Carlsberg In Emerging Markets 5y4l5c

Carlsberg in Emerging Markets

Submitted By: Aditya Kaul (44)

Introduction • In 1847, Carlsberg A/S was founded by J.C. Jacobsen in Copenhagen, Denmark • First foreign brewery was established in Malawi in 1968 • In 2007, company had held a portfolio of 75 breweries around the world and sold approximately 115 million hectoliters of beer in more than 150 countries • Carlsberg focused on the mature beer markets of Western Europe, the growth markets of Eastern Europe and emerging markets of Asia • Carlsberg is the fifth-largest brewing company in the world

Continue…. • In 2000, Carlsberg gets 50% ownership in Baltic Beverages Holdings (BBH), by getting merge with Orkla ASA • 2008, Full ownership at BBH • In 2000, Carlsberg did t venture with Thai company Chang Beverages Pte Ltd, which was a leading player in Asian markets for alcoholic beverages • Carlsberg faced serious loss in time and money by this t venture, as they had many disagreements in between • In 2003, Carlsberg focused on western China and got first mover advantage

Emerging Market Strategy •

3 Different Markets Western European

Eastern European

Emerging Asia

 Maturing market

 Fast growing market

 Changes in consumers’ behavior-health consciousness

 Strongest position  Low labor cost and in the region’s cheap raw material main market (Russia)  Change in market regulations

 World’s largest market in of production and consumption (China)

Continue…. •

Company’s Strategies: Focus on value creation, profitable growth by penetrating foreign markets which geographically divided into 3 regions Western European

Porter’s Five Forces Analysis on the two investigated region – Russia and China

Carlsberg in Russia

Porter five forces analysis on Russian beer market Threat of New Entrants (Low)

Carlsberg in China Porter’s five forces analysis on Chinese beer market Threat of New Entrants (Moderate)

Firm Analysis

SWOT Analysis- Russia Strengths • Beer market leader with strong

brand image and brand awareness • Strong distribution channel, creates accessibility • Company owned ‘Baltika’, the best selling brand, ed for 38% of Russian beer market share • Economies of Scales of Production • Effective vertical integration and Cost efficiency

Weaknesses • Difficulties of financing the

expansion since the failure of the consolidation, which leads to the increase in company’s debt • Company is unable to secure growth and future

Continue… Opportunities

Threats

• One of the fastest growing beer market in the world • Hike in taxes on liquor resulted in the increase of prices of vodka, this will help in increase the consumption of beer by the Russian people • Beer market trend is also booming in the Eastern Europe

• Rapidly consolidation may

increase the competition in the industry

SWOT Analysis- China Strengths

Weaknesses

• Untapped market opportunities

• Southeast dominated by other

in western China • Developing market • High growth rate of 8% comparing to US and EU • Large population

large players • Requires large investments in production • High barriers to entry

Continue… Opportunities • Future extension into central and southern regions • Product line expansion • Possibility of introducing new products in future

Threats • Consolidation of competitors

• Failure in acquiring partners and doing acquisitions •

Market Analysis- Russia • Beer is the second most preferable drink after vodka, it seen as a healthier alternative by many consumers • Between 2005 to 2007, sale of beer increased to 30% • During 2008, consumption of beer started to decline due to government plan to cut alcohol consumption • More than 80% of beer market in Russia is dominated by five key players • In 2007, Carlsberg was the leader in the market with 37.6% share

Market Analysis- China • China’s beer industry has enjoyed massive growth over past three decades • More than 200 domestic brands and 100 foreign brands are competing to gain market share in Chinese market • Big foreign players has merge with domestic major players in the industry and for more than 50 percent of market • Low alcohol beer demand is growing in the market

Challenges • How can Carlsberg maintain its position in the saturated and highly competitive market? • How Carlsberg A/S could successfully continue to capitalize on its growing engagement in emerging markets?

Recommendations • To maintain current position in the market and expand to untapped areas, Carlsberg should try to rejuvenate or reposition themselves in global market • To maintain their current market position in western Europe, they should diversify to health promoting beverages due to new govt. policies and minimize cannibalization • To maintain position in Russia and grow in other parts of eastern Europe, Carlsberg should acquire and expand more in near by countries of Russia and do product line extension

Continue… • To continue to capitalize on its growing engagement in emerging markets of China they should promote products in urban China and low cost but high quality products in rural China • They should focus on improving efficiency in production by using economies of scale, implementing new technologies in production and better packaging • They can establish their own distribution system in China to boost the sale and capture more market, by capturing small vendors also

Continue… • They can conduct market research in emerging markets to understand the taste & preference of domestic consumers and innovate their product accordingly • They can segment the market region and income wise of the consumers, as same products cannot be served in different categories

Thank You