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Carlsberg Group (Denmark)

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"Probably the best beer in the world," is how Carlsberg has memorably described itself in an ad campaign (originally created by Saatchi & Saatchi) that has run more or less continuously since the early 1970s. This world-famous brew is still one of the best-known global alcohol brands, brewed locally at more than 80 sites in almost 50 countries. Carlsberg became the dominant force in Scandinavian beverages in 2000 following merger with Norwegian competitor Pripps Ringnes. In 2004 it strengthened its hand in Northern Europe with the acquisition of German brewer Holsten for €1bn. In 2007, it launched a joint bid to break up the UK's Scottish & Newcastle in partnership with Heineken. As a result of that deal, and consolidation among other companies, Carlsberg will soon become the world's third largest brewer, although it remains heavily reliant upon Europe, where almost 90% of revenues are generated. The main Carlsberg brand is supported by Tuborg, Holsten, Baltika and Kronenbourg.

Advertising

The group declared marketing expenses of DKr 6.21bn ($923m) in 2016. Who handles Carlsberg advertising? Click here for agency account assignments.

Competitors

See Wine Beer & Spirits Sector indexfor other companies

Brands & Activities

Although its eponymous brand remains one of the world's best-known beers, Carlsberg Group had until comparatively recently steered clear of the large-scale global consolidation that has characterised the brewing industry since the 1990s. By the mid-2000s, this reticence had begun to create significant challenges for Carlsberg as its portfolio faced increasing competition in mass markets from new global giants InBev and SABMiller, while a shift among wealthier consumers towards wine and spirits chipped away sales at the upper end of the scale. For some time, analysts had expected the group to launch a bid for the UK's Scottish & Newcastle, already its partner in the Baltic Breweries joint venture in Eastern Europe. That finally happened in October 2007 in the form of a joint bid from Carlsberg and Heineken. After several months of stand-off, S&N agreed to recommend the takeover in early 2008. Carlsberg took full control of Baltic as well as S&N's operations in France, Greece and China. Previously heavily dependent on what are now flat Western European markets, Carlsberg is now looking to Eastern Europe and Asia to supply future growth. With the impending merger of AB InBev and SABMiller, Carlsberg will rise during 2016 from the #4 global brewer to the #3 position behind AB InBev and Heineken.

Beer

Carlsberg Breweries and its associated subsidiaries sold 112.4m hectolitres of beer in 2017 (with the contribution from subsidiary companies calculated pro rata). However that volume has been steadily falling from a high of 123m hl in 2014, mainly because of the sharp downturn in Russia. Around 75% of volumes are sold in greater Europe. Operations include the export of Carlsberg itself from Denmark, as well as local brewing of other brands at 90 production sites in 45 countries. However the group has closed several smaller breweries in recent years. The group is the leading brewer across Scandinavia and Northern Europe. However its operations are still concentrated mainly in greater Europe, supported by a comparatively small Asian presence. It has only a limited presence in the Americas.

The group's single biggest brand is Carlsberg itself, one of the world's best-known premium lagers, distributed in more than 150 countries. It comes in a number of variants, which vary from country to country. In the UK, which is its biggest market by volumes, these include the main Carlsberg lager, brewed locally with a lower alcoholic strength (3.8%), as well as Carlsberg Export (4.8%) and Carlsberg Special Brew, a super-strength lager (9.0%), available only in the UK and first brewed in 1950 to celebrate a visit by Prime Minister Winston Churchill to Denmark.

International variants include high-strength Carlsberg Elephant (7.5% alcohol) as well as mid-strength, light and low alcohol versions. Carlsberg Chill is available only in Asia. Carlsberg Edge (also known as Carlsberg Citrus) is another spin-off in Europe, with added citrus, while Carlsberg Sport is a non-alcoholic water-based energy drink launched in Scandinavia in 2007. The group launched Carlsberg 0.0%, its first ever alcohol-free version of the brand, in selected markets in 2015 (accompanied - bizarrely - by Carlsberg-branded body lotion).

The brand is a major sponsor of sports worldwide, primarily football. Its roster includes teams Liverpool FC, FC Copenhagen and Hamburg SV among others. It sponsors the Danish, Irish and Swiss national teams teams. However, sponsorship of the England team was terminated in 2018 after 22 years. Its portfolio of sponsored events includes the UEFA Euro championships since 1988, as well as other UEFA events. In 2013 it became the official beer of the UK's Barclays Premier League until 2016, as well as the Chinese Football Association's Super League. It also supports alpine skiing in Europe and golf in Asia.

The "Probably the best beer in the world" marketing campaign was originally conceived by Saatchi & Saatchi for the UK market in 1973, and for several years during that decade, legendary actor and producer Orson Welles provided the voiceover for Carlsberg's television ads. The slogan was rolled out to other markets as well, and was used continuously, though with occasional interruptions or variations, for the next 35 years. The group finally called time on that phrase in 2011, with the launch of a new campaign under the tagline "That calls for a Carlsberg". It didn't last long, and the "Probably..." concept was reintroduced again in 2015.

Until recently, Carlsberg was distributed and marketed North America under license by Labatt, a division of what is now InBev. That relationship was terminated in Canada in 2003, and in the US a year later. Instead Carlsberg set up its own subsidiary to import and distribute Carlsberg and Tuborg as well as other group brands. Other key global license partners include Mahou in Spain, Suntory in Japan, and from 2012 independent Coopers in Australia. It now owns what was previously its French licensee, Scottish & Newcastle's Brasseries Kronenbourg.

Carlsberg is supported by Tuborg, which is Denmark's top-selling domestic brew, and also the leading imported beer in several territories including Germany and a number of eastern European markets. In recent years, it has also grown to be the best-selling premium brand in Russia. Just as Carlsberg is most closely associated with football, Tuborg's various sponsorships are aligned mainly with live music festivals in Denmark, Eastern Europe and the UK (including Glastonbury and Download). The Carlsberg and Tuborg beer brands are produced by 60 companies in 42 countries. The group added a third international brand in 2004 with the €1bn takeover of Holsten-Brauerei, Germany's second-largest brewer. Holsten Pilsener is the #2 German beer brand worldwide (behind Becks), exported to more than 90 countries, and is the market leader in the north of its home territory, where the group also produces local beers including Luebzer, Duckstein and Astra.

The group controls a large portfolio of other local brands. The UK has been the company's single biggest market by volumes for several years, but the local business now ranks 4th in a brutally competitive market, with around 15% share in 2014. That position is expected to slip during 2015 following a decision by retailer Tesco to delist almost all versions of the main Carlsberg brand as a reaction to deep discounting through other sellers. In the UK standard lager market, Carlsberg sits well behind Carling and Stella Artois while its Tetley's Bitter has trailed John Smith's (now owned by Heineken) in the ale sector since 1995. In the off-trade (take-home) sector, Carlsberg sales were £215m in the year to Mar 2017 (IRI quoted in The Grocer). The beer was the official sponsor of the England team in their short-lived 2014 World Cup campaign. Holsten Pils has a long heritage in the UK, though sales (£29m in ye 2016) are far below their 1980s highs. A new cider brand, Somersby, was launched in the UK and other European markets in 2009, and had rolled out in more than 40 countries by 2014. Although Carlsberg owns Kronenbourg in most global markets, UK rights remain with Heineken UK not Carlsberg UK.

Carlsberg is the clear #1 brewer in all four Scandinavian countries. Apart from Carlsberg and Tuborg its brands include Pripps, Sweden's biggest beer brand with a 33% market share, as well as Falcon, Ringnes in Norway and Koff in Finland. Other European brands include Super Bock in Portugal and Feldschlosschen and Cardinal in Switzerland - two other markets in which Carlsberg is the #1 brewer). It also has Spluegen in Italy, Okocim and Harnas in Poland.

The acquisition of parts of Scottish & Newcastle added additional brands to the portfolio, and strengthened several key markets such as France and Belgium, Greece and China. Brasseries Kronenbourg, which S&N originally acquired from Danone in 2000, is a major force in France, but faces intense competition from arch-rival Heineken. (InBev is #3 with 10%). It was founded in 1664 as the Hatt Brewery, and didn't adopt the Kronenbourg name until 1947. The business was acquired in 1970 by Danone's predecessor BSN, who merged it with rival brewer Société Européene de Brasseries in 1986. The company's lead brand in France is original Kronenbourg (sometimes known as Kronenbourg Red & White), supported by premium version 1664, respectively the country's #1 and #3 beers. A low alcohol version, Kronenbourg Pur Malt, was introduced very successfully in 2004, followed in 2005 by Kronenbourg Blanc white beer, and top of the range Premier Cru (in the UK) and Malt d'Exception (in France). Stablemate Kanterbrau, a lower-priced brand, is #5. Other brands include flavoured Belgian beer Grimbergen, 2013 launch Tuborg Skoll (flavoured with vodka and citrus) and local licenses for Guinness and San Miguel. The group also inherited Scottish & Newcastle's majority stake in Greece's Olympic brewery, that country's #2 brewer (behind Heineken, whose Heineken and Amstel dominate the market). Lead brands are Mythos and Fix. In 2018, Carlsberg acquired the 49% of equity it didn't already own to take full control.

Carlsberg's activities in Russia, the Ukraine and the Baltic states of Estonia, Lithuania and Latvia were until 2008 a joint venture with Scottish & Newcastle. Carlsberg took full control that year, and bought out all of the remaining minority shareholders during 2012. Baltika Beverages is the leading brewer in Russia (with around 35% share by the end of 2015), the Baltic countries (with 29% share) and Kazakhstan, and produces Russia's #1 brand Baltika (with around 16% volume share, more than three times second-placed Klinskoye from AB InBev). Baltika was the official beer of the 2014 Sochi Winter Olympics in Russia. Supporting brands Arsenalnoye, Tuborg and Yarpivo also feature among Russia's top ten beers. Baltika one of the biggest beer brands in Europe by overall volumes. It is available in a range of different numbered variants, including Baltika No 3 Classic in a can, Baltika No 7 Export in a premium bottle and Baltika No 2 Light. Other regional brands include Kalnapilis and Utena in Lithuania, Nevskoye in Russia, Aldaris in Latvia, Lav in Serbia and Saku in Estonia. However beer sales have come under intense pressure in Russia in recent years following the government-sponsored ban on advertising, higher taxes and the closure of roadside alcohol retailers. Local beer shipments plunged by 17% in 2015 alone. The group scaled back its operations in Russia to accommodate the lower sales, and wrote off more than €500m against the value of the Baltika trademark.

Carlsberg's operations in Asia are also now wholly owned, following dissolution of an earlier joint venture with local partner Chang Beverage in 2003. (A long-running legal dispute over the break-up was resolved in 2005). In addition to production of Carlsberg and other brands, Carlsberg Asia for many years controlled a large minority stake in Korean licensee, Hite. It sold those shares in 2006. In 2007, the group established a new joint venture in India with South Asian Breweries, and has steadily taken control of this business, raising its stake to 94% in 2011. There are also interests in Vietnam and Laos.

However the key market is of course China, where the group markets its products through a largely part-owned regional brewery network it has steadily accumulated since 2004. It has joint venture with the Lan-zhou Huanghe Brewery in China's Gansu province, Wusu brewery in northwestern Xinjiang province, and Lhasa brewery of Tibet, among others. Other local brands include Dali and Huanghe Yellow River beer. This presence was further enhanced by the addition of Scottish & Newcastle's interests in China, primarily a shareholding in Chongqing brewery group, the #5 overall, and undisputed leader in its local region. Its main brands are ShanCheng, Chongqing and 1958 and it has produced McEwan's under license since the mid-1990s. Following a series of share purchases Carlsberg now owns a controlling 60% stake in the business. Carlsberg claims to be the leading brewer in Western China, with a share in excess of 55%. However here too performance has been under pressure, and the group closed seven regional breweries in China during 2015.

Soft Drinks

The company is also a major producer of soft drinks in Scandinavia, with total volumes of around 21m hl in 2017. It is the licensee for Pepsi in much of Scandinavia; other brands include Norway's best-selling soft drink Solo, Tuborg Squash in Denmark and Zingo in Sweden. In 2008, however, it agreed to sell some of its non-alcoholic portfolio to rival Coca-Cola. Brands transferred included energy drink Battery, Ramlosa and Kurvand mineral waters.

In 2000, Carlsberg Breweries was established as a separate unit from the merger of the group's drinks business with Pripps Ringnes, a subsidiary of Orkla, one of Norway's biggest consumer goods companies. As a result of that deal, the business effectively became a joint venture between Carlsberg and Orkla. After some disagreements over strategy, Carlsberg bought out Orkla's 40% shareholding in 2004 for DKr14.8bn (€2.0bn), regaining full control of the business.

Carlsberg disposed of most of its numerous non-brewery interests at the end of the 1990s, although it retains a substantial property business. Royal Scandinavia Group is the umbrella company for porcelain and crystal ware manufacturers Royal Copenhagen, Bing & Grondal, Georg Jensen, the Italian glass group Venini and Orrefors Kosta Boda. The Carlsberg holding company reduced its stake from 60% to 28% in 2000.

Financials

As a result of the Scottish & Newcastle takeover, Carlsberg's net sales jumped dramatically in 2008, but growth since then has been limited, primarily because of the over-reliance on the economically challenged Europe, and Russia's clampdown on alcohol consumption. Revenues peaked in 2012 at DKr 66.47bn (€8.9bn) before falling back to a little over DKr 64bn. The total for 2015 was DKr 65.35bn (€8.8bn), the best performance in domestic currency since 2012.

After peaking at DKr 6.2bn in 2012, net profit has come under increasing pressure. A huge write-off against its operations in Russia, China and the UK resulted in a net loss of DKr 2.58bn (€346m) for 2015. Excluding special items, operating income slipped 8% to DKr 8.5bn (€1.1bn).

Revenues for 2017 were DKr 61.81bn, up 1% on an organic basis but down sharply as a result of currencies. Reported net profit plunged by almost two-thirds to DKr 1.26bn, as a result of another DKr 5bn impairment against the Baltika business in Russia. On an adjusted basis excluding special items, profits were up by more than a quarter.

Western Europe accounted for around 59% of revenues and operating profit and 43% of beer volumes; Eastern Europe for a further 18% of revenues but 27% of volumes; and Asia for 24% of revenues and 31% of volumes. China is Carlsberg's biggest market financially, followed by Russia.

Although its shares are publicly owned, Carlsberg is controlled by a charitable foundation set up by its founding family. According to its original charter, the foundation could never hold less than a 51% stake in the group's equity. This restriction created numerous competitive challenges at a time of wholesale global consolidation in the industry, and the foundation altered the group's articles of association in the early 2000s to allow for a reduction of that stake in the future. At the end of 2011, the Foundation's holding had reduced to 30% of equity but 75% of voting shares.

Management

Jorgen Buhl Rasmussen retired as president & chief executive of Carlsberg in 2015, to be succeeded by Cees 't Hart. Jorn Jensen, previously deputy chief executive & CFO, also departed towards the end of 2015. He was replaced during 2016 by Heine Dalsgaard. Much of the rest of the senior management has also been overhauled. Central executive committee members now include Peter Ernsting (SVP, supply chain), Christopher Warmoth (EVP, corporate strategy) and Anne-Marie Skov (SVP, communications). Flemming Besenbacher is non-executive chairman. The main regional heads are Michiel Herkemij (EVP, Western Europe), Jacek Patuszka (EVP, Eastern Europe) and Graham Fewkes (EVP, Asia Pacific). Key local heads include Marc Vermeulen (CEO, Brasseries Kronenbourg, France), Julien Momen (CEO, UK) and Frank Massen (CEO, Germany). Massimo Di Dia is chief strategy officer; Jessica Spence is chief commercial officer.

Marketers include Morten Holst Boye (VP, marketing, Denmark), Didrik Fjeldstad (global marketing director, Carlsberg brand), Manlio Samma (global marketing director, premium & super-premium brands), Peter Schonheyder-Vitek (marketing operations director, Western Europe), Camilka Kuzon Olsen (international marketing manager, Somersby, 1664, Grimbergen), Jeppe Boel (senior marketing manager, Carlsberg brand) and Richard Whitty (senior marketing manager, football).

Background

Carlsberg was first brewed in 1847 by JC Jacobsen. Born into a family with a long history of brewing ale, the young Jacobsen wanted to try his hand at the sort of bottom-fermented, matured beer traditionally produced in Germany, known as lager. He set up a brewery on a hill outside Copenhagen, which he named after his young son Carl. "Carlsberg" is Danish for "Carl's hill". The beer was an immediate success, and the company expanded rapidly. Carl Jacobsen joined the business in the 1860s, but father and son soon fell out over their respective academic interests. JC's interest lay in the natural sciences, so much so that he used his new wealth to establish the Carlsberg Foundation in 1876 to fund studies in mathematics, philosophy and the humanities, as well as to run the newly completed Museum of National History at Frederiksborg. Carl's interests, on the other hand, lay in the arts, and he wanted to fund activities in this field instead. After a blazing row, Carl left the family firm in 1881 and set up his own competing company, Ny (or New) Carlsberg.

Even after the death of the elder Jacobsen, the two breweries remained rivals for another 25 years. In 1902, Carl retired from brewing and set up his own charitable trust, the New Carlsberg Foundation, dedicated to the arts. In a bid to reconcile himself with his father's memory, he donated his own brewing interests to his father's foundation and the two companies were finally amalgamated after his death. As one of Denmark's biggest companies, Carlsberg had a enormous influence on the culture of the country, particularly in the capital, where the two Carlsberg Foundations bestowed a series of museums, churches and other public buildings, as well as the Tivoli Gardens amusement park. Denmark's most famous tourist attraction, the Little Mermaid statue in Copenhagen, was a gift from Carlsberg to the city in 1913.

Father and son rivalry had not interfered in the growth of the business. The first exports of Carlsberg were to Scotland in 1868, and supply routes were quickly established to the rest of Scandinavia and beyond. The company's fastest growth occurred after the Second World War as Carlsberg became locked in friendly competition with rival Danish brewery Tuborg. This company had been established in the 1870s as an industrial group, but after 1880 devoted its attentions solely to brewing. In 1894, it had merged with a collection of other small companies to form United Breweries. With the international market growing for both companies, Carlsberg and United agreed in 1903 to work in partnership. During the 1950s and 1960s, Tuborg and Carlsberg rapidly developed export markets throughout Europe and Asia, but it quickly became apparent that even friendly competition was getting in the way of business, and the companies agreed to merge formally in 1970 as United Breweries. Although Tuborg became a leading beer throughout Scandinavia, it was Carlsberg which established itself as an truly international brand, and the company reverted to the Carlsberg name in 1987.

Five years later, Carlsberg agreed to merge its brewing and distribution business in the UK into a joint venture with British food and drinks company Allied-Lyons, later Allied Domecq. The resulting business, Carlsberg-Tetley, became the country's third largest brewer, but Allied gradually lost interest in the joint venture as it tried to focus its own broad portfolio. In 1995, Allied Domecq sold its share in Carlsberg-Tetley to #1 brewer Bass. However, that deal was later blocked by the government under anti-competitive legislation. Instead Bass was forced to sell the shares back to Carlsberg in 1997. Also that year, Carlsberg established Coca-Cola Nordic Beverages, a joint venture with Coca-Cola to manufacture and distribute the US company's soft drinks throughout Scandinavia.

The group continued to develop its international coverage with a series of further deals. In 1999, Carlsberg acquired a 20% stake in Korea's biggest brewer Hite, as well as Lithuanian brewery Svyturys, and German beer Gatz. Later the group snapped up Danish drinks business Saltum-Houlbjerg Bryggerier. But it sold its minority stake in Spanish licensee Cruzcampo to Diageo (who in turn sold the whole business to Heineken). Carlsberg later appointed Mahou as its new licensee in Spain. In early 2000, Carlsberg increased its stake in Carlsberg Malaysia, a joint venture with Hap Seng Consolidated, to 50%. The year's most significant deal came in June when the group announced the acquisition of the brewery business of Orkla, one of Norway's biggest consumer goods and chemicals groups. Carlsberg agreed to merge its own brewery arm with that of Orkla's Pripps Ringnes, the largest brewery group in Sweden and Norway, producing beer, soft drinks and mineral water.

A few months after the Pripps deal, Carlsberg announced the friendly takeover of loss-making domestic rival Albani Brewery. However Danish regulators blocked the deal on concerns that the deal would lift Carlsberg's share of the domestic beer and soft drinks market to a virtual monopoly. In 2000, leading Swiss drinks company Feldschlosschen joined the portfolio. Meanwhile the parent company sold off most of its other non-brewing interests, including wine and spirits distributor Vingaarden (to management in two tranches in 1999 and 2002) and the Tivoli Gardens amusement park (to Skandinavisk Tobakskompagni and Augustinus Fabrikker for $40m).

Another series of deals arrived in 2001. Carlsberg acquired controlling stakes in Okocimskie Zaklady Piwowarskie ("Okocim"), a leading Polish brewery, listed on the Warsaw Stock Exchange, and in Turkish brewery Turk Tuborg. At the same time, as a condition of regulatory approval for the Pripps deal, Coca-Cola Nordic Beverages was wound down, with Carlsberg absorbing the company's Danish and Finnish activities (Coca-Cola took control of the bottling in other territories). The company went on to bolster its Polish business with the buy-up of three other local breweries. In 2004, the group paid €1bn to acquire German brewer Holsten.

Last full revision 23rd June 2016

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