“In a world of diversity, Carlsberg brings people together.”
Project 2
Commerce Management Team 22 ZIBAT Group 3
Group 3:Ranjana Tumsing Magar KC, Adam Vašica, Álvaro Martínez, Justyna Jaśkiewicz
April 2016
Zealand Institute of Business and Technology
Commerce Management
1. Title: Project 2 - Carlsberg
2. Authors: Ranjana Tumsing Magar KC, Adam Vašica, Álvaro Martínez, Justyna
Jaśkiewicz
3. Tutor/instructor: Anna Beata Cordua, Jakob Louis Hornbeck, Henrik Quistgaard Pagh
4. Team number: Group 3
5. Date and year of submission:
Signed statement of originality: This project is submitted in partial fulfilment of the
requirements for the degree of the Commerce Management study. I, the undersigned, declare
that this project report is my own original work. Where I have taken ideas and or wording from
another source, this is explicitly referenced in the text.
Projecttitle……………………………………………….
Signature….................................................. Date……………………..
Permission for inter-library loan: I give permission that this report may be photocopied and
made available for interlibrary loan for the purpose of research. (Please note that if the project
is confidential, you should NOT sign below.)
Signature….................................................. Date……………………..
1
Table of Content
Zealand Institute of Business and Technology ................................................................................................1
Commerce Management .............................................................................................................................1
1.
Abstract ...................................................................................................................................................4
2. Introduction .................................................................................................................................................4
2.1. Challenges the company is facing ........................................................................................................5
3.
4.
Problem Formulation and Sub Questions ...............................................................................................6
3.1.
Problem Area ..................................................................................................................................6
3.2.
Problem Formulation ......................................................................................................................6
3.3.
Sub questions ..................................................................................................................................6
Methodology ...........................................................................................................................................7
4.1.
Data collection ................................................................................................................................7
4.2.
Primary Data ...................................................................................................................................7
4.3.
Secondary Data ...............................................................................................................................8
4.4.
Quantitative Data Collection ..........................................................................................................8
4.5.
Validity and Reliability of Data ......................................................................................................9
4.6.
Delimitation ....................................................................................................................................9
4.7.
Choice of Theories..........................................................................................................................9
4.7.1 SWOT analysis ............................................................................................................................10
4.7.2. PEST ...........................................................................................................................................10
5.
Analysis.................................................................................................................................................11
5.1.
SWOT ............................................................................................................................................11
5.2.
PEST Analysis ..............................................................................................................................13
5.3.
Marketing Mix 4Ps .......................................................................................................................15
5.3.1.
Product .................................................................................................................................15
5.3.2.
Price......................................................................................................................................16
5.3.3.
Place .....................................................................................................................................17
5.3.4.
Promotion .............................................................................................................................17
5.4.
Explanation of Sub Questions ......................................................................................................18
5.5.
Where in the market positioning map Carlsberg is located? .......................................................18
2
5.6.
How the drinking culture of Russians affects the sales of Carlsberg breweries? .........................22
5.7.
How can we define the target group of Carlsberg beer? ...............................................................24
5.8.
How Carlsberg Group can stand out against its competitors in the Russian local market? ..........26
5.9.
Financial Analysis ........................................................................................................................34
6. Recommendations.....................................................................................................................................37
7.Conclusion ..................................................................................................................................................38
Appendix A:Process Evaluation ....................................................................................................................40
Appendix B - QUESTIONNAIRE ............................................................................................................44
Appendix C ...............................................................................................................................................48
3
1. Abstract
Carlsberg was established in 1847 in Denmark as an international breweries which produce not
only beer of many types, but also non-alcoholic drinks. Their business is focused in Western
and Eastern Europe and Asia where they have strong market positions and own operations so
as to reach the rest of the world through licence or exports.
In the project we are focusing on Russian market and according to our research we found out
that Carlsberg in Russia faces many challenges. Mainly the ones from microenvironment
including taxes, ban for alcohol and other regulations and, what is more, their competitors.
We have made wide research about Russian market and Carlsberg Group in Russia where we
examined financial state, range of products and their macro environment.
In a nutshell, they could focus more on sustainable development while aiming their
advertisement more on the Russian culture.
2. Introduction
For the Project 2 all groups investigate Carlsberg that is a Danish brewing company known
worldwide. In this project we are focusing on the current situation of it in Russia, where we are
hired as external consultants to conduct a business analysis in order to assess the company’s
situation and to create a strategy which would allow them to maintain and grow on the local
market. Russian culture comes as extremely deep - rooted in inhabitants’ hearts. As far as
Carlsberg masters huge number of 140 brands it is also a proprietor of local, homemade
Russian beer – Baltika.
Despite the fact that beer is owned by the company, our focus does not go strictly to the one
brand. We decided to have a deeper look on the current situation in Russia, the decline on the
brewing market, the impact of imposed sanctions and anti – alcohol campaigns.
What will we use are PEST and SWOT analysis which help us to get better understanding of
the situation and let us to focus directly on the problem. The Internet comes here as the biggest
4
source – we base our project on the information gathered from articles, annual reports and
statements, however by conducting a questionnaire we also collected the primary data.
Secondly, the home page of our company www.carlsberggroup.com also provides us many
useful references which will appear in the prepared report. As we are not able to contact the
Carlsberg Group the project is strongly based on the secondary data, however, to make the
analysis comprehensive we will use the given possibility of making assumptions in case of
lacking information.
2.1. Challenges the company is facing
As we know Carlsberg got 100% share of Baltika breweries since 2012. Unfortunately for them
Russian market faces many problems and crisis which caused a drop by 9 percent in the first
three months of 2015 compared to previous year. The company attributed those changes to
Russia's currently poor macroeconomics conditions and the big financial crisis in 2008.
Carlsberg own there 8 breweries, but runs 10 when 2 of them had to be closed. The company
is a leader on the beer market and is has got around 38% market share.
In the past beer was considered as an non - alcoholic drink which was available at any kiosk,
however, later on ex-president Dmitry Medvedev put into law the new regulation that named
beer as an alcoholic drink, that should not be widely available anymore. What is more, the
government have forbidden people drinking alcohol after 11 pm. Last but not least, taxes
constantly grow so that to decrease the number of people who drinks alcohol.
Despite those regulations, Carlsberg do not give up and still want to stay at Russian market,
even though those regulations make it harder to sustain at the same position.
5
3. Problem Formulation and Sub
Questions
3.1. Problem Area
Beer production in Russia has declined steadily since 2011 when Russian government rolled
out a strict anti-alcohol campaign and sanctions being issued.1 Russian business had a tough
year due to the macroeconomic challenges, including very high food inflation, a rapid channel
shift from traditional to modern trade, leading to changes in their warehouse and logistics
operations, pressure from USD- and EUR-denominated input costs and the closure of two
breweries.2
The problem has been seen mostly due to major macro environmental changes which interested
us the most so that we decided to base our project on analysing this situation.
➔
3.2. Problem Formulation
From the information above, what marketing tools can Carlsberg use to cope with
changing macro environment and sustain in the Russian market?
3.3. Sub questions
➔
Where in the market positioning map is Carlsberg located?
➔
How the drinking culture of Russians affects the sales of Carlsberg breweries?
➔
How can we define the target group of Carlsberg beer?
➔
How Carlsberg Group can stand out against its competitors in the russian local
market?
1
http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Russian%20Beer%20Market%20Update_Moscow%2
0ATO_Russian%20Federation_2-19-2016.pdf (13:26; 04/04/16)
2
Annual report 2015 10:43 6/4/2016)
6
4. Methodology
In this chapter, we have collected the data from different sources and have used different
methods of data collection, how reliable and valid our data is and how we were unable to get
some of the information due to some reasons.
4.1. Data collection
While creating the project we needed to get better understanding of the company. When
Carlsberg stands as a global firm we could have found all relevant information online, however,
we could not contact the company directly. Such situation let us to assume more things instead
of collecting it from direct contact with neither customers nor the owner. Information gained
from questionnaire, articles and reports reached by the Internet helped us to finalize our project.
4.2. Primary Data
“Primary data are information that are collected directly by the person himself/herself through
surveys, interviews and direct observations specifically for a specific purpose of his/her
research project”.3
In our research we have collected the data by ourselves and we used following methods of
primary data collection to investigate Carlsberg's current market environment situation:
questionnaire.
Questionnaire - We decided to make a questionnaire whose objective was to make a
quantitative survey that contained questions and helped us to get some information and opinions
about the products and services in the Russian market. This questionnaire helped us to
understand the customer’s needs and preferences regarding drinking habits. They also gave us
opinions about how the changes in rules and regulation has affected them. They also provided
some feedbacks on how can Carlsberg improve..
3
https://communitymedicine4asses.wordpress.com/2013/01/07/types-of-data-primary-and-secondary-data/
(10:22; 4/04/16)
7
4.3. Secondary Data
“The data which has been collected by someone else for their own reasons other than your own
research project and are used as a reference they are called secondary data.
Secondary data is information that has been collected for purpose other than your current
research project but has some relevance and utility for your research.”4
Our secondary data is collected from online reports and articles that helped us find out more
about the present condition of Carlsberg group in Russia and in a global market. Carlsberg has
been facing this downfall due to many reasons. The change is government rules and regulation
banning the consumption of alcohol,5 wrong marketing strategy and product development and
low customer satisfaction. These are the reasons due to which they have been not able to keep
up with other local brands such as Baltika. Despite being a part of Carlsberg, As seen from the
annual reports, Baltika has relatively high sales than that of other Carlsberg products in 2013.6
Whereas the whole Russian beer industry was facing loss due to changes in the law.
4.4. Quantitative Data Collection
It is also called hard data which is used to quantify attitudes, opinions, behaviours, and other
defined variables which can be measured, and help to get a clear overview of the problem which
may exist in a field of study.7
We collected the data through survey and interviews. We sent the questionnaire through internet
by using Google form.8
4
http://study.com/academy/lesson/secondary-data-in-marketing-research-definition-sources-collection.html
20/10 (14:15; 04/04/16)
5
http://www.bbc.com/news/world-europe -14232970 (23:55 04/04/16)
6
http://eng.baltika.ru/m/6774/in_2014_baltika_breweries_has_continued_investing_in_the_brands_development.
html (24:00 04/04/16)
7
Thomas Harboe, Method and project writing – 2nd edition, Samfunds Litteratur, 2013, p.48;
8
Appendix B
8
4.5. Validity and Reliability of Data
Validity is a term which means to do what it is supposed to do. The data measured should be
true and accurate to be valid. Reliability refers to the dependability of the data which means if
one can depend on the data collected or not. So, in the process of data collection one has to be
sure about the validity and reliability of the data. Without this the analysis of the data cannot
be made which may result in poor outcomes.
The data we collected are both valid and reliable. Our data is based on accurate facts which
were collected by using different methods of data collection. We conducted a questionnaire
which answers the consumers perception towards Carlsberg. Though we could not interview
the employee in the company. We have obtained different data from online article and reports
from reliable source and from the company’s website.
4.6. Delimitation
While looking at the macro environment of Carlsberg, we were only limited with some part of
the study. We were bound to work with limited data due to lack of access to many areas. We
could not get access to employee of Carlsberg who would have portrayed the situation of
Carlsberg in Russia more descriptively. We also could not get enough access to Russian directly
and had to find them through internet sources. Despite having such challenges we have
narrowed down the issues we want to analyse and discuss so that Carlsberg can do to sustain in
the Russian environment. However looking at the present situation of Russia with such rules
and regulation it is really hard. But as we can learn Carlsberg is not quitting but closing its
products which is a clever idea indeed.9
4.7. Choice of Theories
The choice of theories and models is always crucial part of any project as almost the whole
analysis part is dependent on it. While stating the main problem formulation we narrowed it so
that we could have decide on which relevant theories and models will we use to answer
exhaustively both sub questions and the main problem.
9
https://www.youtube.com/watch?v=kl5NogyNyGc (12:11; 4/5/16)
9
4.7.1 SWOT analysis
It is a useful tool for understanding the Strengths and Weaknesses, and for identifying the
Opportunities and Threats and it is a really powerful technique which can help you uncover
opportunities that you might exploit.
Strength and weaknesses are often internal to your organization, while threats and opportunities
belong generally to external factors. In the SWOT analysis we have to ask ourselves many
question. For instance:
Strengths
Opportunities
What advantages does our company have? What interesting trends are we aware of?
What do we do better than others?
Changes in government policy related to our
field.
Weaknesses
Threats
What can we improve?
What are our competitors doing?
What factors lose our sales?
Do we have a cash flow problems?
4.7.2. PEST
PEST is an acronym for Political, Economic, Social and Technological. This analysis is used
to assess these four external factors in relation to your business situation.10
10
http://pestleanalysis.com/pest-analysis/ ( 13:07; 5/04/16)
10
5. Analysis
In this chapter, we have analysed the theories that we selected to answer our problem
formulation which we can relate it to the explanation of the sub questions later in the report.
5.1. SWOT
To get better understanding of SWOT of Carlsberg in Russia we have made an research of
thedrinking culture. Russia is well known for drinking of vodka and be honest if you hear the
word Russia what do you picture in your mind?
Actually, the truth is completely the opposite of that phrase - in the last years consumption of
vodka is climbing down and Russians started to prefer beer over strong alcohol. Despite the
revive, vodka sales and beer industry stuck by the rubble's fall, Russians are buying less spirit
compared to 2014, while sales of beer and wine have risen. Overall prices in the country have
been increased due to sanction, taxes and regulations. The reason is that they would like to
decrease the amount of people who drink almost daily. According to some research, one in four
11
men die before 55 and according to extensive study big part of it is caused by vodka.11What is
more, over the past decade vodka consumption has dropped by around a third, while beer
consumption has rocketed by more than 40 per cent.
One article from 2011 says that former president Dmitry Medvedev set a law which says that
beer is an alcoholic drink and therefore there has been set up a ban for spirits and beers sales in
street kiosk as well as all beer advertising. Except this there is also ban to drink after 11 pm..12
Actually the beer consumption does not have such a bad times and new generation which came
into the scene prefer more beer than those classic spirits - According one article there is Russia's
craft beer revolution. The article says ,”The last time people stood in line for beer was in the
Soviet Union”13.
Fig:
Strength
Weaknesses
-Owner of Baltika The best selling beer in
-Merge of Orkla leads to the increase in
Russia approximately 38% Russian market
company’s debt
share
-Leader of the market with a strong brand
- wide structure may lead to a difficult
communication inside the company
-100% owner of Baltika the best selling beer
-Strong distribution channel
- Innovative products
11
http://qz.com/355157/russians-are-drinking-less-vodka-and-more-beer/ (19:22; 4/04/16)
12
http://www.independent.co.uk/life-style/health-and-families/health-news/end-of-a-drinking-culture-russiaaccepts-that-beer-is-alcoholic-2317798.html (20:20; 4/04/16)
13
http://www.theguardian.com/lifeandstyle/2016/jan/17/russia-craft-beer-geeks-drinking-vodka (10:30;
5/04/16)
12
Opportunities
Threats
-Booming in the beer industry
- Regulations on alcohol (ban for drinking
-Higher taxes for vodka (may lead to a
after 11PM
higher demand of beer)
-Taxes policy
-One of the fastest market in the world
-Rapidly growing competitors (Heineken)
5.2. PEST Analysis
PEST is the acronym for the Political, Economic, Social and Technological situation of a
country, is used for having a better understanding of the external factors that a company is
facing in this country.
Political situation in Russia:
Since the year 2000 Putin is the president of Russia. Even though that Russia has always
followed its drinking culture in 2006 the president made campaigns against the alcohol making
laws against it, doing sales restriction or raising the taxes because alcoholism was one of the
biggest problems in Russia.14
14
http://www.bloombergview.com/articles/2015-08-11/putin-s-other-war-russians-binge-drinking (20:11;
4/04/16)
13
Table 1:Beer Excise Tax Rates, 2009-2016, in Russian Rubbles*
Topic
Beer with 8.6 percent or less ethyl alcohol
2009
2010
2011
2012
2013
2014
2015
2016
3
9
10
12
15
18
18
20
300
11
20
25
20
0
11
8.8
6.1
6.6
6.5
11.4
12.9
Beer excise tax rates increase yo-y, %
Inflation, %
8.8
Source: Tax Code of Russian Federation
*Excise tax rates in Rubbles per liter of alcohol product
Economic situation in Russia:
Russia, as a lot of countries in the world, suffered a big crisis that it harmed their economy from
2008 to 2013 but on 2014 the economy recovered making Russia one of the most economically
strong countries in the world.15
Social situation in Russia:
Russia has one of the most patriotic population in the world, they feel proud of Russia obviously
they have more tendency to choose Russians products instead of foreign ones.16
Technological situation in Russia:
Since 2000 Russia's technological sector has being developing with a very high speed, also they
have been extremely innovative with the military technology making great achievements during
these years.
15
http://www.insor-russia.ru/en/_priorities/competitive_economy (20:20; 4/04/16)
16
http://www.popularmechanics.com/military/weapons/a18331/russias-military-tech/ (20:35; 4/04/16)
14
Carlsberg and Russians PEST analysis:
Since 2008, with the economic crisis, Carlsberg sales in Russia decreased down to 7% also
because of the government's new politic against the alcohol that made more difficulties for
Carlsberg of selling its product, also Carlsberg is a Danish beer which causes a lot of problems
for selling to the proud Russians, whom would choose a Russian beer instead of a Danish one.
Even though that the Russian economy got stronger during these last years, there is still not a
good number of sales for Carlsberg in Russia.
5.3. Marketing Mix 4Ps
The 4P’s also known as Price, Product, Place and Promotion is a strategy that originated from
the single P meaning Price. This strategy was designed as an easy way to turn marketing
planning into practice. This strategy is used to find and meet the consumer’s needs and can be
used for long term or short term purposes. 17Here we have made 4P analysis for Carlsberg to
know more about the product and implement the strategies thereby.
5.3.1.
Product
Product is part of the marketing mix 4P’s. The 4P can help us to get better overview inside our
company and allow us to have deeper understanding what is going on in the company.
In 1847 Carlsberg brewery has been founded and hasn’t such a big scale of product but as time
went on Carlsberg started with bigger production and wider scale of products. Over time they
have entered into an agreement with some companies and their portfolio become again bigger
and wider. Another step they have made was acquisition of other company and in that case they
could extend their portfolio about other products and not only beer but also soft drinks.
Nowadays Carlsberg own many breweries around the world but mainly in Europe.
Carlsberg is a branded company and the Carlsberg beer portfolio is a strong combination of
significant international brands and number of strong regional and local brands. The brands
17
https://www.mindtools.com/pages/article/newSTR_94.htm (14:02; 6/4/16)
15
vary considerably in volume, price, target audience and geographic penetration and include the
leading international brands Carlsberg, Tuborg, Baltika and 1664 and strong local brands such
as Kronenbourg, Koff,. Quality is always at the first place and is really high. Management of
Carlsberg’s international brand portfolio is carried out centrally at Group level to ensure correct
prioritisation and streamlining, and to build strong and efficient brand platforms and growth
models in order to optimise profits.
Carlsberg continuously assesses and adjust the product portfolio in line with consumer demand
to capture and secure market shares not only in the premium and mainstream beer segments but
also, in times of economic downturn, in the discount segment.
Baltika is Russia’s most popular beer, sold across the country. Kronenbourg 1664 is associated
with French Art and pleasure and is super premium brand in Carlsberg portfolio. Tuborg is
youth brand and is well known in partying, sponsoring many events and having a fun across
the Europe. And Carlsberg brand is the flagship.18
5.3.2.
Price
Price is very important factor for our products. It may also determine the perception of our
customer. The price shouldn’t be too low and neither too high. If the price is too low our
customers might think that our product is somehow damaged or low quality on the other side
if our price is too high nobody will buy it and we can go bankrupt. So the best way is somewhere
in the middle and we can use some techniques of how to determine the price. First of all we can
use cost-oriented price, demand orientated price, competitive oriented price .
Carlsberg is more orientated on value creation by increasing earnings and realising the value of
hidden and expansion by growing businesses in existing markets and entering new markets. In
general Carlsberg has different prices due to wide scale of products and different market place.
18
http://www.carlsberggroup.com/investor/downloadcentre/Documents/AR2009Chapters/Uk%20chapters/Beer
%20portfolio_UK_2009.pdf (14:14 6/4/16)
16
5.3.3.
Place
The Carlsberg Group is the market leader in the region’s main market, Russia, and no. 2 in the
second largest market, Ukraine. According to Canada, Russia is the fourth largest beer market
in the world.
In recent years, Russian beer market volumes have declined due to a challenging
macroeconomic, significant price increases and changed regulation. Per capita consumption
has thus decreased from 80 litres in 2008 to 49 litres in 2015. The difficult market and
subsequent decline of the beer category are expected to persist for the next few years.
The off-trade accounts for the majority of the market. On the back of the tough consumer
environment, the modern off- trade, consisting of hypermarkets and supermarkets, has grown
significantly in recent years, now accounting for approx. 40% of beer sales in Russia.
The global brewers are all present in Russia and. Local players have increased their market
share in recent years, and now account for approx. 26% of market volumes, albeit less measured
in value terms.
5.3.4.
Promotion
It is claimed that Carlsberg Group is one of the brands that deals perfectly with their content
strategy. They target their aims directly to the point usually achieving huge global success and
publicity. What their customers value is an immediate and humorous, but bright and creative
at the same time, responses to many social events.19
One of the most powerful Carlsberg Group campaign was surely “If Carlsberg did…”which
they had reinnovate after four years.20 They have released the whole series of short adverts that
were transmitted in few countries - their slogan has become globally popular and recognizable
collecting many positive responses. Such campaign would also increase their sales in Russia as
it is catchy and creative enough to interest even the most contumacious customers. The way
19
https://econsultancy.com/blog/67373-carlsberg-probably-the-best-content-strategy-in-2015/ (10:14;
7/04/16)
20
http://www.marketingweek.com/2015/02/16/why-carlsberg-is-bringing-back-if-carlsberg-did-after-fouryears/ (10:33; 7/04/16)
17
Carlsberg Group introduces their products stays at high level while they keep on innovating for
instance packaging - limited edition for EURO 2016. 21 Another smart move from Carlsberg
Group was introducing Baltika as an official beer of Olympics in Sochi 2014. By showing their
interest in the one of most important sports events is the easiest way to promote themselves and
their beer.
5.4. Explanation of Sub Questions
This part of report consist of the explanation of the sub questions that we made to solve the
problem formulation using different theories and models that are discussed below.
5.5. Where in the market positioning map
Carlsberg is located?
Russia has been the main land for alcohol consumption. The cultural analysis made in the earlier
part of this report shows how alcohol is part of Russian lifestyle. So, have a glimpse of local
markets in Russia we should go back in the past to see what was the statistics of Beer in Russian
market.
Beer production in Russia has declined steadily since 2010 around the same time that the
Russian government rolled out a strict anti-alcohol campaign which legally recognition of
beer as alcohol drink; increased excise taxes for beer with alcohol content up to 8.6 percent;
applied strict limitations to beer advertising; banned sale of beer in outdoor kiosks. From
January-November 2015, Russian brewers produced 659.5 million deciliters of beer
according to the Russian Federal Statistics Service (Rosstat) 7.3 percent less than the same period in 2014. In 2010, production volume surpassed 1 billion
decilitres.
21
http://www.offlicencenews.co.uk/news/fullstory.php/aid/15500/Carlsberg_UK_kicks_off_Uefa_Euro_2016_ca
mpaign_with_limited-edition_packaging.html (10:47; 7/04/16)
18
Graph 1. Russia: Beer Production in 2010-2015, Million Deciliters
Source: Federal Service of State Statistics of Russia (Rosstat)
Looking at the beer market in Russia we came to recognizes the following categories of
beer: pale beer, non-filtered beer, dark beer, non-alcoholic beer, and specialty beer.
Beer production in Russia is dominated by pale beer – 96 percent of total volume.
Nevertheless, a decline in production volume during the last five years was observed in all
beer categories. Beer in plastic containers (PET) dominates the market: 42 percent of market
volume is provided by beer in PET containers, 12 percent by beer in glass bottles, and 6
percent in aluminum/tin cans. Unpacked beer provides 40 percent of Russian beer market in
volume.
Market Overview
The Russian beer industry is strongly consolidated and includes just four major players. 85
percent of the Russian beer market is in the hands of foreign producers, of which own
domestic brands. The current leader is Carlsberg which owns 89 percent of the authorized
19
capital of Brewing Company Baltika. Baltika (Carlsberg) is also the leading exporter of
Russian beer. Its products are available in more than 65 countries around the world. Baltika
currently runs 7 breweries in Russia.
Pie Chart 1: Market share of beer industry in Russia
We are using perceptual map to find out where our products are situated from the view of our
costumer with comparison to other products (our competitors). It is important for us to know
where our products are situated.
We can have a look at our product from the view of a flavour or from the price. Each of this
aspect have an important effect to our customers some of them prefer heavy flavour and some
light flavour. On the other side in Russia there is many people that come from a poor conditions
and they might have not rate it from the view of flavour but rather according the price.
20
Heavy
flavour
Heineken
Carlsberg
Effes
Cheap
Stella
Expensive
Klin skoe
Light flavour
For us it is important to focus on our target customer who are from age 18-25 from our primary
source of data and where we want to be at the perceptual map, then we can find also where our
competitors are and according this we can find a weak point and focus on it. From the perceptual
map we can see that Carlsberg already has a perfect position in the market in the eyes of their
customers. All that matters is what customer thinks of our product. From our data collection
we have found that many people drink Carlsberg because of its brand image, tradition and
unique taste and flavour. This locates Carlsberg in the top in position map giving it a
competitive advantage.
21
5.6. How the drinking culture of Russians
affects the sales of Carlsberg
breweries?
The historical problem with alcoholism in Russia comes from a long time ago (10th century).
During the centuries, Russian governments were encouraging the alcoholic drinks and getting
the revenue from it, but when Vladimir Putin was elected president he started to promote actions
against alcoholism with the objective of making longer the life expectancy of Russia which, on
2013 it was 71, Putin's objective is make the Russian life expectancy on 2018 up to 74. 22 The
financial crisis played a big roll on this, since 2008 the alcohol consumption in Russia was
going lower and lower.
23
Obviously this new alcohol politic in Russia affected the entire alcohol industry in the country
and Carlsberg, which is in the Russian market since 199624, has been affected too.
22
http://www.bloombergview.com/articles/2015-08-11/putin-s-other-war-russians-binge-drinking (14:50;
5/04/16)
23
http://blog.euromonitor.com/2015/01/going-premium-in-russia-is-a-short-term-tactic.html (14:43; 5/04/16)
24
http://eng.baltika.ru/m/41/the_history_of_baltika_breweries.html (15:10; 5/04/16)
22
For having a better understanding of Carlsberg's situation in Russia we decided to use the
Schein model - model that helps to have a better understanding of global issues25,
Looking at the Schein model, on the top we have artefacts (what we can see) there are the
Events, we could include the decrease of the number of sales in Russia. In the bottom of the
model (unemployment, people dying too early), what we cannot see, is the reasons why
Carlsberg has suffered a decrease of sales, basically is because people in Russia are dying too
early because of alcohol and the government make actions to fight this problem and affect
Carlsberg, also the level of unemployment in Russia is an important reason, if people have no
work they will not have money to spend in Carlsberg's products.
25
http://courses.umass.edu/plnts285/TheIcebergModel.htm (15.25; 5/04/16)
23
26
To conclude with the cultural analysis, we can say that, at the moment, the problems that
Carlsberg have in the russian market are directly connected with russian political, economic
and social situation showing how strong Carlsberg depend on the russian situation. It is clear
from the research, that on no condition people who drink beer would quit it as they will find
any way to get it somehow. What should we do is to focus on these who are interested to buy
beer despite constant market changes.
5.7. How can we define the target group of
Carlsberg beer?
If a single person, no matter of his origins, nationality or gender, would have been asked to
name one global beer company the choice would probably go to the Carlsberg Group.
Throughout many years the name, logo or even the slogan became recognizable and inherent
part of the brewery market. They were slowly, but constantly creating their values which helped
them to create the beer kingdom. To maintain at the top and target their products to broader
audience they kept on improving themselves on every possible area, not only the brewery one,
but also sport and social ones. 27 Becoming the sponsors of global competitions such as
Carlsberg for European Football Championship, Tuborg for music events and Baltika for
Olympics in Sochi they claim and keep on assuring that such moves let them stay close to their
customers.
26
http://www.economywatch.com/features/Russia-Caught-in-a-Perfect-Storm.12-19-14.html
27
http://www.carlsberggroup.com/media/news/Pages/Sponsorship-It'sAllAboutPassion.aspx (15:30; 5/04/16)
24
Not only do they show interest in their passions, but also develop the relations with them at the
same time. To find out more about the Carlsberg family it was crucial to have a deeper look at
the way they promote and innovate their products so that to reach everyone taste and
expectations. By analysing the customer behaviour we will get an inside view on current taste
of Russians and what influences them the most to purchase alcoholic drink such as beer.
One of the nationalities that is strongly connected with heavily – drinking habits are for sure
Russians. However, the home of vodka has a new trend recently – brewery market for which
the sales increases constantly from many years.28 Despite the little drop, the latest numbers
show that the beer consumption is again on the high level.29 From collected secondary data we
can assume that everyone drink Carlsberg beer – no matter of gender, age or nationality30 – so
it is in Russia. They do not have any specified target group (except the fact you have to be over
18 in Russia) as they are present on many areas. To catch also female audience the introduced
a new product in 2012, with more appealing taste to satisfy women's needs, which was on sales
in Russia.31 Carlsberg presence in Russia is strongly connected with Baltika beer – the national
beer beverage with the biggest sales.
To strengthen their position around sport fans they were the main beer supplier of the Winter
Olympics in Sochi 2014. As long as beer drinking habits will be equated with sports, concerning
to all stereotypes that men watch football and other contests, they position in this target group
will remain strong. 32 To understand a regular beer customer in Russia we should mark a
question who mostly buys it? “Old people still drink vodka, but we young people prefer goodquality beer” says one of the customer in a bar in Moscow.33 The fact that we were missing
some primary data as our questionnaire sent to Russians did not come as a big success as we
28
http://qz.com/355157/russians-are-drinking-less-vodka-and-more-beer/ (11:19; 6/04/16)
29
Appendix C
30
http://www.carlsberggroup.com/Company/Pages/FacesofCarlsberg.aspx (11;34; 6/04/16)
31
http://www.warc.com/LatestNews/News/Carlsberg_targets_female_shoppers.news?ID=30786 (11:51;
6/04/16)
32
http://russiatrek.org/about-russia-sport (12:52; 6/04/16)
33
http://www.themalaymailonline.com/eat-drink/article/goodbye-vodka-russians-toast-craft-beer-revolution
(13:03; 6/04/16)
25
got only few respondents we had to rely more on the secondary data collected from the Internet.
However, majority of our respondents are in the age group 18-25 what makes the quote
stronger.34
The decision making process is more expanded that it may look like. In this beer case one
person can create the whole buying centre although, at the other hand, it may be also more
elaborate. Majority of our respondents claimed that they drink beer on certain occasions – in
this case we cannot be so sure of the buying centre anymore. Human beings are known for their
submission to peers which can, but does not have to, implement a change of the influencer.
That force us to wonder if drinking Carlsberg beer has any need recognition – if there is it is
probably different for every person and occasion. Such situation make it complicated for the
Group to target directly to everyone as the needs may change while growing up.
At least but not last, the astonishing part of the primary data is that the customers of beer from
Carlsberg Group depend their choice on different criteria than the only the taste one. What the
majority value is good opinion and tradition of the company. When thinking about Baltika this
answer should not be so shocking anymore as Russians are proud of their tradition and prefer
to support their local, homemade product.
5.8. How Carlsberg Group can stand out
against its competitors in the Russian
local market?
The study we did in the 1st sub question about Russian market and history. It is clear that the
Carlsberg and other beer company has been facing downfalls and loss. However the reason for
the downfall is legal changes and government restriction for alcohol consumption. So,
Carlsberg is having problem maintaining their sales.
To sustain in such changing environment Carlsberg know the macro environment which
includes the analysis of their competitors. So, here we have made Porter’s Five Force analysis
and competitor analysis.
34
Appendix B
26
Porter’s Five Force Analysis
Porter's five forces analysis is a framework that attempts to analyse the level of competition
within an industry and business strategy development. It draws upon industrial organization
(IO) economics to derive five forces that determine the competitive intensity and therefore
attractiveness of an Industry.35
35
Principles and Practice of Marketing (p.708) (3:50 4/5/16)
27
Porter’s five forces analysis in Russia
Threat of new entrants
A company's power is also affected by the force of new entrants into its market. The less
money and time it costs for a competitor to enter a company's market and be an effective
competitor, the more a company's position may be significantly weakened.36
Hence, some factors of new entrants in Russia are:
● Easy to enter, low barriers. (common EU market)
● Brand equity(local and premium brand)
● Access to distribution (initial expenses are smaller)
● Anti-alcohol campaign and changing laws
● Increasing tax rates
Threat of substitutes
Competitor substitutions that can be used in place of a company's products or services pose a
threat. For example, if customers rely on a company to provide a tool or service that can be
substituted with another tool or service or by performing the task manually, and this
substitution is fairly easy and of low cost, a company's power can be weakened.37
When we look at the Russian market, there are many substitutes for Carlsberg and some are:
● Different other beers and Vodka
● Tradition of alcohol consumption
● Other broadly defined substitute products: fizzy drinks
36
Principles and Practice of Marketing (p.708) (10:16 5/6/16)
37
Principles and Practice of Marketing (p.708) (11:10 6/4/2016)
28
Bargaining power of buyers
This specifically deals with the ability customers have to drive prices down. It is affected by
how many buyers, or customers, a company has, how significant each customer is and how
much it would cost a customer to switch from one company to another. The smaller and more
powerful a client base, the more power it holds.38
Bargaining power in Russia can be classified as:
● Huge variety of products (five main beer producer in market)
● Price sensitivity, high elasticity of beer consumption
● Rapidly growing purchase power
Bargaining power of suppliers
This force addresses how easily suppliers can drive up the price of goods and services. It is
affected by the number of suppliers of key aspects of a good or service, how unique these
aspects are and how much it would cost a company to switch from one supplier to another.39
The bargaining power of supplier in Russia can be studied as:
● Underdeveloped labour unions
● Vertically integrated industries
● Substitute components
● Not complicated production process
38
Principles and Practice of Marketing (p.708) (12:45 6/4/2016)
39
Principles and Practice of Marketing (p.708)(12;50 6/4/2016)
29
Competitive Rivalry
The importance of this force is the number of competitors and their ability to threaten a
company. The larger the number of competitors, along with the number of equivalent products
and services they offer, dictates the power of a company.40
● Russia banned advertising of alcohol (price competition)
● Major beer producer present themselves
● Easy to enter: advertisements are available
Competitor Analysis and Competitive Advantage
According to industry analysts, the beer giants have been losing market share to local midsized breweries whose share by the end of 2015 reached 26.5 percent. Local breweries are
offering cheaper, more unique and interesting tastes of beer. This trend is helping the craft
beer sector in Russia which is growing and has about 3 percent of beer market share today.
As we can see from the market overview major part of the market is owned by Carlsberg.
Even if so, the other beer company specially local and craft beer holds risk as they have been
introducing new tastes, for example creation of Red Nelson by Sazonov..41 People have been
giving new interest in craft beer and named it as “craft revolution.” This might create
problem to Carlsberg and it should more focus on the innovation of the taste of beer.
Hence, to know more about the local market, we should know more about the parts of local
brands. Their strength and weakness and competitive advantage of our own brand.
40
Principles and Practice of Marketing (p.708)(1:02 6/4/2016)
41
http://www.theguardian.com/lifeandstyle/2016/jan/17/russia-craft-beer-geeks-drinking-vodka (3:11;
4/5/2016)
30
Competitors for Carlsberg in Russia
Hence, to know more about the local market, we should know more about the parts of local
brands.
Table 2: Brands and their parts
Brand
Part of the brand
Carlsberg A/S (Denmark)
Arsenalnoye,
Tuborg,
Nevskoye,
Yarpivo,
Carlsberg,
Kronenbourg
1664,
Holsten,
Grimbergen,
Warstainer and the key Baltika brand
(Baltic)
Competitors
Efes Rus (group
companies
Efes
of
Efes Pilsener, Belyy Medved (White
and
Bear), Sokol (Falcon), Staryy Melnik
SABMiller)
Anheuser-Busch
(Old Miller) and other
InBev
InBev)
(Sun
Stella
Artois,
Budweizer,
Klinskoe,
Sibirskaya Korona (The Crown of
Siberia), Tolstyak (Portly Fellow)
Dutch Heineken N.V.
Heineken, Bochkarev, Okhota (Hunting),
Pit, Tri Medvedya (Three Bears)
31
Currently, the brewing production capacity is working at only 55-60 percent and companies
are reducing maintenance costs by closing down some plants. Carlsberg closed three of its ten
breweries across Russia in 2015 while Belgian beer maker Anheuser-Busch InBev closed five
of its Russian plants over the last three years. Efes also closed two breweries in 2015 while
Heineken Russia, which closed two breweries between 2009 and 2010, announced in April
2015 its plan to produce kvass (a traditional soft drink made from fermented bread or grain)
at four plants around Russia. While the big producers can cope with the difficulties that come
from increased excise duties and excessive regulation, small breweries have been hit more
directly.
Strength and weaknesses of competitors of Carlsberg in Russia
Narrowing down the strengths of the other beer producers, they have been developing slowly.
They are more close to Russian as being the home produced beer. Not only that they have
realized the need of innovation and acceptance and hence has been focussing on different
aspects of the beer.
Whereas they have not been able to cover as much as Carlsberg does. There is still high part
of Carlsberg covering the market. They have not been able to distribute their product as much
as Carlsberg does and having problem with their marketing strategies as well.
Porter’s Generic Strategy
A competitive advantage is an advantage over competitors gained by offering consumers
greater value, either by means of lower prices or by providing greater benefits and service
that justifies higher prices.
32
Looking at the SWOT in previous chapter, the weakness of Carlsberg is the choice of wrong
partner and the possibility of lack of communication due to its diverse classification.
Carlsberg has had a very good market in Russia already. They had a huge success prior to the
crisis and new changes in laws and regulation. To sustain in Russian market it should more
focus on cost leadership. Cost leadership is a business ability to produce a product or service
that will be at a lower cost than other competitors. If Carlsberg is able to produce the same
quality product but sell it for less this gives them a competitive advantage over other
businesses. Therefore, this provides a price value to the customers. Lower costs will result in
higher profits as businesses are still making a reasonable product on each good or service
sold. If Carlsberg are not making a large enough profit, The strategy recommends finding a
low-cost base such as labour, materials and facilities. This will give Carlsberg a lower
manufacturing cost over those of other competitors
33
5.9. Financial Analysis
In this chapter we will conduct a financial analysis of Carlsberg. The aim of this chapter is to
create a clear overview of Carlsberg´s financial profitability and identify Carlsberg´s core
financial drivers and key financial ratios.
Accounting Policies
In order to conduct the financial analysis it is important to ensure that the financial statements
used are identical for the whole period that is being analysed.
As of February 2015 Carlsberg has submitted its financial statements in accordance with
International Financial Reporting Standards (IFRS), issued by the IASB, as adopted by the
EU and Danish disclosure requirements for listed companies, cf. the statutory order pursuant
to the Danish Financial Statement Act.42
Carlsberg´s accounting policies have not changed in the period and the company has
informed that adopting new IFRS-standards, as required by law, has not had significant
changes on its financial statements. Therefore we find it is not necessary to make adjustments
to the reported financial statements to ensure comparability for the period.
All of Carlsberg's annual reports for the period are approved by independent auditors,
KPMG, and give a true and fair view of Carlsberg´s financial position in accordance with
IFRS as adopted by the EU and Danish disclosure requirements for listed companies.43
Financial Overview
The Russian beer market declined by an estimated 10% for the full year. The Russian shipments
declined by 17% on account of continued inventory reduction by their distributors servicing
the traditional trade, and market share loss caused by the price leadership, growth of lowerpriced, local brands and the channel shift to modern trade, where they have a below-average
42
Annual report (2015, p.153) (10:06 7/4/2016)
43
http://file.euroinvestor.com/newsattachments/2016/02/13316521/Carlsberg_AS_Annual_Report_2015.pdf
(10:30; 7/4/2016)
34
market share. The Russian volume market share was 34.7% in 2015 (source: Nielsen Retail
Audit, Urban & Rural Russia).44 They delivered strong price/mix in the mid-teens as a result of
several price increases throughout the year. Mix was flat.
Notwithstanding the profound challenges in Russia, their local business continued to
capture a significant part of the Russian profit pool.
The financial statement of Carlsberg for 2015 are in Appendix D..
Sustaining in Russian Market
The Carlsberg Group is committed to making decisions that have a positive impact on their
business and the communities in which they operate. They want to grow their business
responsibly while enhancing the quality of life for their consumers, employees and other
stakeholders.
In 2015, they continued our efforts to implement sustainable business practices throughout the
Carlsberg Group value chain
44
Annual Report 2015 (10:48 7/4/2016)
35
THREE KEY THEMES
In 2015, the Group’s sustainability activities were centred around three key themes: Resources
& Environment, Health & Well-being and People & Policies. These are the areas that they
consider most relevant to both them and their stakeholders, and where their efforts will have
the biggest impacts.
So, focussing on more of its goals on sustainable development, Carlsberg can carry out many
activities relating to such activities. Even though Carlsberg has been planning different
Corporate Social Responsibility (CSR) related activities globally. Some of them are:
36
6. Recommendations
After analysis of the macro environment of Carlsberg in Russia. We have come up with
some of the things that Carlsberg can really work on sustain in Russian market. Our
recommendations are:
● They are already in good market position where they are top players in Russia.
Carlsberg should make the use of this and give more voice to their customers
and have a connection with their customers so that the customers can feel more
close to the product. For example: Carlsberg walk and talk interviews.
37
● Marketing advertisements in other countries have great influence on people.
So, Carlsberg should make similar advertisement in Russia so that they can
connect more to their target group.
● From our analysis, we have learned it does not matter what the regulation are
people would still buy beer. Carlsberg can get more access to such store where
retailers sell Carlsberg and make a good deal.
● Following trends have been a huge thing for today’s generation. So, we
recommend them to make Gluten-free Beer which may bring new changes in
Russian market.
● There has been huge influence of government in Russian beer market. So, we
suggest them to make some request to government about how they can
function and take necessary steps. If Carlsberg has to quit it would affect the
whole Russian economy which may lead to further crisis.
● As they have been planning for sustainable businesses. They should implement
their tasks so that people can see the efforts it is making. Health, people and
resources should be more focussed. They should carry out more of the social
issues to sustain in the market (CSR).
7.Conclusion
The main objective of the report is to find out what can Carlsberg do to sustain in the Russian
market. The factors that can threaten Carlsberg are mainly the political and economic situation
in Russia, along with the economic crisis in Europe. These are factors that Carlsberg cannot
influence by itself but will need to take some strategic actions to counteract the development.
Intensified competition also limits Carlsberg´s growth opportunities. Carlsberg Group has
38
already strong position in the brewery market for many years, however, their presence in Russia
is constantly harmed by many factors as we have mention in the project.
By collecting reliable Secondary Data we prepared in - depth analysis of 3 of our 4 sub
questions additionally conducting on - line questionnaire to get better understanding of the
consumers and describe the buying behaviour.
In general, Carlsberg Group is already recognizable enough in the russian market, however, we
prepared some recommendation for the company so that they can improve their position and
make it stronger. We have also suggested some sustainable measure so that Carlsberg can
sustain in Russia.
39
Appendix A:Process Evaluation
Alvaro:
This week doing the Project 2 was a really nice experience or at least it was better than the last
project we did in the last semester, this time we all could do team work. Even knowing that this
project was harder than the last one, I enjoyed working on it with my teammates and I could
learn a lot with each of them. I was really glad of doing this project, I wish all the projects that
I will do in the future will be like this one.
Adam
Before I know who am I in a group I was a bit afraid because not every time you can cooperate
with everyone. But here in this group we had a lot of fun we worked together like a team without
any conflict and this is how it should look like at each organization, only than the performance
can be for 100%. For me is good environment key part to success. I am happy for each member
of our team and I think we did our best!
Justyna:
After the end of the week I can honestly say that we did outstanding job. As a group we worked
perfectly until the end avoiding inside conflicts. As the individuals, each of my groupmates
reached the top of their amazing abilities preparing the report. Not only did we have good time,
but also learnt essential things from each other. I am proud that we could have distilled from
our advantages and helped each other in tough moments. It was a pleasure to team lead this
group and I am thankful to them for the patience they showed me.
40
Ranjana:
The Project 2 was much harder to be honest but it was fun to work with all the members in the
group. Justyna is a very good team leader and Alvaro and Adam were really helpful and
hardworking at the same time. We have helped each other and worked together as a team. This
whole week we have learned many things from each other and have done our best. I hope to
work again with this group in coming future.
Project Plan
Date: 1/4/2016
Title: Project 2 Kick off
Member of the team
Justyna: Team Leader
Ranjana: Writer
Adam: PowerPoint In charge/Planner
Alvaro: Timekeeper
Rules in the group:
Punctual
Equal contribution
Ask for help if needed
Respect each other
Plan Schedule
Project Deadline: THURSDAY
Time to meet for the project: 9:00 am
Friday (1st April 2016)
Make problem formulation, sub questions and theory to be decided
41
Project week
Monday: Make questionnaires and collect the data
Tuesday: Analysis and model and theories
Wednesday: Work on rest of the parts of the project
Thursday: Put everything together and get the project ready.
Friday: Submit the project.
Saturday and Sunday: Practice the presentation
Monday: Rehearsal and feedback (1/2 hour)
Idea of a company Carlsberg, Russia
Project 2
Team 2: Adam, Alvaro, Justyna, Ranjana
Date
Time
Place
Titles of Discussions
Result
1st April
11:00
Campus
Starting of the project,
Naestved
Introduction, Problem
Formulation and others.
Problem Formulation and
Introduction
Campus
Naestved
Methodology and subquestions
4th April
9:00
Discussion of use of model and
theories
Change the problem
formulation
Data collection methods
Questionnaires preparation
Methodology completion
in process
5th April
9:00
Campus
Naestved
Complete Methodology and
start with Analysis model and
theories.
12:00 Completed the
methodology
Started with analysis
42
6th April
9:00
Campus
Naestved
Discussion for explaining
subquestion, use of models and
analysis and collection of
financial data
Completion of
Subquestions. Financial
analysis in process
7th April
9:00
Campus
Naestved
Completing the project and
review and correction.
Completion of the project.
Uploading, printing and
binding tomorrow.
Process evaluation
8th April
9:00
Campus
Naestved
Correcting the project and
submitting it.
Completion of the project.
Getting ready for the exam
on 13th April 2016.
43
Appendix B - QUESTIONNAIRE
44
45
46
47
Appendix C
Appendix D
48