Carlsberg’s four pillars for portfolio growth
The Danish beer giant recently launched its five-year SAIL’27 strategy, a program designed to capture long-term growth opportunities for the company and drive organic revenue growth of 3-5%.
This includes honing its portfolio to find growth opportunities both in beer and beyond beer: with CEO Cees ‘t Hart explaining the four key categories the company is targeting.
1. Step up in Premium
The premium category is growing three to four times fastest than mainstream beer, according to ‘t Hart, with the momentum in the category being demonstrated across Carlsberg’s regions.
“Historically, our business has been built from local power brands and consequently skewed towards mainstream. Therefore, we have a gap to close in several of our markets. We see this as a significant opportunity.
“We have an attractive, diverse brand portfolio and liquids and the right tools to allow us to really step up and improve our performance in the premium category. We will sharpen our approach to how we develop and grow premium brands. This includes a higher level of differentiation versus core mainstream brands in terms of sales execution, value management, marketing investments and resource allocation.”
One thriving area in premium and is the company’s craft & speciality category, which has delivered average annual volume growth of 11% and increased its share of beer revenue from 7% in 2016 to 14% in 2021. Leading the premium portfolio is 1664 Blanc, which has grown by more than 15% per year to more than two million hectoliters.
“We have identified three distinct opportunities for which we will have clear guidance for market on how to drive growth and prioritize brands and investments. Firstly, we will grow in super premium. A key priority here is to further build and scale 1664 Blanc. We will also drive growth for our local craft brands and selectively scale our super premium brands such as Grimbergen and Brooklyn. Secondly, we will selectively use Tuborg and Carlsberg, which we believe we can expect more volume and value growth, particularly in Asia. And, thirdly, we will further grow and scale our strong local premium brands that often are regarded as national treasures using repeatable models with proven success. Good examples are brands such as Jacobsen in Denmark, Frydenlund in Norway, and Valaisanne in Switzerland that all have strong momentum.”
2. Mainstream beer
Mainstream beer is a central part of Carlsberg’s business: with more than 60% of total beer category value generated by the category. Thus, mainstream beer continues to be key in shaping the overall image of the beer category and bringing in new consumers.
“Mainstream core beer is the backbone of our business, and it is important that we continuously ensure the relevance and strength of our brands,” notes ‘t Hart. “We see good opportunities for value growth, for example, by expanding innovations and repeatable commercial models across markets and brands.”
Local mainstream power brands are a significant part of Carlsberg’s portfolio, notes ‘t Hart: providing a solid mainstream base as well as an opportunity to grow into new categories.
“These brands have strong local roots and histories and fulfil the continued consumer demand for local and authentic brands. Our local power brands also offer opportunities for premium line extensions and entry points into other categories, for example alcohol-free beer.
“We will apply a structured and disciplined approach to manage our local brands, clustering them into four groups in order to determine the level into four groups in order to determine the level of marketing investments needed, criteria for innovations, opportunities for geographical expansions in or outside their home markets and specific value management efforts. So, we are taking a more rigorous approach on how we manage our mainstream core brands. And although the category is under pressure from premiumization, the category offers appealing long-term revenue growth opportunities for us.”
Alcohol-free brews are a ‘well-known priority’ for the company and will remain in focus in the coming years: driven by brands such as Carlsberg 0.0, Baltika and a partnership with Brooklyn Brewery.
The category is one of the fastest growing beer segments, especially in Europe, but Carlsberg will now turn its focus to carving out the category in Asia.
“We have delivered strong growth of 14% CAGR in alcohol-free brews during SAIL’22 [Carlsberg's growth strategy from 2016-2022] and in many markets, and Western Europe and Central & Eastern Europe, we hold strong number one market positions,” said ‘t Hart. “Our portfolio is right and includes traditional alcohol-free beer, beer mixes, flavored non-alcoholic beers and non-fermented malt beverages.
“Our ambition is to continue our strong growth momentum. We will do so by accelerating volume growth in Western Europe, further scale our alcohol-free brews portfolio in Central & Eastern Europe and seeding the category in Asia, leveraging our strong local power brands, our international premium brands, and stand-alone alcohol-free brands. Our ambition is to more than double our alcohol-free brew volumes.”
4. Moving beyond beer
A new priority for Carlsberg is to grow in the beyond beer category: with more alcoholic beverages such as RTDs on the cards.
The company has been testing the waters with launches such as Garage and Somersby hard seltzers, launched in 2020 in select markets. Carlsberg will now turn its focus to scaling these brands up.
“Alcoholic categories beyond beer, such as ciders, hard lemonade, hard seltzers and RTDs are becoming increasingly popular in some of our markets,” said ‘t Hart.
“This is due to sweeter taste and more fruity and flavored variants appealing to some consumer groups.
“We see a very appealing growth opportunities in this space with already existing and proven brands. The two key brands will be Somersby and Garage that have developed very strong growth in some markets in recent years. From being local priorities, we will now make them global or regional priorities, with the required attention and investments.
“Those brands have proven to be scalable, and by applying repeatable global models and expanding into new markets, we believe they can deliver a sizeable growth.”