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Carlsberg rivals face Russian organizational 'challenges', CEO suggests

By Ben Bouckley , 08-Nov-2012

Carlsberg CEO Jørgen Buhl Rasmussen has suggested that rival SAB Miller and new strategic partner Anadolu Efes may be facing challenges in Russia as they combine their businesses, as his firm wins market share.

He was speaking as the Danish firm reported its interim results yesterday, which showed group turnover up around 7%to DKK 18.81bn ($) in Q3 2012 (against Q3 2011), but net profit fell circa. 26% to DKK 2,361bn ($403,237).

Carlsberg said it won share in all three regions, while Carlsberg sales grew 9% in premium markets, Tuborg (now in China, India and Russia) 6%, while Grimbergen and Somersby also grew strongly.

Western European beer volumes fell 2-3% due to bad weather in Q2 and July and amidst “difficult consumer dynamics”, although Carlsberg grew volumes 1%; its Eastern European volumes fell 7%.

While the brewer’s Russian beer volumes fell 1% in 2012 to date (the country is key, representing around 40% of group volumes, and Carlsberg hopes to close 100% ownership of Russian market leader Baltika Breweries by the end of 2012), Carlsberg scored 2% growth in Q3; Asian volumes grew 10%.

Shifting market share

During a later analyst call, Hans Gregersen, equity research analyst at Nordea Markets, asked Rasmussen about recent relatively large shifts in market share between major market players in Russia.

Carlsberg is by far the largest multinational player in Russia and said it hopes to better the 37.4% share it held at the end of 2011, after attaining a 38.9% share in Q3 (up 100 basis points on Q2).

Rasmussen told Gregersen: “I don’t want to comment too much on competition as such, but clearly if you look at trends… Efes is now combined with SAB Miller [SAB Miller clinched a deal last October to transfer its Russian beer business to Anadolu Efes – which is vehicle for both group’s investments] and they are losing share.

“Maybe that’s a sign also of them still working on combining their businesses, and have some challenges,” he added.

“Then also ABI [AB InBev] have lost some share in the same period, and as we have said many times in the last quarters, we do see also ABI being more balanced on volume value than in the past.

“So making sure that they also have a profitable business,” Carlsberg’s CEO said.

Asked by Gregersen about a “relatively major slowdown” in Chinese growth rates in Q3 2012, Rasmussen denied that these were significant.

“As always in a market like China, you see ups and downs between quarters and are also impacted in terms of what might be happening in terms of climate, etc.,” he added.

Gloomy prospect: 2013 French duty hike

While he admitted that there was a little less growth in China, Rasmussen urged Gregersen to remember that Carlsberg’s business was to a great extent focused on Western China.

“Here you see still more healthy growth than average in China, and also more long-term opportunities based on much lower consumption.”

How did Carlsberg’s CEO believe that concrete proposals to introduce a significant excise tax rise in France could impact mix and pricing?

“Let’s see what it’s going to be – there is clearly dialogue going on in France. Will it be 150% or less? Time will show. Until we know we won’t comment on the impact,” Rasmussen said.

“But yes, it will be bad news, it will be negative for the market development,” he added, stating that an increase of, say, 150% would involve price increases of around 15% on average for Carlsberg (Heineken has predicted average rises of 20%).