Asian margins matter less than growth in key markets, Carlsberg CEO


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Carlsberg claims Tuborg is now the top-selling international beer brand in India
Carlsberg claims Tuborg is now the top-selling international beer brand in India
Carlsberg CEO Jorgen Buhl Rasmussen says the firm is currently less concerned with building Asian margins than securing growth in a key region, particularly in markets such as China and India.

The executive was speaking this morning on a call with analysts to discuss the Danish brewer’s Q1 2013 results, where the historically quiet quarter only accounts for 6% of annual operating profits.

During Q1 Carlsberg’s net revenue rose to DKK13,278bn ($2,336bn) while adjusted consolidated profit attributable to shareholders in Carlsberg was DKK 104m (both figures on a reported basis), a strong increase against Q1 2012, where the profit number was DKK-33m.

Rasmussen said the firm’s Russian business continued its positive performance – the firm says it won share from rivals AB InBev and EFES/SAB Miller – while underlying profitability increased in Europe, albeit boosted by strong performance in Eastern Europe rather than the lackluster West.

In Asia Carlsberg delivered 14% operating profit growth to DKK 493m, and 13% net revenue growth to DKK 2.555bn (organic figures), while the divisional operating margin rose 10 basis points (bps) to 19.3%.

Strong showing in Vietnam

Carlsberg said it saw particularly strong growth in Vietnam (driven by the Huda brand in central Vietnam) Cambodia and India, while Chinese volumes rose by 18% when one factored in the impact of the brewer’s increased equity stake in its Chongquing Jianiang Brewery JV.

Regional volumes of Tuborg grew by around 80% (the brewer relaunched the brand in China last April – including bottles with pull-off caps) and Carlsberg claimed it was now the largest international beer brand in India and the fastest-growing international premium brand in China.

Addressing the suggestion that Carlsberg was lapping a fairly low comparative in terms of Tuborg’s China growth, a Carlsberg spokesman told “I guess we were starting from quite a low base [in China] but it’s doing extraordinarily well in Asia and is also the top-selling international premium brand in India – Turborg is growing at 19% across all its markets.”

Breaking-down Carlsberg’s beer volumes on an approximate regional basis, the spokesman said that Western Europe accounted for 40%, Eastern Europe (including Russia) 40% and Asia 20%, and he added that  the brewer was, broadly speaking, eyeing growth opportunities in Russia and Eastern Europe and and Asia.

Targeting growth in India and China

Carlsberg’s strong Asian showing caught the eye of Barclays Capital’s Samar Chand: “I notice that your margin was up 10bps this quarter, which is the first time since 2011 that you’ve had margin growth,” ​the analyst said.

He asked Buhl Rasmussen and Jensen: “Can we expect this now going into the future – that you expect to now be able to generate top-line leverage through to your margins. Or are we still going to have the issue of negative country mix hurting your margin development in Asia?”

Jensen said: “It’s a growth region, and we want to invest and take our fair share – more of our fair share of the growth out there. So you will see ups and downs [in terms of margin] depending on what we do with brands and in terms of capability building out there.”

Rasmussen added: “We want to grow more in say China and India…than we will grow in some of the other markets. In that sense the margin will structurally be under pressure. It’s not really about the margin, as such, at the moment in Asia, but is far more about growth.”

In March, Carlsberg launched a partial takeover bid for Chongqing Brewery Company for DKK 2.65bn (to add a 30.31% stake to its existing circa. 30% holding), and is in discussions with Vietnamese brewery Habeco, to increase its shareholding to 30%.

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