Danish brewing major Carlsberg is looking to hone in less on its high-end premium brands in China as it looks to adapt to weak consumer sentiment in the region.
Speaking on the Chinese market to Just Drinks, Carlsberg CEO Jacob Aarup-Andersen stressed that the group was still performing well in the region but said it “has not been in a great place…since May, June, and then the weather brought the market down quite hard. It’s been a tough market to operate in”.
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He added that the company did not expect to “see a pickup in China consumer sentiment in the foreseeable future… We do expect that we will continue to outperform the market in China, and in the end that we cannot change weather or consumer sentiment more broadly, but what we can do is we can make sure that we continue to lead [the market]”.
In its first-half results released yesterday (13 August), the 1664 brewer booked 2.3% growth in beer volumes in Asia on the year prior, at 22.5 million hectolitres.
Volumes in the six-month period ended 30 June for its “other beverages” segment, which includes the soft drinks brand Xixia, were down 2.1% on the year prior to 3.3 million hl. Total volumes for the region still grew 1.9% to 25.8 million hl.
When asked how the Grimbergen producer would look to adapt to weak consumer confidence in the country, Aarup-Andersen said: “Our focus is on driving our affordable brand. So what is happening is that the high-end premium brands are struggling.
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By GlobalData“What our focus is on is making sure that we’re [positioning] our affordable premium brand in the right way in the channels, to make sure that they are in front of the consumer and that they take the affordable premium brand instead of the main[stream] brand.
“A good example is we continue to see strong growth of Tuborg in China. [It is] our biggest brand globally, and Tuborg is affordable premium and some of that Tuborg growth is being supported by more high end brands like 1664… or also Wusu Red and other brands.
“Tuborg is a good example of how we are persisting our brand to make sure that allowing the Chinese consumer to trade down a bit and still staying within our brand”.
Revenues in the period declined 1.2% year-on-year on a reported basis and were up 4.7% organically, to DKr11.6bn ($1.09bn). Operating profits dropped 2.5% on a reported basis and grew 5.3% organically to Dkr2.8bn.
Western Europe
When it came to the group’s other regions, Western Europe booked volume declines across the board, with total volumes down 1.7% to 21.2 million hl.
France in particular took a significant hit with volumes down by “high-single digit percentages” due to “poor weather throughout Q2”.
Speaking on France to Just Drinks, Aarup-Andersen said the company’s decision to “hold back on promotions” could have held them back in driving up volumes, but stressed that it expects to “recover some of that share loss” in H2 through increased campaigns in the summer.
He added: “We’re excited about the long term potential of the French business. Kronenbourgh is great brand across and has a strong [presence] in the French market, and we totally recognise that it’s just been a tough year, and the team has been focused on driving stability over volume.”
The Copenhagen-based group booked total revenues of Dkr38.7bn in H1 2024, a 2.6% and 3.9% hike on a reported and organic basis on 2023 figures. Operating profits grew organically 4.7% and on a reported basis by 1% to Dkr6.3bn.
In its H1 period, Carlsberg also booked a 1.4% increase in total volumes on an organic basis and 1.5% on a reported basis to 65.7 million hectolitres.
The company upped its earning expectations following the release of its first-half results, now predicting operating profits to grow between 4% and 6% for full year 2024. It had previously expected between 1% and 5% growth.
Speaking to analysts on a call today (14 August), Aarup-Andersen said: “The adjustment was due to solid business performance year to date and good cost control”.
