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For Brewery Giant Carlsberg, It's Back to Basics

International: The firm is shedding its other business interests in order to concentrate on beer.

March 15, 2001|JAN M. OLSEN | ASSOCIATED PRESS

COPENHAGEN, Denmark — Carlsberg A/S, the world's fifth-largest brewery group, is reinventing itself as it struggles to keep its leading position amid stiff international competition.

The company is expanding in key markets and ridding itself of ancillary businesses, including its large ownership stake in Copenhagen's famed Tivoli Gardens amusement park. And because people in western Europe are drinking more wine and less beer, Carlsberg has cast its eye on growing markets in Asia, eastern Europe, Russia and Ukraine.

"From being the biggest in Denmark, we have become a leading brewer worldwide," spokeswoman Margrethe Skov said. "Now we have to stay there."

Last month the company reported global sales of $4.4 billion for the 15 months ended Dec. 31, with net profit of about $269 million. Both sales and earnings were up from the preceding year, though the fifth quarter was flat in terms of revenue.

The extended reporting period allowed Carlsberg to orient its fiscal year with the calendar year beginning in 2001.

Carlsberg, whose brands include Carlsberg and Tuborg, controls about 70% of the Danish beer market, though some 90% of its sales are abroad.

It was founded in 1847 by J.C. Jacobsen, who learned how to make lager beer in Bavaria and returned home to Copenhagen to convert ale-drinking Danes to the lighter, fizzier brew. In its first year of existence, his company--named after his son Carl and berg, the Danish word for hill--produced about 1 million bottles.

The company now produces 750,000 bottles of beer daily and has 22,000 employees in 100 subsidiaries and associated companies around the world. Its other businesses include soft drinks, packaging, porcelain and silverware.

The intensified focus on brewing has received a thumbs-up from analysts, who say consolidation is needed within the beer industry because the top companies, led by Anheuser-Busch Cos., carry so much weight.

"The landscape in the brewing world is changing a lot these days," said Andrew Gowan, who follows the industry for Lehman Brothers in London. "It has become increasingly difficult to sit in between those who are consolidating and those who are being consolidated."

Carlsberg shares dropped about 15% on the Copenhagen Stock Exchange after the company reported its earnings. Analysts say investors were dissatisfied with the flat growth rate in the fifth quarter of the extended fiscal year.

"We had expected some more growth in the results," said Stig Nymann, an analyst with Sydbank.

Carlsberg has been busy in the past year. It created a joint venture with Singapore-based Chang Beverage Co. to set up Carlsberg Asia, bought out Switzerland's largest brewery and made a deal to take over the beer and drink operations of Orkla ASA, a Norway-based conglomerate with interests in media, food and chemicals.

Orkla holds a major stake in Russia's leading beer brand, Baltika, and that would give Carlsberg "a huge push on the Russian market," Skov said.

The Orkla deal required Carlsberg to end soft-drink ventures with Coca-Cola Co. in Norway and Sweden because Orkla has a similar partnership with PepsiCo Inc. in those nations. Carlsberg may not distribute both Coke and Pepsi in the region.

Under an arrangement announced in February, Coca-Cola will take over distribution of its products in Norway and Sweden, while Carlsberg will provide Coke and its sister drinks in Denmark and Finland.

Jakob Bundgaard, an analyst with Denmark's Jyske Bank, said the recent agreements by Carlsberg to broaden its beer business will improve the company's chances of remaining competitive.

"Internationally speaking, it is a strong signal that Carlsberg is concentrating on what it does best: beer," he said. "It has strengthened Carlsberg on the market."

Last year Carlsberg took another major step by selling its shares in Tivoli Gardens and in Royal Scandinavia, the maker of the Flora Danica and Royal Copenhagen porcelain brands and Georg Jensen silverware.

Carlsberg started acquiring shares in Tivoli--an amusement park, performance center and botanical garden--in the late 19th century, when tough competition among Danish brewers made them invest in the entertainment business, restaurants and hotels to ensure distribution of their products.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Carlsberg at a Glance

Headquarters: Copenhagen, Denmark

Founded: 1847 by J.C Jacobsen

Beer operations: Brews about 25 million gallons per year, 90% of it for consumption outside Denmark. Leading brands are Carlsberg and Tuborg. Recent deals expand its presence in Russia, the Baltics, Thailand and South Korea.

Other present and former interests: Soft drinks, porcelain, packaging, silverware and the Tivoli Gardens amusement park in Copenhagen.

Employees: About 22,000

Source: Associated Press

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