Carlsberg, the Danish brewer, is planning further expansion in Asia to help reduce its substantial exposure to the volatile Russian beer market.
“We do see Asia as being a place to expand and invest in,” Jørgen Buhl Rasmussen, chief executive, told the Financial Times in an interview. He said that a stronger business in Asia – which today accounts for only 10 per cent of Carlsberg’s sales volumes and 6 per cent of operating profits – would “balance” the company’s exposure to Russia, which contributes about half of group profits. The focus on Asia comes amid expectations of a slow economic recovery in Europe, with Mr Rasmussen forecasting that both 2009 and 2010 would remain “tough and very challenging”.
He dismissed suggestions that Carlsberg’s financial targets for 2009, including making a net profit of at least DKr3.5bn ($672m), up from DKr2.6bn last year, were not too bullish. “The targets are challenging . . . but they’re still feasible.” Carlsberg’s shares have risen nearly 30 per cent since May 6, when it announced unexpectedly strong first-quarter earnings as it gained market share in Russia.
Still, the company’s exposure to Russia, a country considered both politically and financially volatile, concerns investors, and Carlsberg – the world’s fourth-largest brewer – trades at a discount to its rivals.
Mr Rasmussen denied that Carlsberg had overpaid for the Scottish & Newcastle assets it bought last year for more than £4bn.
“I think we did [the acquisition] at exactly the right time,” he said, adding that it would have been difficult for Carlsberg to get the necessary financing if it had attempted the deal even six months later. “In the medium term, Russia will become a growth market again.”
Carlsberg expects its sales volumes in Russia will be flat this year and that the overall beer market will drop 2 per cent. Although Carlsberg is focused on paying down debt and improving cash flow following the S&N deal, Mr Rasmussen said he was prepared to make an acquisition in Asia if the target was “a fantastic fit”.
Carlsberg sees “big opportunities” in Vietnam, China (especially in western and central regions) and India. It already has a presence in these countries, as well as in Malaysia, Nepal, Sri Lanka, Singapore, Laos and Cambodia.
Yesterday it started construction on the $42m Hanoi-Vung Tau Brewery, its joint venture in Vietnam with Vietnamese group Habeco (the Hanoi Beer and Beverage Corp) near Ho Chi Minh City.
Carlsberg is also searching for a new executive to run its Asian operations. “We need broader experience,” Mr Rasmussen said.
Carlsberg this year broke with tradition and appointed non-Danish nationals as non-executive directors for the first time. Irishman Richard Burrows, a former co-chief executive of Pernod Ricard, and Dutchman Kees van der Graaf, a former Unilever executive and board member, have joined the board.
The brewer has also brought in Khalil Younes, a former Coca-Cola executive, to run its innovation and marketing operations, and is trying to hire more women. Mr Rasmussen said he wanted to develop more products to attract female drinkers, who buy 20 per cent of its beer. “I would love to see our business appeal more to women.”