Comment - Carlsberg's Russian Reboot

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That, in just the space of two days, Carlsberg has announced both a pay freeze and the closure of two Russian breweries, speaks volumes about the seriousness of the situation in its Eastern European stronghold.

Carlsberg is to close two of its Russian breweries

Carlsberg is to close two of its Russian breweries

But, if you really want to see the true scale of the tectonic shifts currently unnerving the Danish brewer, then take a look at this just-drinks interview from late-2012. In it, Isaac Sheps, the then-CEO of Carlsberg's Baltika division in Russia, responds to a question about unused capacity in the country and why diminishing demand should surely lead to brewery closures.

Not so, argues Sheps, who claims that over-capacity in Russia is not a problem, because it is compensated for by the logistic costs from the huge distances in Russia. 

“We'd rather have over-capacity in a brewery than bring goods 9,000km from another brewery," he says. "That would cost us more.”

Fast forward just over two years, and Carlsberg has closed two of its ten Baltika breweries. For the up-to-600 employees affected, it is a life-changing blow. But for Carlsberg, going back to what Sheps said, it also an admission of defeat - one that suggests the company does not expect demand to ever return to Russia.

If Shaps was correct, then Carlsberg set up its brewing network in Russia not by capacity but by dint of logistics. It wasn't just a case of closing one or two if demand fell; they all had to operate to keep the network running.

But, with two now gone, that logistical foundation has disappeared and Carlsberg has had to rewire its whole system. In short, Carlsberg has done a reboot.

CEO Jørgen Buhl Rasmussen will reveal more about Carlsberg's future plans for Russia when the brewer's full-year results are announced next month. When I spoke to him before Christmas, he made it clear that there would be no quick-fix in Russia

He also seemed slightly peeved at his misfortune over Russia's ever-increasing circle of problems - from the initial tax increases and ad bans to border tensions with Ukraine, and now a plummeting global oil price and Rouble.

None of these have been Carlsberg's fault. But, with the reboot, Rasmussen has attempted to take control of the situation. He must now hope it will be enough.

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