Carlsberg plans for China's beer dominance
breweries within a decade to reflect a permanent shift in beer
market growth from west to east, and more specifically, China.
Spokesperson for the Danish brewer, Jens Skaarup, said streamlining breweries was an inevitable consequence of the firm's need to "optimise production" amid declining beer markets in Western Europe.
"Some breweries will not fit this optimised network, they will not match it," said Skaarup, adding that around half of the group's 29 breweries could easily be shut in five to 10 years.
Closing breweries does not come cheap and there will be much reorganisation needed.
Yet, Skaarup said nothing could be ruled out. "We have no holy places, no safe places," he said, explaining that the firm was likely to shut its original Valby brewery within six years. The Valby site began the Carlsberg story in 1847.
Beer markets in Western Europe have largely stagnated in the last couple of years, making it increasingly hard to maintain sales and profits.
Beer sales in Denmark alone fell six per cent last year and five per cent in the first half of 2005. Poor markets across Western Europe helped Carlsberg to €42.8m loss in its 2005 first quarter, while UK brewer Scottish & Newcastle said at a similar time that weaker markets in France and Belgium had forced restructuring.
Carlsberg's decision to substantially cut facilities in Western Europe over the long term makes it one of the first brewers to properly shift its assets in anticipation of a new global beer market map dominated by the east.
The group's BBH joint venture with S&N has already risen to lead Russia's fast-growing beer sector. And Skaarup said Carlsberg was shifting its focus to Asia in the hope of emulating BBH's success in China.
"We now have 30 breweries in western China, while all our competitors go for the eastern provinces," said Skaarup.
The group, like other international brewers, believes China holds great growth potential, despite the average Chinese person consuming around 22 litres of beer per year. This compares to around 85 litres per year in Denmark and 121 in Germany, as well as 44.5 litres in South Korea and 41.9 in Japan.
China's beer consumption is even lower in Carlsberg's western province stronghold. But, the country houses around a sixth of the world's population and its economy is one of the fastest growing.
China is already the world's biggest producer of beer with output of some 24m tonnes per year. Analysts recently cited Russia and China as two of the most important emerging beer markets in the world, even predicting the two nations could make up half of the global beer market by 2010.
In terms of beer types, Skaarup said local brands were still loved by consumers and that Chinese people as a whole preferred beers with less hop, unlike hop-loving Western Europeans.
Even so, big brands have started to push through and Skaarup said Carlsberg Chill had found a market among higher earners since its launch in China last year.
Pricing remains low on the Chinese beer market. Average price per litre was around US$0.45 (€0.37) compared to $0.85 in Brazil, $1.20 in Poland and $2.40 in the UK, according to a recent report by Goldman Sachs.
