Analysis - Carlsberg: Emerging from the Russian Winter

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As Russia finally offers the world's brewers a period of (relative) calm, market leader Carlsberg looks poised to turn the corner this year. But, could 2014 be a case of déjà vu for the Danish company?


Following the co-takeover of its Baltic Beverages Holding JV partner, Scottish & Newcastle, in 2008, Carlsberg has seen Russia become its major market: Today, the country generates around 40% of the brewer's profits. But, a wave of measures introduced by the authorities in recent years - including regular tax rises and bans on advertising and sales from kiosks - has hammered the country's beer market.

Back in November, as it announced flat sales for the nine months to the end of September, Carlsberg highlighted the "challenging market environment in Eastern Europe with Russia continuing to be impacted by outlet closures and slower macro-economic growth".

A new year, however, suggests a new dawn for Carlsberg, according to Trevor Sterling, an analyst with Bernstein. “We expect 2014 to represent a point of inflection for Carlsberg, with modest improvements in top-line trends,” he said late last week. Sterling admits, however, that he is at risk of repeating himself. “To be honest,” he continues, “we thought the same at the start of 2013; and we were wrong, as we significantly underestimated the impact of the kiosk ban in Russia.”

The choppy Russian seas of the last five years or so now appear to be behind us.

“These (government) measures are now well understood,” Sterling says. “There have been no new material restrictions legislated for two-and-a-half years (with the 2013 kiosk ban being the last to be implemented). 

“Indeed, the Russian Government has indicated that it feels that it does not need any further regulatory constraints. Whilst it is too early to be definitive, it is encouraging to see beer industry volumes stabilise towards the end of 2013.”

So, while Carlsberg's full-year results statement, expected on 19 February, may still prove grim reading, the brewer will be hoping, finally, for a Slavic sunrise in 2014.

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