In the Chinese market, the beer giant Carlsberg plans to speed up investment to seize the future opportunity.
Xiaoshidai noticed that at the 2022 China Daily results meeting held for analysts recently, Cees’t Hart, chairman and chief executive officer of Carlsberg, talked about the investment focus in China, the outlook for the second half of the year and the prediction of beer consumption. Let’s have a look.
In the first half of this year, Carlsberg group, which owns Wusu, 1664, Lebao and other brands, handed over a financial report that exceeded the pre epidemic level.
The financial report shows that the group’s revenue in the first half of the year was DKK 35.447 billion (about RMB 32.597 billion), an increase of 23.6% year-on-year; The organic growth rate of sales volume was 8.9%; Operating profit was DKK 6.442 billion (about RMB 5.924 billion), up 35.9% year on year.
“This is a challenging half year due to the conflict between Russia and Ukraine, the significant rise in costs and the epidemic. Nevertheless, Carlsberg has achieved strong performance, and basically all indicators are much higher than the level in the first half of 2019 before the epidemic.” Hao Hansi said at the meeting.
The financial report shows that compared with the same period of 2019 (Note: excluding the Russian business), Carlsberg’s sales volume in the first half of the year increased by 11%, revenue increased by 21%, and operating profit increased by 42%. Many markets have contributed to this, of which the Chinese market is particularly strong.
As introduced by snack generation, Chongqing beer is the only platform for Carlsberg to operate beer assets in China. With the completion of asset restructuring between Chongqing beer and Carlsberg in 2020, the brands under Carlsberg, such as Wusu, 1664, Lebao, Carlsberg, Fenghuaxueyue and xiaxiafen, have entered the brand portfolio of Chongqing beer. Together with Chongqing and Shancheng brands, they have formed a brand portfolio of “local strong brands + international high-end brands”.
According to the 2022 interim report released by Chongqing beer, its operating income in the first half of the year was 7.936 billion yuan, up 11.16% year-on-year; The net profit attributable to the shareholders of the listed company was 728 million yuan, with a year-on-year increase of 16.93%; Beer sales increased by 6.36% year-on-year to 1.6484 million kiloliters.
Hao Hansi revealed that the growth of sales volume in the Chinese market is due to the continuous good progress made in the successful New Year activities and growth priorities, including the expansion of distribution, the promotion of international and local high-end product portfolio and the strategy of big cities. Thanks to the growth of high-end products, the revenue of the Chinese market increased by 11% during the period.
However, in the second quarter, the epidemic repeatedly hit Carlsberg China. “In the second quarter, as some big cities we entered were affected by the epidemic, the sales growth slowed down to only 2%.” Hao Hansi said that despite the overall downturn in the second quarter, sales growth has picked up at the end of the quarter and in July and August.
In terms of brands, many brands in the Chinese market have also been “praised by name”. Hao Hansi said that he was “very satisfied” with the performance of fruit wine summer fun in China. Although the brand is still in the early stage of development, its sales volume has exceeded expectations. According to the financial report, the sales volume in China tripled in the first half of summer.
In addition, Carlsberg Caibao reported that the beer brands of Lebao, Wusu and Chongqing also recorded
Hao Hansi also said that he was optimistic about China’s beer consumption in the second half of the year. “According to our current judgment, the (epidemic) will not have a serious impact in the second half of the year, and it is expected that the Chinese market will resume its (growth) momentum in the second half of the year.”.
Looking forward to the whole year, dalsgaard said that Carlsberg had raised its annual profit guidance and expected the organic growth of operating profit in 2022 to be high single digits.
“The main reason for the increase is the strong business performance in the first half of the year and the better than expected start of the third quarter. In many European markets, the recovery of the current drinking channel is stronger than expected, while in Asia, the revenue and profit growth in most markets exceeded the expectations at the beginning of the year.” Dalsgaard said.
However, dalsgaard also pointed out that the profit performance in the second half of the year is expected to weaken. This is mainly because, on the one hand, Carlsberg has decided to speed up the investment in the key items of the “sailing 27” strategy, including increasing the marketing and sales investment of the whole group, especially the sales Investment in the Chinese and Vietnamese markets.
On the other hand, with the dissipation of the previous favorable effects of hedging, the increase in commodity and energy prices is expected to have a greater impact on the cost in the second half of the year. “Although we will increase the prices in various markets in the second half of the year, the impact of these price increases will lag behind the increase in costs.”.
Dalsgaard said that although the cost continues to increase, he believes that Carlsberg’s value management measures, including pricing measures, strict cost focus and growth strategy, especially driven by the high-end of the Asian market and the whole group, will support the continuous growth of profits.
Hao Hansi said that so far, he has not seen the impact of price rise and inflation in Carlsberg’s market on his business. The company has a variety of products with different price bands to meet the demand.
“Of course, we expect some impact in the second half of the year, but there will not be much impact in the whole year because the peak season is coming to an end. Moreover, our product portfolio has many brands and broad price bands, from ultra high-end brands to very affordable brands.” Hao Hansi said, “looking back on history, beer is a resilient category, and we have confidence in withstanding the ‘storm’.”
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Carlsberg wants to speed up investment in China, CEO bet on big city strategy