From his vantage point on the 20th floor of the Carlsberg corporate headquarters in central Copenhagen, Jørgen Buhl Rasmussen can take in the past and future trajectories of the world-famous brewer within a single expansive sweep. In one direction sits the soon-to-be developed former Carlsberg brewery site which it’s hoped will turn the district into one of the city’s buzziest, and the broader horizons the company’s CEO hopes will yield a new generation of beer aficionados. In the other, a steady stream of tourists trickle into the company’s on-site museum, horse stables and tasting rooms.
Since taking the top job in 2007 – after a career with consumer markets companies such as Duracell, Gillette Group, Mars and Unilever – the affable Dane has overseen Carlsberg’s transition from stable lager brand to acquisitive international brewer, competing with rivals such as Heineken, SABMiller, Diageo and AB InBev with tactics including a significant internal reorganization, a major expansion in China and a US$15.4bn acquisition (alongside Heineken) of Scottish & Newcastle’s diverse brand portfolio.
“We all make a choice when we’re thirsty …
even ice cream is competition for us”
Jørgen Buhl Rasmussen, CEO, Carlsberg
The company’s rising revenues – which hit US$11bn in 2011, though profits before tax slid slightly – make it the world’s fourth-largest brewer, with a host of household names including Tuborg and Kronenbourg 1664 alongside its signature tipple. The 57-year-old CEO talked to ConsumerCurrents about the ups and downs of emerging markets, the attractions of craft beer and the pace of consolidation.
You’re ranked as the fourth largest brewer in the world. Will that change in the next five years?
We can all guess, but who knows? Carlsberg will be one of the top global brewers: whether it’s number two, three or five is less important to me. It’s more important that, where we choose to be, we have scale. It requires a lot of investment to build a brewery. If you don’t have scale, it’s hard to make it profitable. I expect Carlsberg, in the long term, to be among the top brewers in the world. We have not yet seen the end of consolidation in the brewing industry.
Are you optimistic about the global beer market?
Europe will be challenging for some time. I don’t expect it to get much better in the near future, with probably some small declines in Western Europe in 2013 and 2014. We expect Asia to continue to grow. Will it be as much as we saw in 2010 or 2011? Possibly, possibly not, but not far from it. We do see a little slowdown in China, but it is still a growing marketplace in general. We expect Asia to grow as a region from a GDP point of view and certainly from a beer market point of view. Consumption is still very low there compared to many other regions.
What are the expectations and risks you are preparing for in China? Government regulation? Local competitors?
Probably all of it. You definitely have competitors and they will be local and global. But Asia for Carlsberg is no doubt a very important growth engine. It’s based on the business we have out there today but also on any acquisition we make.
We are present in more countries than any of our global competitors. China will be very important, but growth will also come in markets like Vietnam and, in the long term, India. External sources of beer market statistics say in the next five years, roughly half the volume growth – 40-50% – will be from Asia.
How is the current climate for deals?
Any takeover target Carlsberg looks at, we won’t be alone in doing so. There will be international brewers and local competition wanting to buy. That’s why you have to put yourself in a good position in terms of building a relationship. Money is the driving factor, but having a reputation for working well with partners and people is important and can put you in a slightly stronger position.
Do you just think of other beer companies as competitors, or do you include spirits and wine too?
All of them. I would even argue that one should think much broader. It’s not only alcohol: it’s also soft drinks and other beverages. We all make a choice when we are thirsty and need some refreshment. I mean, even ice cream on a summer day is a competitor … you have to think about how you get to the consumer early enough when they are getting close to decision-making.
Wine has taken a big share of the market, especially around meals, but I think we can change that trend. The beer category has suffered from an image problem, being connected in the last 10-15 years with drunken people on the street sitting with cans. We see more craft beer and specialty beers coming in to offer a different experience. It’s making people talk positively about beer again.
How big can craft beer become, and how far can multinationals like Carlsberg stay involved?
Craft and microbrews have penetrated up to 10% of market value in a few selected markets, so it’s still relatively small and it can grow for some time. Whether it’s Carlsberg behind it or someone else, I don’t think it makes a difference. It’s all about not being a mass-produced beer: it must taste great and have some unique flavours. We want to play a part because we have the knowledge and the competence.
Are you on track for your stated goals of doubling Carlsberg brand profits by 2015 and being the fastest-growing brewing company on the planet?
I believe we are on track for doubling profitability. The results are encouraging. Are we on track to be the fastest-growing beer company in the world? No, because Russia is 35% of our earnings and in recent years Russia has been affected by external factors: it was hit hard by the financial crisis, and by increases in raw material prices (compounded by a poor harvest). It has also had to deal with increased regulation – all of which has had a negative impact on consumption.
With the Scottish & Newcastle acquisition we got ownership of the Baltic Beverages (BBH) business, which was a significant transformation. We do believe, based on the footprint we have, that Eastern Europe and Asia are growth markets for a long time. We should be able to deliver on our promise of being the fastest growing, meaning organic growth without acquisition, over a three-year average.
Most of our markets position Carlsberg as a premium brand, at the upper end of the price range. I want to see the growth in premium markets outperforming our average as a company, which has happened in 2011 and 2012.
How would you describe your approach to innovation?
Since I became CEO, we have established a centralized innovation workstream, so the R&D center, consumer insights and innovation marketing people are all part of the same structure. We established platforms, for example female drinks, and we have developed concepts. We had a Copenhagen beer in the Nordic markets, with a very trendy-looking clear bottle, a very appealing look, though the liquids still need some further optimization.
We also launched a product called Beo in Denmark and Sweden – you could call it the first brewed, non-carbonated soft drink, based on natural ingredients. It needs more work, because the concept is not understood by the consumer. We don’t call it a soft drink. It’s not a beer, or a non-alcoholic beer. Defining the category takes time and you often have to be patient with new innovations.
What did your background in FMCG companies teach you?
The impact of strong execution. I believe the way in which you get your offering in front of the consumer – on the right shelf, at the right price, at the right time – this is how you separate a successful business from a non-successful one.
1847 - JC Jacobsen founds the first Carlsberg brewery, just outside Copenhagen. He brews his first drink on 10 November with a team of around 10 men.
1867 - Samples are sent to India, Singapore and Hong Kong to prove the beer survives long-distance transit. Later, Carlsberg sets its sights on South America.
1868 - Export begins with one barrel of beer sent to Edinburgh. The dark brew is very popular with the Scots, who mix it with their whisky.
1892 - The modern bottle cap is invented – bottled lager soon rivals draught for popularity.
1903 - Carlsberg and Tuborg agree to share revenue and collaborate on investments. The two companies later merge.
1935 - The first canned beer goes on sale in the US in Richmond, Virginia. By the end of the year, 38 breweries are offering lager in cans.
1941 - Packaged beer sales surpass draught beer sales for the first time.
1968 – Carlsberg opens its first overseas brewery in Blantyre, Malawi.
1988 - First step into international football sponsorship with the European Championship. Carlsberg sponsors every such final that follows and becomes an official UEFA partner.
1993 - China’s Snow Beer is brewed for the first time. By 2009, it is the world’s best-selling lager. Today, China is the world’s biggest beer producer, brewing 44bn liters in 2010.
2001 - Carlsberg merges with Orkla, one of Norway’s largest companies. Carlsberg Breweries A/S becomes the leading brewery in the Nordic region.
2006 - Total global sales of premium beer (lagers with an ABV of 5% or more) reach US$151bn, a jump of 75.6% since 2000.
2008 - The joint acquisition of Scottish & Newcastle with Heineken is Carlsberg’s biggest deal ever. The Danes gain French market leader Kronenbourg.
2012 - Carlsberg is now the world’s fourth largest brewer and expects Asia to be a big growth market in the coming years.