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Russia gives Carlsberg a hangover

Wednesday, 21 Aug 2013 | 5:59 AM ET
Carlsberg will increase focus on cost: CEO
Wednesday, 21 Aug 2013 | 4:30 AM ET
Jorgen Buhl Rasmussen, president and CEO of Carlsberg, comments on the group's strategy for the second half after results revealed weakness in Russia and western Europe.

After Danish brewer Carlsberg announced disappointing second quarter profits, the company's CEO placed the blame firmly on Russia, where a raft of legislation has heavily regulated the sale of alcohol.

Carlsberg's operating profit fell slightly to 3.44 billion Danish crowns ($615.76 million) in the second quarter, down from 3.47 billion Danish crowns a year earlier, and below the 3.58 billion Danish crowns forecast by a Reuters poll of analysts.

The company's president and CEO, Jørgen Buhl Rasmussen, was asked by CNBC why Carlsberg's figures were a disappointment.

(Read more: Cramer's bull market in beer)

"I do believe there is one major reason here, and that's basically Russia," Rasmussen said. "I'm very concerned about Russia and some of the regulation that has been implemented in Russia, and that's really having a negative impact on our share development compared to some of our peers."

Carlsberg has long focused on Russia for profit - the country is famous for its drinking culture - and the Danish brewer did increase its market share in Russia in the second quarter to 39.2 percent. However, the nation's predilection for heavy drinking has led the government to clamp down on alcohol consumption with new regulations and taxes.

Rasmussen says that this year Carlsberg has been hit by a new law that prohibits the sale of alcohol from kiosks, usually a popular place for Russians to purchase beers and spirits.

(Read more: A Gender-Neutral Beer? Carlsberg's Attempt to Woo Women)

"That has had a negative impact for 2013," he said. "At the same time, the per capita consumption is extremely low in Russia nowadays, and a lot lower than it used to be, and lower than many Western European countries."

Rasmussen was none too optimistic about the outlook for the rest of Europe,despite encouraging data in recent that has piqued hopes the euro zone is on the mend. Rasmussen said it would take some time before the consumer market improved significantly in Europe, and that 2013 and 2014 will still be challenging.

Asia, however, remained Carlsberg's key area for future growth, said Rasmussen. Carlsberg's revenue in Asia grew by 10 percent in the second quarter, although this still lagged analysts' forecasts.

"I do believe the average Asian economy will keep growing for years to come and also, quite importantly, the category we are in is still very undeveloped in most Asian countries," he said. "You are talking about still very low consumption...the underlying fundamentals for this category are very strong."

(Read more: Heineken profits from developing markets surge)

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