Another challenging year ahead

Eastern Europe is Carlsberg’s major market, already contributing 44 percent of total volume (including 51.3 million hl beer) and 52 percent of EBIT. For comparison, northern and western Europe contributed 43 percent of total volume (of which 50.2 million hl were beer), and 41 percent of EBIT.

Small wonder, market observers were curious to find out how Carlsberg had fared in Russia, whose consumers in 2009 not only suffered economic hardship, but were also treated to a political broadside against alcohol consumption.

Carlsberg said the Russian beer market shrank by around 10 percent in 2009, while its own beer volumes in Russia rose 1 percent thanks to retailers stocking up with beer in December ahead of a 200 percent rise in beer excise taxes on 1 January 2010.

The tax hike however poses a threat to Carlsberg, which said it expects the Russian market to show a low double-digit percentage decline in 2010, though it would continue to outperform the market.

Looking forward, Carlsberg says that due to Russian stock-building in the fourth quarter of 2009 and subsequent destocking in the first quarter of 2010, its full-year operating profit in Russia might be negatively affected to the tune of about DKK 300 million (EUR 40 million).

Carlsberg, whose 300 or so beer brands in some 150 markets include Tuborg, San Miguel and Kronenbourg, still forecasts group operating profits in 2010 to be in line with 2009.

Interestingly, Carlsberg has set itself new medium-term (3-5 years) operating margin targets: in northern and western Europe, margins are to reach 15-17 percent (previously 14-16 percent), in eastern Europe they are to rise to 26-29 percent (previously 23-25 percent), while in Asia they are to climb to 15-20 percent. As a group, Carlsberg would aim at hitting an operating profit margin of 20 percent.

Many analysts find these targets highly ambitious in light of the depressed volume in developed markets (Europe and the U.S.). In addition, it remains to be seen what will be the price elasticity for the Russian market.

Russian beer market (share %)

Despite the economic crisis, Baltika managed to increase its market share. Source: Business Analytica/Carlsberg Group 2010