Carlsberg results hit by declining Russian beer market

By Rachel Arthur contact

- Last updated on GMT

Pic:iStock/mpalis
Pic:iStock/mpalis

Related tags: Russian beer market, Carlsberg, Marketing, Russia

Carlsberg’s beer volumes in Russia have dropped 14%, dragging its global beer volumes down 3% for the year.

Performance in Russia was impacted by a declining beer market in the country and downsizing of PET bottles, following the country’s ban of larger beer bottles.

Carlsberg’s organic net revenue grew 1% to a reported net revenue of DKK 61,808m ($10.25bn) for the year ending December 31, 2017. Organic operating profit grew 8.4% (reported growth of 7.7%) to DKK 8,876m / $1.472bn.

Russia: volumes down but profit up

Carlsberg says its Russian business delivered ‘solid organic operating profit growth’ despite the 14% volume decline. Key brands in premium and mainstream sectors – such as Baltika 3, Carlsberg, Tuborg and Zatecky Gus gained market share.

Beer in plastic containers dominate the Russian market: but in an effort to reduce heavy drinking, the government has limited the size of beer PET bottles since January 2017.

“The Russian beer market declined by an estimated 4-5% for the year, impacted by the downsizing of PET bottles. Our Russian volumes and market share were severely impacted by the PET downsizing,” ​says Carlsberg.

“In response to this significant change in the Russian marketplace, we adopted a value-based approach to drive further value in the market. A few of our competitors chose to adopt a volume-based approach. Consequently, our products in the PET segment were priced at a premium vis-à-vis the average price points in the market, resulting in market share loss. However, our value approach was a key driver behind our strong profit improvement.”

Carlsberg's eastern Europe division (Russia, Azerbaijan, Belarus, Kazakhstan and Ukraine) made up 25% of group volumes and 16% of net revenue in 2016. 

Craft, premium and alcohol-free

Carlsberg says alcohol-free beers saw strong year in Western Europe, growing 15%. “This was supported by good results for a number of local propositions, such as Carlsberg Nordic in Denmark, Švyturys Go in Lithuania and 1664 Blanc San Alcool in France.”

Meanwhile, it continues to boost its craft and speciality portfolio, which saw overall volume growth of 29%. “This was supported in particular by very strong results for Grimbergen, which was up 15%, and 1664 Blanc, which grew by 46%.”

In the UK, Carlsberg has continued to focus on premiumizing its portfolio: including the addition of Brooklyn along with other craft and premium brands such as Poretti; the rejuvenation of Carlsberg Export at the beginning of the year and the 2017 acquisition of London Fields Brewery.

In China, premiumization helped grow Carlsberg’s portfolio against a backdrop of a market that declined by 1%.

“Our growth [in China] was mainly driven by continued good performance of our premium portfolio,” ​reports Carlsberg. “This was supported by our ongoing premiumisation trend in the market as consumers trade up into premium categories. Our international premium portfolio in China, which includes Tuborg, Carlsberg and 1664 Blanc, grew volumes by 12%. Tuborg remains our most important premium brand in China.”

Efficiency savings

Cees ’t Hart, CEO, Carlsberg, said: “We delivered a strong set of results for 2017, fuelled by disciplined execution of our efficiency program – Funding the Journey – which we now believe will deliver around DKK 2.3bn, well above our initial expectations of DKK 1.5-2.0bn.

“During the year, we invested DKK 500m in our strategic growth priorities, which should lead to healthy and sustainable top- and bottom-line growth going forward."

Related topics: Beer, Wine, Spirits, Cider, Beer

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