
“Some older consumers shifted from Coke to kvas, which they became accustomed to during Soviet times,” said Aki Hirvonen, Coke’s Baltic marketing manager. He said those over 30, who fondly remembered kvas, were especially likely to switch.
Since 1998, Coke’s 40 percent market share fell to 23 percent; it posted losses of about 1 million dollars in 1999 and 2000, said Hirvonen.

Similar trends occurred in the other Baltics and in Russia, where Coke was also steadily losing ground to kvas, which costs about 30 Latvian santims (48 U.S. cents) for a 1.5 liter bottle—or about half the price of Coke.
Unable to beat the kvas makers, Coke decided to join the competition—or, rather, to start buying them up. It bought a number of kvas brands from Siberia to the Baltics, refitting some plants to produce kvas along with its standard colas.

Earlier in the year, Coke bought the most popular kvas brand in neighboring Estonia, Linnuse Kali, which accounted for 60 percent of the 8 million liters of kvas, or kali, sold in 2000.
More recently, Coke has seen its Baltic profits rise.

An ever-more cramped market has forced producers to diversify. Latvian juice maker Gutta now sells vitamin-enriched kvas aimed at kids and a sugar-free kvas light for dieters. It also changed the name of its original brand to klassik, reminiscent of how Coke once renamed its original cola classic.
“We are on the same playground as Coke and we have to have the same tools when we go into the stores and try to sell,” said Gutta general manager Uldis Ronis.

Shamarin complains that all the posturing undercuts the traditions of kvas, which dates back 1,000 years to when Slavic hunters began boiling stale bread and then fermenting it; kvas derives from a Russian word for sour.
“You can’t carbonate wine and call it champagne,” he said.
Shamarin is in charge of kvas production for Kok and Company, a condiment maker that decided to start making kvas in 1998.

Squeezed into a white frock stained brown with kvas, he wouldn’t reveal his recipe. But he insists it’s the closest version of the real thing left in Latvia, asserting that many Latvians he knows wouldn’t touch the kvas that Coke makes.
But he conceded the kvas he produces is pasteurized, allowing it to be bottled and giving it a slight mass-produced flavor. And his firm did recently succumb to competition pressures and start making what Shamarin calls healthy kvas.

“The kids love it,” he says.
Leaning in, he sheepishly reveals its appeal: “More sugar.”