Helped by market share gains in all regions, Carlsberg has reported a 47% rise in net profit to DKr3.28 billion in the first half of 2012 on organic net revenue up by 1% to DKr32.46 billion (Eur4.35 billion). However, operating profit at DKr4.05 billion was down from the DKr4.70 billion in the first half of 2011, due to decline in Northern & Western Europe and Eastern Europe offset by growth in Asia.

During the first half, the Northern & Western Europe beer market, excluding Poland, declined by an estimated 3-4% while the Russian beer market was up by an estimated 2%.

“Carlsberg achieved positive market share growth in all three regions which shows that the recent years’ significant efforts behind our international premium brands, local power brands, and within sales execution are paying off,” comment Jorgen Buhl Rasmussen, chief executive of Carlsberg. “It is particularly satisfactory to see a further improvement in our Russian market share which is a clear sign that our efforts initiated during last year are beginning to bear fruit. Excellent execution of EURO 2012 delivered very strong visibility of the Carlsberg brand. Sales and marketing investments were more skewed towards the first half of this year which, combined with the very bad weather in Northern & Western Europe, impacted profits for the first six months.”

Carlsberg expects full year operating profit before special items to be at the level of 2011 with slightly growing adjusted net profit.

Carlsberg Group has reported a 2.8% rise in revenue to DKr12.9 billon (Eur1.7 billion) but operating profit declined by 43% to DKr574 million for its first quarter as volumes falls in Russia, due to destocking, offset solid growth in Northern & Western Europe and in Asia.

Northern & Western Europe and Asia achieved operating profit growth in spite of slightly higher cost of sales and higher sales and marketing investments due to different phasing than last year. Profits in Eastern Europe declined mainly due to lower volumes, slightly higher cost of sales and different phasing of sales and marketing investments compared to previous year.

The Carlsberg Group grew market shares in Northern & Western Europe and Asia during the quarter. InEastern Europe, its Russian market share improved slightly compared to Q4 2011 but declined as expected versus Q1 2011.

Jorgen Buhl Rasmussen, chief executive of Carlsberg Group, comments: “2012 is a year where focus, prioritisation and efficiency are key in everything we do. We are focusing our commercial activities behind our most important brands and events. We are putting significant resources behind the EURO 2012 sponsorship, which will be a key driver behind the support of the repositioning and the growth of the Carlsberg brand in 2012. In addition, the rejuvenation of the Tuborg brand will support the brand growth through improved performance in existing markets, as well as through introductions into new growth markets such as China.”

Carlsberg Group’s 2011 financial performance has been adversely impacted by a decline in the Russian beer market. Group operating profit at DKr9.82 billion (Eur1.32 billion) declined organically by 4%, as solid growth in Asia and Northern & Western Europe was not enough to offset the Eastern European decline, and group operating margin declined to 15.4% from 17.1% in 2010.

Group beer volumes grew organically by 3% and including acquisitions by 4% to118.7 million hl, with all three regions reporting organic volume growth for the year. Net revenue grew by 6% to DKr63.56 billion with a solid 6% organic growth (total volume 2% and 4% price/mix).

In Northern & Western Europe, Carlsberg’s performance was driven by efficiency improvements and market share gains, while in Asia it was driven by growth and market share gains. However, its performance in Eastern Europe was impacted by the Russian beer market decline and Russian market share loss, which was caused by a high level of promotions and price activity by competitors. The overall Northern & Western Europe beer market was flat in 2011. The Russian market declined by an estimated 3%.

Jorgen Buhl Rasmussen, chief executive of Carlsberg.

Jorgen Buhl Rasmussen, chief executive of Carlsberg, comments: “While 2011 was a challenging year with headwinds from rising input costs and a challenging Russian market, our Northern & Western European and Asian regions continued to perform well, both commercially and financially. Throughout the year, we maintained our focus on profitable development by balancing volume and value share, which led to share growth in both volume and value in Northern & Western Europe and Asia, but in the case ofRussiaresulted in market share loss due to a high level of promotional activities from competitors.”

An important commercial project in 2011 was the repositioning of the Carlsberg brand across more than 150 markets. The Carlsberg brand grew in volume by an encouraging 7% in premium markets.

He continues: “In our planning for 2012, we’re investing to grow market share and continuing the implementation of efficiency improvements. Strong prioritisation on the most important activities will be a key driver for how we approach businesses in what we expect to be a challenging environment in Northern & Western Europe in 2012. In Russia, the steps we’ve taken to strengthen the business will begin to bear fruit in 2012. At the same time we’ll continue to explore acquisition opportunities in growth markets.”

Following a challenging 2011, Carlsberg plans to reduce the number of positions in its headquarter functions across Europe by 130 to 150, of which approximately 95 positions have already been made redundant in Denmark, Poland and Switzerland. On top of this, Carlsberg is planning to transfer 25 employees from Carlsberg IT to BSP, its business standardisation project. Part of these changes will be implemented during 2012.

“We are preparing for challenging market conditions in the coming years in Europe. Our response is to focus on fewer, but more important activities and execute them with greater impact. This also means that there will be activities which we choose not to do or become a lesser priority. At the same time, we have looked for new and more efficient ways of working across the Carlsberg Group,” says chief executive Jorgen Buhl Rasmussen, mentioning as an example that Carlsberg’s digital marketing activities will now be combined into a new entity with much greater co-operation across markets.

Carlsberg is also establishing an integrated supply organisation for Europe, which will incorporate the group procurement, supply chain and logistics functions. The aim is to achieve cost savings and to improve customer service. The organisation will be located in Switzerland and will be in place by the end of 2012.

“The new supply organisation will cross borders and ensure that production is organised as efficiently as possible, capable of delivering all our supply requirements. This will allow our local markets to focus on customers and consumers,” adds Jorgen Buhl Rasmussen.

Peter Ernsting, senior vice president of this new supply organisation, comes with experience from Unilever, where he was responsible for a similar process. Bengt Erlandsson, head of Carlsberg’s procurement activities, will join Peter Ernsting in managing this new organisation.

The continuing decline in beer consumption in Russia, Carlsberg’s largest market, has impacted the Danish brewer’s financial performance in the first half ended June 30th 2011 and forced a review of its full year projections. Although Carlsberg achieved beer volume growth  of 5% and increased net revenue by 8% to DKr31.3b (Eur4.2b) during the period, operating profit declined by 5% to DKr4.7b.

Despite an improved Russian macro economic environment, the beer market in Russia declined by approximately 1% for the first six months and by 2% in the second quarter. Over the past 18 months, consumer prices on beer have been increased by an average of 30% reflecting the duty increase. Russian consumers have not yet fully adjusted to these substantially higher price levels resulting in an extended period of declining consumption delaying the overall recovery of the Russian beer market. Furthermore, unfavourable weather conditions during the second quarter also impacted consumption negatively.

Jorgen Buhl Rasmussen, chief executive of Carlsberg.

Overall, Carlsberg’s group beer volumes grew by 5% to 58.3m hl with 4% organic growth but with large variations between regions. Northern & Western European volumes grew organically by 1% and Eastern Europe by 5%. Asia continued its strong expansion and delivered 10% organic beer volume growth.

As expected, operating profit was impacted by higher input costs and sales and marketing investments across the group. Eastern European operating profits were further impacted by higher logistics costs and the Russian market development being below expectations. The Asian and Northern & Western European regions delivered good organic operating profit growth in both the first and second quarters. Group net profit was DKr 2.2b compared to DKr2.7b in the corresponding period in 2010.

Carlsberg is now forecasting a low single-digit decline in the Russian market for 2011 (against previous growth expectation of 2-4%). As a result of this, the brewing group has revised its 2011 earnings expectations. Group operating profit before special items is now expected to be around DKr10.0b compared to DKr10.25bn in 2010 and against previous expectation of high single digit percentage growth. Similarly, adjusted net profit growth is now expected to be 5-10% against previous expectation of more than 20%.

“With the adjustments we’re making to our local portfolio, channel approach and forward pricing strategy, I’m confident that our Russian business will return to growth,” says Jorgen Buhl Rasmussen, chief executive of Carlsberg. “At the same time, I’m pleased with the performance of the rest of the group. In the first six months we have continued our relentless focus on driving efficiencies as well as long-term sales value growth.”

Carlsberg Group has started 2011 well and is firmly on track to meet its full-year financial targets. In the traditionally small first quarter of the year, beer volumes grew by 11% to 23.3m hl, net revenue growth was 14% to DKr12.5b (Eur1.7b) and operating profit rose by 38% to DKr1b. However, the comparison is distorted by the destocking in Russia in the first quarter of 2010.

According to Carlsberg, overall beer markets in Northern and Western Europe declined in quarter one, and consumer dynamics remain challenging although there are some signs of small improvements. Carlsberg improved overall market share in the region with particularly strong improvement in Poland and South East Europe and with the UK business continuing to strengthen its market position.

Performance of the Eastern European business in the first quarter benefited from an improving macroeconomic environment and from distorted year-on-year comparisons. The group’s total beer volumes grew organically by 28% for the quarter. Adjusted for the destocking impact in Russia in Q1 2010, the organic volume growth for the region would have been an estimated 6%.

Jorgen Buhl Rasmussen, chief executive of Carlsberg.

On April 5th, the group launched a new global positioning of the Carlsberg brand with the aim of unleashing the brand’s full potential within the coming years. The new positioning will be rolled out across markets throughout 2011 using a wide variety of multimedia and marketing communication channels.

Supported by slightly higher marketing investments than in 2010, the group is well on track in the planning and executing of the commercial activities that will deliver the expected profitable market share growth across a large part of the business.

Carlsberg has confirmed its underlying assumptions and full-year outlook for market share growth in markets representing two-thirds of its business, high single digit percentage growth in operating profit and adjusted net profit growth of more than 20%.

Jorgen Buhl Rasmussen, chief executive of Carlsberg, comments: “We are satisfied with the group’s performance in Q1, while at the same time acknowledging that in most of our markets, it is a small quarter. We are particularly pleased that the important Russian market has returned to growth. We continue the efficiency agenda with the implementation of several large projects in 2011 and, at the same time, a number of commercial initiatives are taking place to support profitable market share growth. This includes the global repositioning of the Carlsberg brand that was announced in April. That calls for a Carlsberg.”

Carlsberg is investing significantly in repositioning its brand to support its ambition to be the fastest growing global beer company. While Carlsberg’s famous green logo is known all over the world, its sales simply do not measure up to its brand recognition.

At the heart of the repositioning is a redefinition of the brand proposition – a proposition which celebrates Carlsberg’s heritage and values, while connecting with today’s active, adventurous generation of beer drinkers. The proposition encourages consumers ‘to step up and do the right thing’, rewarding themselves with a Carlsberg for their efforts and it carries the tagline ‘That calls for a Carlsberg’.

Carlsberg’s visual identity has been modernised, distribution channels are being widened and a completely new range of packaging is being rolled out across more than 140 markets. The changes to both the brand proposition and the visual identity are designed to help to make the Carlsberg brand more consistent, appealing and distinctive to its consumers in both its established and newer markets.

Jorgen Buhl Rasmussen, chief executive of Carlsberg.

Consequently, by 2015, Carlsberg anticipates that the Carlsberg brand will have doubled its profits.

With over 100 scientists employed in its research laboratories, Carlsberg continues to seek improvements to the quality of its products, both in terms of production and taste. One of its recent achievements is the development of a new type of barley – Null-LOX barley – which has the benefits of being high yielding, provides a better foam for the beer and keeps the beer fresher for longer. These benefits are further enhanced when combined with Carlsberg’s new fast-acting strain of yeast (234).

“People are familiar with Carlsberg but do not necessarily know what it represents. This global launch is our way of getting our story out there to both our mature markets and our newer markets. We want people to know that Carlsberg beer stands for something – for heritage, for quality, for great taste and for doing the right thing,” comments Jorgen Buhl Rasmussen, chief executive of Carlsberg. “Although international recognition is good, it is not enough. We are investing significantly in the Carlsberg brand, widening our distribution channels and making every effort to get closer to our customers and consumers.”

The new initiative is being rolled out across a wide variety of multimedia and marketing channels, with a new television advertising campaign being launched throughout 2011 to reinforce the new brand positioning.

Reflecting a highly challenging year in Russia, its largest market, Carlsberg increased net revenue by 1% to DKr60.05b (Eur8.0b) and operating profit by 9% to DKr10.25b in 2010. However, revenue fell 3% organically during the year with volume down 2% and a 1% decline in price/mix. Favourable currency factors were responsible for 8% of the rise in operating profit and organic growth was 1%.

Net profit grew by 49% to DKr5.35b but included special items of DKr598m related to step acquisitions. The group’s beer volumes were down by 1% to 114m hectolitres and the organic volume decline was 2%.

Carlsberg is focusing intensively on driving profitable market share growth, while simultaneously improving efficiencies across the group. This is a continuous process and an integrated part of the Carlsberg strategy and business model. During 2010, Carlsberg significantly intensified investments behind its key brands, including innovations, new products, media, digital, consumer and customer activities. The Danish brewer also invested in innovations to be launched in 2011 and beyond.

Market Trends

According to Carlsberg, overall beer market trends improved in 2010 compared to 2009. The overall beer market in Northern & Western Europe declined by an estimated 2-3% – a slightly improved trend compared to the estimated 5% decline in 2009.

Jorgen Buhl Rasmussen, chief executive of Carlsberg.

Carlsberg continued to strengthen its position in the UK growing value and volume market share in both the on-trade and off-trade channels. In a UK market, which declined by 4%, the group grew volumes and added 110bps to take its market share to 15.4%.

The Russian market was stronger than anticipated. At the beginning of the year, Carlsberg expected a market decline of low double-digit percentages following the sharp rise in excise duty in January 2010, as consumer price increases of approximately 25% were needed to offset the duty increase. However, due to favourable weather conditions, overall faster and ongoing recovery of the Russian economy and improving consumer sentiment, the Russian beer market picked up in the second half of 2010 leading to a decline of approximately 4% for the year.

The other Eastern European markets improved significantly compared to 2009. The Asian beer markets, which were largely unaffected by the economic crisis in 2009, continued their very strong growth pattern.

“2010 was an extraordinary year for the group due to the substantial excise duty increase in our largest market and we are very pleased with the strong 2010 performance. The improved market share in a large part of our businesses demonstrates our ability to strongly execute on our plans,” comments Jorgen Buhl Rasmussen, chief executive of Carlsberg. “For 2011 we believe market dynamics will improve slightly, not least in Eastern Europe where we anticipate the Russian market to return to growth. In our efforts to balance profitable growth with continuous efficiency improvements we will roll out innovations and market tools to support growth during 2011.”

In 2011, Carlsberg is projecting low single-digit decline in Northern & Western European beer markets, growth of 2-4% in Russia and continued growth in key markets across Asia. The impact from increased input costs will be mitigated by higher sales prices in all regions. In Eastern Europe, the input impact will be higher than the group average and consequently operating profit margin in the region will be impacted negatively for 2011.

For 2011, Carlsberg expects market share growth in markets representing two-thirds of its business, high single-digit percentage growth in operating profit and adjusted net profit growth of more than 20%.

Carlsberg Group has strengthened its standing in the Chinese beer market by increasing its shareholding in Chongqing Brewery from 17.5% to 29.7%, thereby becoming the largest shareholder. Since 2008, Carlsberg has developed a constructive relationship with both Chongqing Brewery and its main shareholder, Chongqing Beer Group. Following the completion of the transaction, the parties will continue to work together to explore opportunities for increased co-operation, including further sharing of best practices and the development of Shancheng, which is the leading brand in the markets in which Chongqing Brewery operates.

Jorgen Buhl Rasmussen, chief executive of Carlsberg Group.

Chongqing Brewery operates 16 breweries in Chongqing and the surrounding provinces of Sichuan, Hunan, Anhui and Zhejiang. In 2009, Chongqing Brewery’s Chinese beer volumes were approximately 10m hectolitres.

“We have been actively involved with Chongqing Brewery and are very excited about the possibilities for further development arising from the transaction. The transaction is in line with Carlsberg’s strategy of strengthening our presence and building a platform for long-term growth in Asia,” comments Jorgen Buhl Rasmussen, chief executive of Carlsberg Group.

Carlsberg Group operates 19 breweries in China. In 2009 the group’s pro-rata Chinese volumes were approximately 9m hectolitres. Carlsberg Group holds strong market positions in Western China. In addition the group holds a number two position in the international premium segment with the Carlsberg brand portfolio.