Carlsberg A/S Brewing 1

Carlsberg A/S Brewing

Wendy Sibley

Anh Nguyen

Stephen Andrews

T. Christopher Moseley

Dr. D. Blaine Schreiner

Strategic Management
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Environment Analysis

Carlsberg A/S (hereon referred to as Carlsberg), one of the largest breweries in the world, has

multiple locations found in Europe and Asia. Carlsberg is not only considered an exporter of beer but also

license their products. Beer manufacturing remained consistent until the early 2000’s when the industry

started to consolidate, and the number of breweries reduced drastically. By the late 2000s, the largest

breweries worldwide dominated the beer industry. Carlsberg gained the title of the fourth largest brewery

in 2010. Their market shares in 2010 were up 5.5 percent with products being sold in over 150 countries.

In many markets, Carlsberg would be considered an attractive industry. Europe has been very

profitable for Carlsberg, with 44 percent of Carlsberg’s total sales deriving from the Eastern European

market. In 2009, Carlsberg grew financially with the acquisition of Baltic Beverages Holding company

(BBH). However, the very next year they were faced with a big challenge in the Russian beer market.

The excise tax increased by 200 percent by the Russian Government. This, in turn, caused prices to

increase and sales to fall. This resulted in an unpredictable market. In turn, Carlsberg doubled its

marketing budget to introduce new products and spotlight existing brands.

Fortunately, Carlsberg’s beer sales continued to increase in 2010 with large organic and revenue

growth and solid margin improvements. This was due mainly to the Asian markets not being taxed like

other markets. Carlsberg still must compete with the other large breweries, like the new “boutique-like”

brewery options that peak consumer interest with their specialty and craft beers and the growing

popularity of healthy drinks. All these factors could be a substantial threat to Carlsberg which could turn a

once very attractive industry into an unattractive industry.

Mergers & Acquisitions

Currently, Carlsberg is one of the largest and fast-growing breweries in terms of production

volume. The company has some reasons for its merging and acquisitions. More importantly, there are
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some strategies the company uses to enhance development and profit. The first reason why the company

would merge or acquire other companies within their market area is the sharing of information and

intelligence. Through successful strategic partnerships, Carlsberg together with different companies can

share information and knowledge concerning production, marketing, and selling of their products.

Through mergers and acquisitions, Carlsberg would acquire an improved transactional and

financial report structure. Enhancing financial reports would aid the company to track its past costs and

predict future expenditures. Through the provision of capital to companies acquired or merged with,

Carlsberg’s brand recognition in a newer market would be boosted and open opportunities for faster

market expansion. Moreover, these techniques are typically used to support companies that are more

exposed to hostile takeovers. Nevertheless, this also creates an enormous amount of debt for Carlsberg.

Carlsberg is described by a high diversity of markets, cultures, and brands. The overall strategy

aims at making use of the regions in which the company competes and operates. The overall objective is

to be the best and fastest beer company globally. These regions operate under similar strategies to reflect

the local conditions of each. To achieve the goal of merging and acquisitions, the company has laid down

some procedures for operation.

Carlsberg has been very keen on its recruitment and hiring. They have continuously recruited

competent and skilled personnel. They do this to have a smooth and unique performance culture

throughout their production period. Also, the strategy enhances the quality leadership that is appropriate

based on diversity, ownership, and trust. As a result, other companies find it easy to trust the merger or

acquisition.

Carlsberg has also been focusing on the reduction of prices of their product. The reduced prices

the beer ensures that there is a cash flow in their market. The strategy is not only a survival technique for

Carlsberg but also opportunity generator for their future market. The main aim of being a pull factor
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directed to potential investors. The investors mainly focus on the flow of cash in a company before they

strike a deal with them.

Lastly, Carlsberg has been focusing on improving their products. Their production of new beers

has exposed their creativeness and innovation. The creativeness has enhanced its portfolio of

internationally by the ability to produce strong local brands and international premium. As a result,

excellence has been gradually following the company thus making other companies have the urge to

merge or be acquired by Carlsberg.

Corporate-Level Strategy

Carlsberg’s international corporate-level strategy focuses intently on presence in multiple

countries, investments, and diverse brands. After starting in Western Europe, they then branched into the

United States, followed by Eastern Europe, and Asia. When these major investments in the new market

were made, it resulted in revenues and local brand recognition. Carlsberg was focused on a strategic

expansion; which led to successful launches in specific markets. For instance, in Asia, the primary focus

was on long term growth and building their position. In Eastern Europe, the earnings were higher, and the

growth was rapid. Corporate social responsibility is a practice that is evident throughout the chain.

Carlsberg successfully adjusts to the markets they step foot in and can continue to do so by balancing

growth with maturation.

Findings and Recommendations

Given all the data collected, we cooperatively believe that Carlsberg made the best decision by

entering in multiple emerging markets. Carlsberg was able to effectively deduce necessary changes

needed if they intended to grow. Having an already heavy presence in the European market, Carlsberg

knew that to maintain a competitive advantage they would need to seek opportunities in other regions.
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Due to the over saturation of the North and South American markets and the underperforming market in

Africa, Carlsberg sought to grow in developing nations.

Carlsberg implemented strategic M &A’s to grow into new untapped markets by providing

capital and licensing their beer recipes to local manufacturers. Carlsberg was able to effectively make soft

entrances into underdeveloped beer markets. Carlsberg’s primary concentration was to saturate these

markets with their own products before other competing companies could gain a foothold. However, with

companies like Heineken buying local breweries in Russia and the Russian government looking to raise

taxes on beer sales Carlsberg may need to move more aggressively in the Russian market if they intend to

remain competitive.

A more lucrative market for Carlsberg is in the north and western provinces of China. Even

though this market requires hefty capital investments, many political risks and other high entry barriers

the potential from growth is too great to overlook. Carlsberg has seen many setbacks in this market over

the years. However, by starting in the virtually untouched rural areas of the Chinese market they will be

able to slowly make a push to the more heavily populated cities to the east and improve their presence.

For Carlsberg to be successful and remain competitive in this type of market and to give

themselves the best opportunity for long-term gains they will need to position themselves in each country

as to maximize profits and meet consumer demands. We believe Carlsberg can achieve this by remaining

affordable, investing in local infrastructure, and researching consumers preferred flavors. To be

successful in an emerging market Carlsberg will have to remain competitive with their prices due to the

lower economic nature of these markets. By investing in the infrastructure Carlsberg will not only

increase the capability of their supply chain and distribution but also increase local loyalty. The most

important area to focus on is on researching local flavors using locally found ingredients. What may work

in one country or area may not work in another. Carlsberg must remember that just as culture is different

from region to region the same applies to palates.

Resources

Our Rich Heritage. (n.d.). Retrieved from https://carlsberggroup.com/who-we-are/about-the-

carlsberg-group/our-rich-heritage/