China/India: Carlsberg rolls out big city strategy in China

“We have a good momentum in China. We are rolling out our big city strategy there, and by the end of 2018, we will be in 21 cities,” said Carlsberg’s CEO Cees ‘t Hart during an earnings call last week . “And for 2019, we expect to have an additional 10 cities, meaning that by the end of 2019, we should be in 31 cities.”

The company is successful in the premium brand segment in China with a growth in the third quarter of 11% in the total international premium brand portfolio. The Carlsberg brand grew by 9% and Tuborg by 10% and 1664 Blanc even by 38%. The share in that segment is up by 70 basis points and the company sees potential for further growth.

“We’re as well positive about the development in India,” added ‘t Hart. “The market went up, but we outgrew the market. We estimate our market share is slightly above 18%. In Q3, we look at a 15% volume increase and more than 25% value increase. We are now number one or two in six states and number three in three states, and we serve 37,000 outlets versus the universe of 64,000.” The Tuborg brand grew by 12% year-to-date in India and the Carlsberg brand by even 37% year-to-date.

The positive result in the both markets as well in other business areas are a result of SAIL’22, a strategic vision of Carlsberg which was launched in March 2016 after half a year of strategic work of the Top-60 leadership team of the Carlsberg Group. SAIL'22 set out goals for the coming years based on key global trends, value drivers of the global beer industry and the Carlsberg Group’s strengths. (inside.beer, 2.9.2016)

“Our SAIL’22 investments are coming through,” confirmed Carlsberg’s CFO Heine Dalsgaard and he specified: “Top line investments into craft & speciality, alcohoI-free, DraughtMaster, China, India, it’s coming through.”

Prior to the implementation of SAIL ’22 the Chinese market was a problem child to Carlsberg. The Danish brewer underperformed the already negative market and had to close 19 breweries in western China. Together with a push into big cities in the east the closures helped to lift Carlsberg’s operating margins to 14-15 percent in the first quarter of 2018 from around 6 percent two years before.

 

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