Carlsberg goes for gold in UK share race
A £28m re-branding of its core beers in the UK, is only the first step in Carlsberg-Tetley's plans to drive sales in the increasingly competitive market. CEO Colin Povey talks to Chris Brook-Carter about the push towards premium and why the UK won't consolidate further.
Carlsberg announcement this week that it is to invest £28m to re-launch its two leading brands on the UK market, employ Danish super model Helena Christiansen to market them and has developed new technology to dispense a pint of either in 14 seconds. It should sound a clear warning that the UK is about to enter a period of heightened competition.
Carlsberg's move in itself may be a reaction to the arrival of the canny international player Interbrew and US giant Coors in the UK, designed to pre-empt what will no doubt be a genuine shake-up of this mature market.
Of the two, it is likely to be with Interbrew (and its Stella Artois) where the real battle will lie, as the crux of Carlsberg's plans is to push its Export brand further into the premium end of the market.
"The big brands continue to get bigger at the expense of the smaller brands and the need for the larger players to keep a sustained level of investment is crucial," says Colin Povey, CEO of Carlsberg Tetley. "The biggest thing is to give Export a more premium image. It will maintain its link with the Carlsberg brand but we are more clearly differentiating the two variants."
The most obvious shift in focus is in the brand's packaging, which will change from a green to gold can with a mat finish, "a first for the beer industry," Povey explains.
The stagnant nature of the UK's standard lager category has also driven the company to upgrade the image of its eponymous standard brand. On top of a makeover of the can and bottle, Carlsberg Lager will now only be known as Carlsberg. "Consumers understand Carlsberg is a quality lager and that Carlsberg is a lager. It has enabled us to clean up the image on the bottle and the can," says Povey.
Povey protests that the standard brand is not being ignored in favour of a bigger place for Export in the portfolio. "It is not a question of either/or, we are supporting both variants strongly." And, given the sheer size of the standard market, Carlsberg cannot afford to take its eye off this category. But premium is where the growth is, and from this side of the fence it is apparent Carlsberg believes this too - Export is where the future lies.
The brand grew 30% last year in a market where premium lagers jumped only 7%, helping the Carlsberg brand in total leap 12% against a stagnant 2% increase in the general market. And, Povey is confident that the investment will pay off with similar performance levels.
"The UK market is very competitive but we are looking to sustain and improve on [this year's] performance." Indeed 2002 has already started well with a major re-listing in off-license chain First Quench and growing supermarket shares. Povey says Carlsberg will also be announcing "other deals in the next few weeks".
"But the good news needs to be tempered, coming as it does against a backdrop of continuing stagnation "
"The industry is worried about this topic. But we can be a bit pessimistic. This is a £16bn industry in the UK and with the right portfolio you can generate good growth. The big brands are pinching from the smaller brands and the longer challenge is to get the drinker from wine and spirits. Vortex is part of that response."
Vortex is Carlsberg's new delivery mechanism for the on-trade, designed in conjunction with Birmingham University. A vortex in the dispensing tap is said to improve head formation and retention, while pouring a pint in around 14 seconds (30% quicker than conventional taps). In the convenience driven world this is an interesting development in the fight against the likes of Smirnoff Ice and bottled beer.
It is as a result of the stagnant nature of the UK market that there has been so much speculation of consolidation in the last six months, some of it concerning Carlsberg-Tetley itself. In particular there were reports earlier this month that the brewer was close to finalising a deal with Belgian giant Interbrew to merge the distribution operations of both companies in the UK market.
But Povey says there are no plans to merge Carlsberg-Tetley at the moment. "We have to remind ourselves we have a truly international brand with a real heritage to work with. We need to have confidence in that," he says.
He then adds: "Everyone is trying to get a structural solution, but even if brewers want it the regulators won't so I can't see it happening." Indeed, following the subsequent upheaval that came in tow with Interbrew's eventful arrival on the scene (which has subsequently resulted in Coors arrival), Povey sees the situation now in the UK as "clearly very competitive" but "much more settled".
"There is fairly consistent speculation about S&N's (Scottish & Newcastle) vertical integration and there will clearly be some consolidation in pubs. A number of the large pub groups are looking for 6-10,000 (pubs) instead of the 2-3,000 they have now. But will the big four (UK brewing operators) become a big two like the normal European model? In my opinion no."
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