The just-drinks interview - Carlsberg's CEO
In this month's just-drinks interview, we speak to the CEO of Carlsberg, Jørgen Buhl Rasmussen
Carlsberg held its 'Capital Markets Day 2010' in Copenhagen yesterday (16 September). Michelle Russell made the journey over to Denmark, and managed to grab some time with company CEO, Jørgen Buhl Rasmussen.
The CEO of Carlsberg has had a very busy three-year tenure. Since taking up the hot seat in 2007, Jørgen Buhl Rasmussen has been at the helm of the Denmark-based brewer through a roller-coaster ride of events including an arduous and colourful battle to secure Scottish & Newcastle (S&N), brewery closures, job cuts and a brace of stake purchases in the emerging markets of the world on the firm's path to becoming what he hopes will be "the fastest growing beer company in the world".
Most notably, Rasmussen has had to turn his attention to Russia, a country that has experienced a tumultuous year so far, involving wheat shortages and a ban on wheat exports, a slump in beer sales and, of course the Government's three-fold tax hike.
But, while the consumer outlook in Russia is now looking a little rosier, the country has still been a major drag on Carlsberg's volume sales. Last month's half-year figures noted a 3% slide in like-for-like volumes to 55.8m hectolitres in Russia, resulting in group net sales for the six-month period dipping by 2%.
Despite this, Rasmussen is optimistic about Russia's potential to return to growth. The brewer now holds a 40% share of the market, through Baltic Beverages Holding, which it secured sole ownership of through the S&N purchase. It also owns breweries in ten cities across the south and west of the country and is currently investing in innovation while looking to new target markets.
"There is no need to panic," Rasmussen tells just-drinks. "All the trends in Russia are going in the right direction so it is becoming a lot more positive and is looking a lot brighter. If anything, Russia is coming out of the recession a lot faster than any other market in the western world. Fires in Russia have caused a problem for wheat and barley supplies and possibly also rice but as we have said, it will require price increases in some parts, but nothing more than the level we saw when we got the duty increase.
"This [wheat prices] we can manage," Rasmussen continues. "We are a significant player in Russia and we have what we call agro projects with farmers where we help them to grow barley, and we have been doing this for seven months now, so we have a very good understanding of the market. I do believe that our position, and the fact that we have big agro projects and facilities, is certainly to our advantage."
Rasmussen is equally optimistic about Carlsberg's second-half results but says efficiency will remain top of the agenda.
"I am as confident as ever about the second half," he says. "I still have strong confidence in what we set out in quarter two and our outlook for the year.
"In 2009, there was a lot of cost cutting, but more because of the crisis and so much uncertainty. It was very hard, but going into 2010, we have to get back to investing in growth. We are still doing the same kind of activity in terms of looking for more efficiency and how we can work smarter. In some parts of Carlsberg we need more centralisation, at the same time we are investing more and more in growth and in new products."
Innovation appears to be key for the world's fourth largest brewer as it looks to broaden its offering and develop products away from its core beer brands for future growth.
Speaking to investors yesterday, Rasmussen said the successful launches in Russia of Somersby cider and Eve, a fruit-flavoured malt beverage aimed at women, meant the company would now look at categories adjacent to beer, and even turn to bottled water and soft drinks if that paid off.
"When we look at innovation in the future, we will see products that support beer," he told attendees.
The chief executive said the brewer will target women in general, and northern and western European markets in particular.
"The Russian consumers always like new news, they are very brand minded," he tells just-drinks. "When we talk about innovation in Carlsberg it has to build on our core competencies, and to me our core competencies are new products and concepts. It could be for women and it might mean looking at different platforms, we talk a lot about health. We have to look at the mega trends in society when we are coming up with new concepts and ideas.
"So, there will be new concepts and there will be some new beer types, but not just for Russia. This is a group innovation where we look at global trends and where the profit opportunities are. Then we look at how we can get new consumers into our categories or new adjacent categories."
Looking further afield, the brewer has a close eye on its Asian markets where the firm is currently making waves.
In July, it moved closer to taking a further 12.25% stake in China's Chongqing Brewery after the deal was endorsed by the worker's committee. The move would take Carlsberg's total share in the firm to 30%.
The deal certainly represents a statement of intent in Asia-Pacific for Carlsberg as it saw off interest from China Resources Enterprises, which runs a brewing venture with SABMiller in China, and also, reportedly, from Anheuser-Busch InBev.
But, while Asia is still only a small part of Carlsberg's business, accounting for 13% of volume sales in 2009, Rasmussen views it as important growth region for the firm, with Vietnam in particular, an essential piece of the puzzle.
"Asia is where we see most of our growth coming from in the future," Rasmussen says. "Within Asia, key strategic markets are Vietnam, China - and that's Western and Central parts of China - and also India, but that country (India) being more long term.
"In Vietnam specifically, we have different stakes in different businesses and we have built through those partnerships a very strong position in the north and central parts of Vietnam," he adds. "I believe that over time we can integrate the business model more and more in Vietnam and become stronger and stronger."
Indeed, Rasmussen points to the wider Indochina region as a market to watch.
"Indochina is a strong position for us, so on top of Vietnam, when we are talking about Indochina we are talking about Camobodia where we also have a joint venture and a strong market position," he says. "We have been growing market share significantly there in the last couple of years through our local brands, and as well as having a very strong position in beer, we are also in a joint venture on soft drinks. So, the whole Indochina region is a strong position for us with a lot of opportunities coming through."
As for entering new markets, Rasmussen is in no rush. "It's possible," he says. "But, in time.
"One should never say never but I do believe that the platforms where we are, with Vietnam and China, there is a lot more to be done," he concedes.
"We are very happy about the partnership with Chongqing, we have done a lot together even before we bought the stake. We have worked a lot on how to improve efficiencies and production facilities in the region, so let's see where we take the partnership over time.
"But, an important thing for Carlsberg when we talk about Asia and the different markets we are in today, I do see many many more opportunities and we don't need to acquire to grow," he insists. "We have much more opportunity where we are in terms of growth without acquisitions for bottom line growth. We don't need it but we will still be out there watching, looking and assessing if the opportunity is right."
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