Carlsberg organizational structure

C-47 Case 4: Carlsberg in Emerging Markets CASE 4 Carlsberg in Emerging Markets A breeze of optimism blew through the office of Carlsberg A/S’s CEO, Jørgen Buhl Rasmussen. After finally gaining 100 percent control over the giant Russian brewery Baltic Beverages Holding (BBH), and with the investments in Western China beginning to bear fruit, the newly appointed CEO was confident that the Danish brewing company’s intensified focus on emerging markets would pay off. The company was counting on tapping the massive potential in emerging markets in order to achieve a much-needed reduction in its dependency on the maturing and stagnating Western European beer markets, which accounted for a full 61 percent of the company’s revenue in 2007. Indeed, Carlsberg’s emerging market efforts had come a long way. In the Russian market, which was considered to be one of the fastest-growing beer markets in the world, Carlsberg enjoyed market-leader status through its ownership of BBH. In that market, it had a sales volume of approximately 23 million hectoliters of beer in 2007 and revenue of kr 9 billion (US$1.8 billion). As for the highly promising Chinese market, which was regarded as the world’s largest beer market in terms of population and size, the Danish company had achieved a 55 percent market share in the western parts of the country, and it operated 20 brewery plants in China with close to 5,000 employees. In fact, as Carlsberg recognized that the European markets would eventually reach a point of saturation, the aim of the Chinese investments was to create a platform for future growth and revenue. The outlook for Carlsberg had not always been as bright as it appeared by 2008. Carlsberg’s emerging market strategy had taken a long and winding road. For instance, Carlsberg’s acquisition of the BBH shares was the result of a troubled and expensive partnership with Norwegian Orkla ASA. In addition, before Carlsberg had become successful in the western provinces of China, the company had spent plenty of valuable time and resources trying to enter the rich provinces of southeastern China, a strategy that had failed. Furthermore, in the early 2000s, Carlsberg was on the brink of being reduced to a secondary player in the global beer market—as the consolidation of the industry proceeded, Carlsberg A/S became an obvious takeover target and was also at risk of being cornered as a small regional player. Nonetheless, in 2008 as the first decade of the millennium neared an end, Carlsberg was the fifth-largest brewery in the world in terms of volume produced. Much of this reversal of fortune could be attributed to the company’s emerging market focus. Despite Buhl Rasmussen’s optimism about the future, the real question was how Carlsberg A/S could successfully continue to capitalize on its growing engagement in emerging markets. “We don’t know how large the Chinese market will be in five years, and I don’t know if China can become a new BBH,” the CEO explained, “but it is definitely not impossible, as the market is enormous.”1 It was no surprise that competition was becoming increasingly fierce in this booming emerging market, and history had clearly proven that doing business successfully in this market required unconventional approaches. Introducing Carlsberg A/S The successful course and strategy which Carlsberg has pursued in recent years will remain basically the same no matter what. The strategy has proved its worth with growth and better results, and it is now strongly rooted in our organisation. Our business is thus to focus on the beer markets in Western Europe, Eastern Europe and Asia. — Carlsberg A/S CEO, Jørgen Buhl Rasmussen2 As the fifth-largest brewing company in the world, Carlsberg A/S’s vision was “our brands will be the consumer’s first choice, and we will lead our industry in profitability and growth through a culture of quality, innovation and continuous improvement.” Moreover, Carlsberg saw itself as “probably the best beer company in the world.”3 The core businesses of Carlsberg A/S were brewing, marketing and selling beer. In 1847, J.C. Jacobsen opened the doors of Carlsberg A/S’s first brewery in Copenhagen, Denmark, and the first foreign brewery was established in Malawi in 1968. In 2007, the company had 33,000 Associate Professor Michael W. Hansen, PhD Student Marcus Møller Larsen and Professor Torben Pedersen wrote this case solely to provide material for class discussion.