By S. Ashwiinie
Nestled in a nook in Shah Alam, amidst all the lush greenery—lies a brewery, a landmark difficult to miss by those using the Federal Highway—-Carlsberg Brewery (M) Bhd. The brewery located on a 20 acre site, has been in operation since the early 1970’s, and is one of only two major beer brewers in the country.
A few years ago Carlsberg controlled 60 percent of the beer market locally, spearheaded by its flagship Carlsberg Green. However today, although Carlsberg Green still remains the number one selling beer, the company has since given up its pole position, to now control about 43 percent of the total beer market share.
The remainder and the dominant position is held by Carlsberg Brewery’s rival, Guinness Anchor Bhd (GAB).
Carlsberg Brewery’s managing director Soren Ravn in an exclusive interview with KiniBiz explains,“We have the number one brand (Carlsberg Green) but we are only number two in the entire beer market. Our strategy now is to keep the number one position with Carlsberg Green.
“Today consumers want variety… If you open up a bar or restaurant, you want to have at least three to four beers on tap and then you want to have another ten beers by bottle,” he explained.
In a nutshell Guinness Anchor saw this trend—-the need for variety— before Carlsberg Brewery did, and capitalised on it, taking over the lion’s share of the beer market.
However Carlsberg Brewery is no pushover and is capable of fighting back, and wresting back some of its lost market share. After all parent Carlsberg AS is the fourth largest beer brewer in the world.
New strategies in place
Soren Ravn
“Over the last three to five years we radically changed our strategy… but we still use a big chunk of the money to keep Carlsberg Green in the number one position… it’s our bread and butter, it’s our justification in the market that we have the number one brand and it’s a great selling point… We want to use that strength to improve our portfolio,” Ravn said.
In August 2008, Carlsberg Brewery formed a 70:30 joint venture with liquor and beer importer, Luen Heng Agency Sdn Bhd.
Some of the brands under Luen Heng’s belt include Hoegaarden, Budweiser, Stella Artois, Becks and Foster’s.
“We know that over the last three years we have done quite well, and so we think we have increased our market share,” Ravn said.
However, because the beers are imported, profits have to be split with the brand owner, and import duties have to be paid, not to mention heavy transportation costs from Europe to Malaysia, which lead to high selling prices.
Once again Ravn explains.
“Our prices could not compete with our competitor which had locally produced premium brands…We were catching up in terms of volume but not on profits— but that is the next step.
“The three years I’ve been here, we have been looking at imported beers, which can be produced here. For now we are focusing on two, our own brand Kronenbourg and Asahi,” he explains.
Carlsberg Brewery’s 51 percent parent, Carlsberg Breweries AS has more than 300 brands under its belt and if a needed, a brand can be brought down on a trial basis, after which brewing can be done in house in Malaysia, as is being done with Kronenbourg.
Some of the more known brands with a more illustrious history include Tuborg, Tetley’s, Holsten, Kronenbourg and Baltika to name a few.
“Kronenbourg was a no brainer. We called headquarters and said we in Malaysia want to produce Kronenbourg, they said great…get more fresh products in the market, good quality, skip all the import cost all the duties,” Ravn said.
However Ravn explains that not all Carlsberg’s 300 odd brands have the ability to sell in Malaysia, but which ever brands are selected will be tested via Luen Heng introducing it to the market first.
“We test it with Luen Heng….if it continues to grow, we look at moving it from Luen Heng to Carlsberg, put more money into marketing, produce it here,” Ravn explains the strategy.
Asahi meanwhile is brewed under licence, from its Japanese owners, and a global partnership is being ironed out.
However it takes time for a new brand to make money in the brewery business, breaking even or even bleeding the first two years, as a company converts logistics cost to marketing.
“You have to believe in a three-to-five-year horizon, you invest ahead of the curve,” Ravn explained.
It is also noteworthy that Carlsberg Brewery wholly owns Carlsberg Singapore Pte Ltd and has a 24.8 percent stake in Lion Brewery (Ceylon) PLC, which means that any changes implemented here in Malaysia can extend across the causeway and possibly to Sri Lanka as well.
The way forward
Much of the fight between Carlsberg Brewery and GAB is likely to be in the lucrative, premium beer, segment where Guinness Anchor’s Heineken is the number one seller.
“When compared to them (Heineken), we are tiny (but) five years ago we had only 1 percent of the premium (beer) segment. Today we have close to 25 percent. In 2012, premium brands grew 12 percent, but our premium brands grew 15 percent.
“Look at our brands— these are leading international premium brands that have proven themselves,” he added.
Nevertheless Ravn said that the current brands under Carlsberg Brewery and Luen Heng would keep Carlsberg busy over the next two years at least—meaning it is unlikely that any new brands will be taken on for brewing.
“For the next two years our plate is full. For the next two years, we will focus on getting this portfolio of our brands right,”he added.
Other than competition with Guinness Anchor, beer sales are also slowing with Malaysia being a mature beer market.
Malaysians are also more affluent now, drinking single malt whisky, consuming wine, aperitifs and digestives. There are also many now who are health conscious, with the large number of gyms and fitness centres sprouting up.
Despite all this, Ravn said that Malaysia still has potential to show growth because a big chunk of beer sales is still in the mainstream segment, whereas in a mature market, the mainstream segment would come down to at least 50 percent, and premium beers would have around 30 percent market share.
What is clear however is that Carlsberg both here and abroad are getting aggressive.
It is interesting to note that parent Carlsberg AS entered into a three-year partnership with English football’s Premier League as the official beer partner of the Barclays Premier League, for the upcoming 2013/2014 season which will kick off in August and will continue until the end of the 2015/2016 season.
How much of an impact these advertising campaigns have remains to be seen.
Carlsberg Brewery on Wednesday announced that Ravn is headed to China, as CEO of Carlsberg Greater China, effective July 1, and his place is to be taken over by Henrik Juel Andersen, who is currently the regional CEO of Carlsberg Indochina Ltd.
Under Ravn’s watch, Carlsberg Brewery has set the stage for its battle with GAB.
Ravn’s successor Henrik, will certainly be watched closely, as he takes the fight to the next level.
The analyst fraternity generally view Carlsberg Brewery positively, as a result of the steady earnings and strong dividend payments.
For its financial year ended December 2012, Carlsberg Brewery posted net profits of RM191.63 million on the back of RM1.58 billion in revenue. Earnings per share for the 12 months in review was 62.68 sen.
Carlsberg Brewery forked out 63 sen per share for its financial year ended December 2012 which works out to a pay-out ratio of 100.5 percent.
On Thursday, Carlsberg Brewery’s stock hit a five year high of RM14.96 giving it a market capitalisation in excess of RM4.5 billion.
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