Carlsberg tackling European beer slump

By staff reporter

- Last updated on GMT

Related tags Carlsberg Europe Estonia Russia

Carlsberg's plan to scale down operations in Western Europe in
favour of emerging beer markets in Eastern Europe and Asia has
helped it to improve first quarter results this year.

Carlsberg increased first quarter net sales by six per cent to €1bn, despite selling almost a tenth less beer than in the same period last year.

The brewer said it decided to cut sales through non-profitable, discount channels in Sweden and Italy, though was also hit by weaker on-trade beer sales in the UK.

Shrinking and stagnant beer markets across much of Western Europe have forced many international brewers to re-think their strategy in the region.

Carlsberg confirmed last autumn it planned to shut around half of its 29 European breweries, including its original Valby brewery, within the next decade. A group spokesperson said the move reflected a permanent shift in beer market growth from west to east.

The move will not be cheap to implement, but signs from the group's early restructuring efforts as part of this strategy suggest it may help.

Carlsberg still made a net loss of €24m in the first quarter of 2006, but was down from a loss of around €40m in the same period in 2005. Operating margins in Western Europe recovered to 0.3 per cent in the quarter, after hitting -1.7 in this time last year.

Emerging markets in Eastern Europe and Asia, meanwhile, have continued to power Carlsberg's sales forward.

Baltic Beverages Holding (BBH), the 50-50 joint-venture firm owned by Carlsberg and Scottish & Newcastle, increased beer volumes by three per cent and revenue by 17 per cent, to €171m.

There were signs, however, that brewers will increasingly need to look beyond Russia to continue fast growth rates in the region.

Russia remained by far BBH's biggest market, but volume growth there was only three per cent, compared to 36, 17 and five per cent in Ukraine, Kazakhstan and the Baltic States respectively.

In Asia, recognised by several analysts as the region holding the biggest profit potential for brewers, Carlsberg improved sales by 28 per cent.

This came despite a 10 per cent drop in volumes, and served to reinforce Carlsberg's strategy to focus more closely on this region, and specifically China.

China's beer consumption is currently lowest in Carlsberg's western province stronghold.

But, the country houses around a sixth of the world's population, and Carlsberg spokesperson Jens Skaarup said last year the firm had an advantage because "we now have 30 breweries in western China, while all our competitors go for the eastern provinces".

Related topics Manufacturers Beer & cider Carlsberg

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