Carlsberg drops Asian investment hint amidst Russian concerns

By Neil Merrett

- Last updated on GMT

Related tags: Eastern europe, Russia, Financial times, Carlsberg

Eastern Europe’s potential as an antidote to declining beer demand in more mature markets has taken another blow as Carlsberg reportedly prepares to step up its focus on the emerging markets of Asia to offset concerns about regional sales.

Speaking in an interview with the Financial Times​ newspaper, group chief executive Jørgen Buhl Rasmussen this week said that Asian markets are expected to help ‘balance’ the company’s operations in Russia, which currently accounts for almost half of its profit.

Eastern Europe has been a key driver for brewers’ sales in recent years, leading to some major investment in the region by some multinationals. However, brewers and analysts alike are now expecting some difficulties in the region in light of the economic downturn.

Buhl Rasmussen says in the report that with current volatility in the Russian market, reflecting wider concerns about growth prospects across Eastern Europe, Asian investment may help offset its exposure in the region.

Carlsberg claims that unlike its substantial holdings in Eastern Europe, boosted further from its buyout of former joint venture Baltic Beverages Holding (BBH), Asia currently accounts for just 10 per cent of total sales volumes, according to the press report.

Longer-term concerns

Carlsberg, which holds the largest market share in Russia through the Baltika brand of beer, has previously expressed caution about prospects in the national market.

Baltika accounts for 38.3 per cent of national beer sales in 2008, according to the group’s own figures.

With the company previously set to strengthen its presence in Russia in coming years, the brewer said back in March that it was preparing to last out the potential impacts of the economic downturn in the region and had strategies in place.

During its financial reporting for the 2008 fiscal year, Carlsberg said that sales in the region had increased by 20 per cent on an organic basis, due predominantly to its operations in Russia.

Although Carlsberg has previously expressed predictions that 2009 would see flat growth rates in Eastern Europe, other analysts have question this outlook as being potentially optimistic, with short-term loss expected at the very least.

Declines in 2009

In looking ahead at predictions for 2009, the financial analyst suggested that some industry claims that Eastern European demand for beer would remain flat seemed ambitious.

The analyst group, which asked not to be named due to its work with the brewing industry, told BeverageDaily.com that slowing demand was being felt across the region in relation to a falling gross domestic product (GDP) in certain markets.

As a result of this demand lull, the group claimed that single digit falls in sales were more likely to occur during the next nine to 12 months for the company in the region.

Related topics: Carlsberg

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