Carlsberg Chief Is Confident of Growth in Russia as He Bets on Recovery
Carlsberg AS, the maker of Baltika beer, is confident of growing market share in Russia as it bets on a recovery in 2011 whilst preparing to raise beer prices in the face of rising costs and a tax increase.
“I’m still confident we can continue on this track to grow share,” Chief Executive Officer Joergen Buhl Rasmussen said today in an interview with Bloomberg News in London. “A place like Russia is out of the crisis faster than most of the western European markets. We’re extremely optimistic about what we are likely to see in eastern Europe, which is a big area for us. If anything, it’s going to get slightly better again in 2011.”
Carlsberg, the biggest brewer in Russia, raised prices in the country this month, and will do so again in 2011 to compensate for soaring malt and barley expenses and a tax increase of about 10 percent on beer in 2011, Rasmussen said. He declined to comment on a specific target for price increases.
“It’ll vary a lot by segment and brand,” the CEO said. The brewer expects the Russian beer market to “move to the plus side for next year.” Rasmussen said he’d comment further on Carlsberg’s outlook in February, when the Copenhagen-based company is due to release full-year results.
Carlsberg, which gets 52 percent of operating profit from eastern Europe, is looking to Russia for growth to offset sluggish demand in western Europe. Russia’s beer market will grow 2.1 percent by volume in 2011, according to Mintel estimates. The country is the fourth-biggest beer consumer in the world, behind China, the U.S. and Brazil, Mintel data shows.
Lower Market Share
“Looking at the next five years, we think Russia probably has the best growth in its profit pool of all the beer markets,” said Ian Shackleton, an analyst at Nomura in London.
Carlsberg rose as much as 1.6 percent in Copenhagen trading and was up 1.5 percent at 563.5 kroner at 3:30 p.m.
Russia is proving attractive to consumer-goods makers as government austerity measures and unemployment hinder growth in developed markets including western Europe and the U.S. PepsiCo Inc. agreed this month to buy a controlling stake in Wimm-Bill- Dann Dairy & Juice Co. for $3.8 billion. The economy is set to grow 4.2 percent in 2010, according to Bloomberg data.
Carlsberg, which said in November that its share of the Russian beer market slid 0.8 percentage point to about 39 percent in the first nine months of 2010, is the biggest brewer in the country, ahead of Anheuser-Busch InBev NV, Heineken NV, Anadolu Efes Biracilik & Malt Sanayi AS and SABMiller Plc.
Beer sales slumped in Russia this year after the government raised taxes 200 percent on the beverage in January. Carlsberg, which had previously estimated the market would show a “low double-digit” percentage decline, now sees a “mid-single- digit” fall this year. Taxes on beer will rise again in January, from nine rubles (29 cents) to 10 rubles. This, plus soaring costs of wheat and barley, will lead to price increases.
Raising prices “should be easier this time” as the increase in taxes is less than in 2010, Shackleton said.
Prices increases by SABMiller and Anadolu Efes in November were probably “catching up” with Carlsberg, Rasmussen said. The Danish brewer said in November that its market share slid due to higher price increases than competitors.
Any price increases next year “will not change the consumer dynamic,” the CEO said. “I have no doubt” that Russian consumers will continue to buy beer, he said.
‘Lot of Growth’
Beer consumption has fallen from a high of about 79 or 80 liters per capita to 65, Rasmussen said.
“I can’t see it staying at 65,” he said. “There’s a lot of growth to come from volume, and on top of that, value growth. You can hopefully improve the mix and add more premium products. Long term, this market has so much potential.”
Rasmussen also said Carlsberg may consider buying a further stake in Chongqing Brewery Co. after China’s government approved an increase in its shareholding, paving the way for further expansion in the world’s most population nation.
“What I would like to do, if at all possible, is to expand the collaboration with the Chongqing government,” he said. The brewer might consider buying additional shares in the Chinese company among other options.
To contact the editor responsible for this story: Celeste Perri at email@example.com.