INDUSTRY VOICES: Royal Unibrew CFO hails ‘transformational’ $612m Hartwall takeover


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Finnish Flag: Lars Jensen insists there are similarities between Finland and Royal Unibrew's home market Denmark
Finnish Flag: Lars Jensen insists there are similarities between Finland and Royal Unibrew's home market Denmark

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As Royal-Unibrew inked a deal with Heineken last Thursday to buy Finnish drinks firm Hartwall for $470m (€612m), the Danish firm’s CFO Lars Jensen discusses the rationale for a ‘transformational’ deal.

The acquisition is subject to regulatory clearance in Estonia, but Jensen tells that Royal Unibrew does not foresee any problems pushing through a deal for the multi-beverage firm that will take his firm's group sales to circa. DKK 5.64bn ($985m); as opposed to DKK 3.4bn in 2012.

(Hartwall has strong Finnish positions in beer, carbonates, water, long drinks, cider, wine and spirits; Royal Unibrew has also agreed the extension of a deal with Heineken that allows it to brew the third-largest brewer's eponymous brand for the Finnish, Latvian, Estonian and Lithuanian markets.)

Ben Bouckley: What attracted you to Hartwall Lars? And how does this acquisition fit your long-term strategy within Royal-Unibrew?

Lars Jensen: “It’s within our core geography and it fulfills the criterion of being a large player with a clear No.1, 2, 3 position in the market.

“We believe that, with the product range that the company has, and the way that the business is structured, this is very much within our core competences. So it’s a good fit for us.”

Ben Bouckley: Do any particular parts of the business excite you? Obviously, there is the beer business, but Hartwall also launched the first alcoholic drink in Europe sweetened with stevia…

Lars Jensen: “Hartwall is a very innovative company, but this is not just one thing we’re buying. It’s a portfolio of brands, commercial agreements in the market. So this is really a portfolio company and not a single-brand proposition.”

“That is also what we see in most of the Nordic countries, rather small countries, where you need scale in both your own way of doing business, production, sales, distribution-wise, but also looking towards the trade – they appreciate it that you come with a portfolio of products.”

Ben Bouckley: Has Royal-Unibrew looking at potential M&A opportunities for a while, given that this is a transformational deal, but also the company’s quietness in recent years on this front?

Lars Jensen:“I would say this is the biggest deal we’ve ever made. This is a really transformational for us. We made acquisitions years and years back [the last was a deal to buy Polish brewer Brok-Strzelec in 2005] but nothing of this kind.

“First of all, it’s big. Secondly, Hartwall has a very strong position in the market.

“Then we have been through basically the same kind of exercise, of making a better margin out of the business in Denmark, and there’s a lot of similarities between Denmark and Finland in that respect.”

Ben Bouckley: How profitable is Hartwall now, and how will you boost the company’s commercial and operating strength?

Lars Jensen:​ “Taking the combined business of Royal-Unibrew and Hartwall. We believe that we can increase the EBIT margin by 130bps [1.3%] in the mid-term. So we’re not guiding on the Hartwall business as such, but the combined base.”

Ben Bouckley: Given your newfound distribution strength in Finland, does this deal give you the potential to leverage Danish brands within Finland?

Lars Jensen:“No. The nature of the beverage business as we see it, at least in the Nordic countries, is that you find that the international segments rather small. So that means that local brands, national brands have the strength.

“Of course, when it comes to soft drinks things are a slightly different because you have Pepsi and Coke dominating the picture. So we don’t intend to launch any of our Danish brands in Finland or vice versa.

“We can learn from each other on the innovation side. Finland is a very innovative country and Hartwall is a very innovative company.

“There will be stuff that we can learn, but not under the Hartwall brands. But rather the ideas you check, and then you find out how they fit with the other local brands that we have either in the Baltics or Denmark.”

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