Deadly Ukraine violence has not hit Carlsberg beer sales…yet


- Last updated on GMT

Lvivske 1715 is a 4% pilsner that forms part of the Carlsberg's Ukraine portfolio (Juanedc/Flickr)
Lvivske 1715 is a 4% pilsner that forms part of the Carlsberg's Ukraine portfolio (Juanedc/Flickr)

Related tags Russia Eastern europe

Carlsberg’s CEO says that deadly clashes between police and opposition protestors in Ukraine have not hit beer sales yet but hinted that they could do so in future.

Since Tuesday, 28 people have been killed in Kiev in the worst outbreak of violence in the country since Ukraine gained independence from the Soviet Union in 1991.

Responding to a question on the issue from Handelsbanken analyst Casper Blom on the unrest and its business effects, Jørgen Buhl Rasmussen said: “On Ukraine, of course there were a lot of sad events last night there.

“But in the early part of 2014 we couldn’t really say the situation in Ukraine has impacted the beer category. But of course, if it does get worse and worse, then who knows?”

The brewer posted FY 2013 net revenue of DKK 66.552bn ($12.21bn) up year-over-year, profit before special items rose to DKK 9.844bn ($1.8bn), due to strong Asian performance and 4% profit growth in Western Europe despite volume declines there.

Ukraine in the doldrums

Turning to Carlsberg’s performance in Ukraine, Rasmussen said: “The market fell 7-8% due to the economic slowdown and bad weather. Our market share was flat despite tough comparables and new market entrants, throughout the year we launched a number of innovations.”

Carlsberg’s chiefs described the Eastern European beer market as “difficult”​ in 2013 due to kiosk closures in Russia and a regional economic slowdown – 2013 saw the weakest year-on-year growth for the Russian economy since 2007.

The brewer’s regional beer volumes – Eastern Europe accounted for 35% of group volume in 2013 and 36% of EBIT – fell 5% in FY 2013 and 9% in Q4, mainly due to Russia. Net revenue in the region fell 4%.

But in Russia alone Carlsberg (Baltika Breweries) grew its market share 30bps (0.3%) to 38.6% in Q4 2013 at the expense of EFES Russia and others, while value share (which is undisclosed) rose faster than volume.

“Driven by a very focused agenda in our Eastern European organization, we delivered a very satisfactory +2% operating profit growth and a 120bps [1.2%] profit margin,”​ Rasmussen said of Q4 2013.

“This was achieved despite the substantial headwind from the negative volume development,”​ he added.

Russians supermarket beer sales grow

He attributed the Eastern Europe earnings and margin improvement to tight cost control, a lower marketing spend (with Carlsberg lapping activations around Euro 2012 last year) and efficiency improvements.

“The underlying trend in the [Russian] market is a continuing shift from the traditional typical Eastern European trade to the modern trade as the larger supermarket chains expand and open new stores,” ​Rasmussen said.

“Traditional trade still accounts for around two thirds of the market. But the trend was further accelerated in 2012/13 due to the ban on non-stationary outlets selling beer from January 2013.

This hit consumer uptake more than expected in 2013, Rasmussen said, and was the main reason behind the estimated 8% Russian beer market decline. Nonetheless he said Carlsberg achieved strong super-premium and mainstream beer growth with “good results”​ for innovations around brands such as Baltika 0 and Holsten.

Carlaberg also activated sponsorship of Sochi Winter Olympics and Russian National Hockey League throughout most of 2013 – promoting its sponsorship of both in stores and on packaging materials.

“The Olympics did benefit us…It’s  less about the two weeks when it’s taking place, but more about how it can support the brand image and equity by using that franchise for a long period of time.” ​Rasmussen told analysts.

Related news

Follow us


View more