Carlsberg Case Study

 

Introduction

Carlsberg is a well-known Danish brand that has recently gotten greater notice far outside Denmark. Over the past, they have progressed from a small Danish brewery to a big role in the global market. The Carlsberg Group is now the leading or second brewer in 22 of their operating nations and the world's fourth largest brewer. Carlsberg is also involved in a few other sectors than brewing. The corporation is most known for owning Royal Scandinavia, a recognized exquisite porcelain, silverware, and glassware manufacturer. Carlsberg also holds a 43 percent stake in Copenhagen's Tivoli Gardens, a well-known amusement park.

Emerging Market Strategy

Carlsberg decided to expand into new areas of growth in the early 2000s. This choice was made as a means of avoiding being bought out or being a central player in the world global beer industry. Carlsberg was rated among the top five brewers in the world throughout the course of several years, proving that this very decision was an accomplishment (Heynold et al., 2016). In the Russian market, it has become one of the quickest emerging economies in the world, while in China, it has become the largest global beer market in due to its size and populace.

Carlsberg needed to devise a strategy that would enable for a comprehensive worldwide influence that was both lengthy centered and short-term monetarily optimistic, because the Western European market compensated for the large percentage of Carlsberg's earnings (66 percent in 2007) and it became an area with comparatively low anticipated opportunities for development (2.5 percent per year compared to China's 8 percent) (Heynold et al., 2016). As a result, the corporation has decided to invest in Russia and China as key participants in the East European and Asian sectors, respectively.

China, as the biggest producer and consumer of beer, has emerged as a potential option for Carlsberg's Asian development. Despite the fact that the industry was segmented, with local non-premium brands accounting for the vast bulk of transactions and barriers to entry high, an initiative in the Western Chinese cities could be the answer. The majority of international brewing corporations entered the market by buying shares in regional brands in the nation's eastern side, where consumption levels were higher (Hatch & Schultz, 2017). As a result, beginning in the West meant buying cheaper enterprises and not anticipating revenue from the area for another five to 10 years.

Joining Russia, on the other side, was a calculated move for rapid expansion. Carlsberg already had the tools it required to succeed in the market in Russia. Carlsberg gained market leadership after getting the Baltic Beverage Holding (BBH). BBH's distribution system was used to bring international brands to the Russian market (Hatch & Schultz, 2017). Carlsberg was able to earn strong returns in Russia due to the low costs of entry and the synergistic benefits that resulted from adopting BBH's distribution systems, which accounted for around 75 percent of sales in Eastern Europe (Ekaterina, 2018).

Key Strategic Issues/Problems

The markets in Russia, China, and Eastern Europe are evolving due to low labor and raw material costs, as well as the fact that local taxes are high for wine and spirits but inexpensive for beer. However, not being familiar with these marketplaces exposes you to a variety of risks, including political, management, and cost hazards. Extending into such nations and continents will necessitate extensive market research and an awareness of the differences between markets and consumers.

Carlsberg required a large amount of capital as a result of many acquisitions, and the business suffered a significant financial loss as a result. Second, due to a sudden shift in the environment, there were demonstrations and clashes against Carlsberg by employees working while reorganizing within the local firm (Binder & Mantovani, 2017). Furthermore, because of collective ownership, there may be reluctance to exchange information. Again, the ability of local breweries to adapt to the specific situation in China may pose some challenges for Carlsberg.

The Chinese brewing sector is extremely competitive. This is due to the fact that the Chinese beer business is still in its infancy. Beer is being utilized in greater quantities as people's wages rise. This will result in an ever-increasing market, ensuring the beer industry's long survival. China has a considerably larger marketplace than the rest of the world, but it is extremely diverse locally, particularly in the brewing business. As a result, client loyalty to local preferences and brands poses barriers to multinational businesses entering the market. Beer's limited shelf life, high transportation costs, taxes, and national quality regulations are further factors. These features of the industry indicate that, in the past, local brands would have dominated the market. Almost every province has at least ten breweries. As a result, the majority of foreign nations have chosen acquisition as a strategy. Ambev-Interbrew and SAB-Miller are two worldwide giants that have grown through acquisitions and worldwide mergers (Ekaterina, 2018). They incorporate strategies that are local, global, and multi-tiered.

Finally, Carlsberg's performance in comparison to its competitors is not very impressive. Carlsberg's entry into the Chinese market was marred by environmental qualities that ran counter to Carlsberg's objective. The vision demonstrates that Carlsberg prefers to create high-quality premium items that can surprise customers on a regular basis. However, alternative tactics were needed to thrive in the Chinese market. With no really national brewery, the Chinese beer market was hugely fragmented and highly regionalized. Non-premium regional and local brands prevailed, and cost was frequently the deciding factor.

Carlsberg Case Study Outline

1. Introduction

Carlsberg is a well-known Danish brand that has recently gotten greater notice far outside Denmark. Over the past, they have progressed from a small Danish brewery to a big role in the global market. The Carlsberg Group is now the leading or second brewer in 22 of their operating nations and the world's fourth largest brewer.

2. Emerging Market Strategy

• Carlsberg decided to expand into new areas of growth in the early 2000s.
• In the Russian market, it has become one of the quickest emerging economies in the world.
• Carlsberg needed to devise a strategy that would enable for a comprehensive worldwide influence that was both lengthy centered and short-term monetarily optimistic.
• The majority of international brewing corporations entered the market by buying shares in regional brands in the nation's eastern side, where consumption levels were higher.
• Joining Russia, on the other side, was a calculated move for rapid expansion.

3. Key Strategic Issues/Problems

• Carlsberg required a large amount of capital as a result of many acquisitions, and the business suffered a significant financial loss as a result.
• There were demonstrations and clashes against Carlsberg by employees working while reorganizing within the local firm.
• The ability of local breweries to adapt to the specific situation in China may pose some challenges for Carlsberg.
• The Chinese brewing sector is extremely competitive. This is due to the fact that the Chinese beer business is still in its infancy.
• Carlsberg's entry into the Chinese market was marred by environmental qualities that ran counter to Carlsberg's objective.