2017 will be another tough year
Just when you think you see the light at the end of the tunnel – uh-oh. Investors in Carlsberg were in for a big surprise when Carlsberg reported its full year 2016 results on 8 February 2017. Although Carlsberg said that the decline in the Russian beer market has possibly flattened out, the Danish brewer nevertheless forecast a 5 percent drop in volumes for 2017.
The same day Carlsberg’s shares fell sharply in the opening hour of trading, wiping out most of their three month gain.
“The Russian beer market declined by an estimated 1 to 2 percent for the full year and an estimated 4 percent in the fourth quarter. The market development during the second half of the year was helped by very warm weather in the third quarter,” the company said. “Although some macro indicators have started to show improvement in 2016, the market remains impacted by the ongoing macroeconomic challenges in the country.”
In fact, while Russia’s general economy seems to have improved a bit, Carlsberg remains cautious if this will translate into a more optimistic consumer sentiment and hence higher beer sales.
Carlsberg’s Baltika Brewery is the market leader with a market share of 34.5 percent, which declined slightly over the previous year, it was reported. Carlsberg also said that its brands Carlsberg, Baltika 0 and Zhigulevskoe enjoyed a good performance, but this may have been due to price adjustments.
In Eastern Europe, Carlsberg’s beer volumes rose to 34.4 million hl in 2016 from 34.3 million hl in 2015. But net revenue declined to DKK 10.2 billion (USD 1.46 billion) from DKK 10.9 billion and operating profit to DKK 1.8 billion (USD 258 million) from DKK 1.9 billion.
Russia, which used to be Carlsberg’s biggest money spinner in the last decade, contributed only 16 percent to group EBITDA in 2016.
Following the ban on PET bottles larger than 1.5 litres for beer in 2016, Carlsberg has launched a new 1.42 litre bottle. Carlsberg plans to increase prices roughly in line with inflation in the country this year and smaller bottles have slightly higher margins, Carlsberg’s CEO Cees ’t Hart said.
The company said the brewing industry is in talks with the Russian government in hopes of easing its stance on alcohol. Speculation is rife that the Russian government may not issue any more anti-alcohol laws as the country gears up to host the FIFA World Cup in 2018.
“Discussions are good at a very high level,” the CEO said. “At this moment in time, we’re slightly more optimistic, but again, that can change almost every minute in Russia.”
