Case Study On Carlsberg

Introduction: J.C. Jacobsen founded the Danish brewery in 184, which has its headquarters based in the capital Copenhagen. Furthermore, the firm's flagship brand is "Carlsberg beer" but also manufactures Kronenbourg, Tuborg, Somersby cider and brews Russia's best selling beer Baltika, Grimbergen and more than 500 local beers. The company employs more than 45,000 workers around the world.

Question 1: Analyze the global beer industry and relate this to Carlsberg's realized emerging market strategy? There is no major global beer they are all local. Beer is made through the process of fermentation and the brewing of the malted barley's starch. The beer industry involves in the manufacturing (brewing), distribution and sale of the beer. Beer has the largest market share among all alcoholic beverages. In 2012, the global beer market was value at $509,554 million and representing a compound annual growth rate of 1.7% between 2008 and 2012 and the performance of the market is forecasted to accelerate furthermore and reach the $586,740.7 million by 2017. The market has shown a deceleration in Europe and in the US but the growth has developed in Asia (China, Thailand, India). The main drivers of the market are various, such as the increase in the income levels, the strong promotion and marketing campaigns of the beer market, its low price compared to other alcoholic beverages and an increasing beer consuming population. However the industry has been affected by several factors such as the increasing tax rates, increasing consumption of wine and spirits, differing climatic conditions, regulations, and health effects.

Some of the key determinants of the market are Carlsberg breweries A/S, Asia Pacific Breweries, Yanjing Brewery, Tsingtao, Anheuser-Bursch InBev, Apporo breweries, Asahi, Molson Coors, Heineken and Kirin Brewery. While the growth of the beer consumption is stagnating in Europe because of rising incomes, demographics shifts towards urbanisation and increasing westernization, some emerging markets are appearing such as Russia, China, India, Mexico and Turkey. These markets are evolving thanks to their low cost of labour and raw materials but also because the local taxations are high for wine and spirits whilst they are in favour of beer. Especially in Asia, Russia and India, the market size is exponentially important and therefore there is a potential high demand. However not knowing well these markets involves several risks such as political, management and cost risks. Expanding in such countries and continents will demand thorough research on the demand and understanding the difference between markets and people. Finally a technique used by Carlsberg was to create partnerships with local brews with enabled the company to develop as a local level and understand their client's needs.

2.2 Porter's Analysis: Framework used for industry analysis and business strategy.

Carlsberg is aspiring to be one of the fastest growing global beer company and in order to so it has relied on the long term. Indeed the group owns and acquired many brands of beer and more recently Kronenbourg 1664. The group owns Carlsberg, Tuborg, Baltika, Kronenbourg 1664, Ringnes (Norway), Felschosschen (Switzerland), Lav (Serbia), and Wusu (China). We can observe that by investing in local brands, Carlsberg group is trying to globalise itself and be omnipresent in as many geographical areas as they can and is the fifth on the beer market. Furthermore, Inbev is very much similar in its management structure but is present in 6 geographical areas (200 beer brands in 23 countries) and is therefore more present than Carlsberg. We can say that Carlsberg is a competitive company, even though you can be present in many countries if you are not bankable then you are not really a competitor to others and this is what occurred for the company in China.

2. What is Carlsberg's competitive environment in China and how well are they positioned vis-à-vis of its competitors? (SWOT) China is the world's fastest growing beer market in the world and when the sales are stagnating in Europe there are a lot of opportunities in Asia. Indeed, the government taxes are quite heavy on wines and spirits, which favour the development of the beer market, as it is cheaper and more accessible. Additionally the central government has shifted focus to creation of a 'harmonious society', increasing rural incomes and consumption. The beer industry saw China as a big emerging and potential market, its annual growth is estimated at around 5 to 6 % per year and western parts are expected to grow even faster because of the narrow support that has narrowed the disparity between East and West. SWOT analysis: Strengths: - One of the first to establish its own brewery in Asia (Hong Kong). - Strong international brand with the power to buy share of local breweries. - Only international leading brewery in the West China (overall market share of 55-60%). Weaknesses: - Recent important financial loss due to bad management of partnerships and decision-making. -Lost three years in which to establish itself in Asian market and caused revision of strategy. - Ownership structure was main contributor to difficulties of expansion Opportunities: - Asia is a developing market - Industry is capital intensive, in order to be profitable it's necessary to be #1 or #2. - China's "Go West" policy increasing growth. - Expand in West China where it is cheaper and avoiding fierce competition. Threats: - Anheuser-Busch, SABMiller and Heineken are strong competitor. - Western Europe stagnating market (potential losses). - Worrisome Russian taxation proposals on beer.

Explanation: Strengths: As a great world leader, Carlsberg was one of the firsts to establish a plan to remedy to the stagnation of beer consumption in Europe. Indeed, Carlsberg invested very early in the Chinese market when it established a brewery in Hong Kong (1981), the firm had the advantage to spot a strong emerging market quickly and the entry for other competitors were very high. Being a strong international brand, the firm had a great amount of funds and could afford buying share of many local breweries first in East China and then in West. Furthermore, a few years after exploring the Asian market they became the only international leader in Western China and owned an overall market share of 55-66%. One of Carlsberg's main asset is the fact that they always get back on their feet after running into an obstacle (after failure of joint venture and after European stagnation). Weaknesses: The company lacked of appropriate management and reflection on decision-making, when they pulled out the joint venture (CAL). This move was a violation of the contract and the company made a great loss that kept the firm from expanding its operations in China for a while. Some policies and ownership structure established by J.C. Jacobsen in 1876 had remained unchanged which caused great difficulties to expand and blocked potential fusions. The firm seemed to be unable to secure continuous growth due to this conservatory structure and in 2007 the charter was changed Opportunities: The industry being capital intensive concerning production and distribution, the companies had to be number one or two in order to be profitable and this was an advantage for Carlsberg. The Chinese willing to develop the West part strongly helped the company to expand in that region. There is a great opportunity in West China and Carlsberg has ceased it, as an emerging market it will continue to grow. There are some regions and parts of the world (and of Asia) that still remain unexplored by the beer industry and these would be great opportunities for Carlsberg to buy cheaper local breweries and still avoid fierce competition. Threats: Anheuser-Busch, SABMiller and Heineken have allied in order to expand together in China and this could be a threat to Carlsberg as they have show in the past to be strong competitors. The Western Europe stagnation is never a good sign and there are possibilities that it could start involving losses for the company if the situation continued to degrade itself. The chief Executive Jorgen Rasmussen said: " We still see a challenging environment in 2014. In Western Europe the consumer is still not going to be very willing to spend. The consumer will still hold back a little." Finally, Russia has threatened to introduce higher taxes on beer, which would seriously affect the beer consumption.

3. What are the key marketing challenges when entering an emerging market? How is it different from Western Markets? In a general manner, exporting is a vital necessity for a firm and its country, it's a certificate of good health. For a company to continue growing, it has to increase its sales and it will often reach a 'domestic saturation' similar to the languishing of the Western European beer market. There are three main factors in the consumer decision that take greater important in emerging markets. First of all, the initial brand consideration set is likely to be considerably less important than in developed markets. Therefore the company has to set a clear and understandable brand image that the consumer can position easily in the market, which will maybe later create a switch from initial local brand. Second of all, the word of mouth is a marketing technique that cannot be underestimated, as there is a higher mix of first-time buyers and a fragmented media landscape. According to a McKinsey study roughly 30 to 40 percent of the repondents in UK and the US said they received recommendations from family and friends concerning food brands, whereas consumers in Africa and Asia reported dramatically higher figures (70% in China, 90% in Egypt). As we can observe in this graphic, the word-of-mouth is substantially higher in emerging markets. An explanation for this pattern is the fact that most of the consumers of emerging countries is that they are "first buyers". For instance, in China 40% of people purchasing laptops are first-timers and few brands have been present for long enough to ensure loyalty. Furthermore, when you have never used a product and you see someone you know purchasing it and using it, it is quite reassuring. The confidence shapes brands that customers will value to acquire. Another way to target local communities is to offer training and free samples, sometimes the people can be so far behind in the development of technology or specific products that they need an introduction to these. For instance, in India, Procter and Gamble created a brand of sanitary napkins, which they introduced to the locals by offering training and free samples to young girls in schools. After introducing this word-of-mouth idea, they expanded their campaign and reached more than 2,000,000 girls and the result was drastic. The use of textile-based protection instead of sanitary napkins went down from 66% to 6%. The main discernment we can observe between emerging and developed countries is the approach to have with the consumers. Indeed, in the emerging markets people have never seen most of the products introduced and need to understand the need to acquire these. It is not huge billboards featuring the products or services that will attract them, it is companies such as P&G that will make the effort to come to them and explain to them. People in emerging markets generally, like to stick to a small set of brands and are less likely to switch to a brand not present in their initial set. After developing awareness of a product it is essential to develop TV and general media advertisements, but again we have to adapt to the community. In surfacing countries individuals tend to watch the local news and newspapers instead of the national ones and these should be targeted by the international brands, it will help creating a feeling that a firm's priority brands are leaders. However spending millions in media is not sufficient, the brand has to tailor its message to the culture and needs of a population, taking into account religion, lifestyles etc. The fact that this population are still unused to spending what is considered for them to be a lot of money means that they have a different buying method. The customer will return multiple times and acquire as many information about the product as they can before making their final decision whereas in Europe for instance generally people will go to the shop once and then make the decision. As a result, there is a lot more room in emerging markets for brands to influence the consumer's decision during the purchase and the use of trained sales reps could be very useful. In order to make full use of this technique, brands first have to spot where are the priority outlets and have a visibility in the purchase moment.