Case Study: Carlsberg in Emerging Markets

Case Study: Carlsberg in Emerging Markets

            Carlsberg is the fifth largest global brewer founded in 1847 and has headquarters in Copenhagen, Denmark. Carlsberg is the company’s flagship brand, including other brands like Kronenbourg, Tuborg, Somersby cider, Baltika (Russia’s best-selling beer), Grimbergen (Belgian), and numerous local beers (more than 500). The company was focusing on taping the vast potential in emerging markets to reduce its dependency on the maturing and stagnant beer markets in Western Europe, which accounted for 61 percent of Carlsberg’s revenue in 2007 (Hit, Ireland &Hoskisson, 2007). The company, however, faces several challenges in its venture into emerging markets, including the consolidation of most markets and competition as both South and North American markets had already been lost to other established and well-known markets. The focus on becoming a global player was, therefore, hindered, thus prompting the company to focus on emerging markets. Carlsberg decided to delve into the Russian and Chinese markets, which offered more potential, but its success also depends on competition and economic development factors. The company aims at holding a significant position in markets where they are present, with emphasis on either becoming the market leader or the runners up.

Situation Analysis (SWOT)

1. Internal Analysis (Company)
2. Strengths

Carlsberg boasts of a strong product portfolio, with well-known brands like Baltika, Tuborg, Somersby, Grimbergen, and Kronenbourg. The company also caters to most of its customer’s tastes, thanks to the diverse local beer production (more than 500). Carlsberg also has brand loyalty by being in the market long enough to get most of its customers accustomed to some of the flavors and strengths of their drinks (Bhasin, 2019) Concerning geographical coverage, the company is present globally in more than 150 countries, hence making them dependent on a diverse market base. Financially, the company has sold around 115 million hectoliters in the countries where it operates, accounting for a net value of € 6,000 million, and thus putting them in a good position. Carlsberg also has a good marketing campaign with interesting advertisements that are worth remembering, hence facilitating a strong brand recall for its customers.

2. Weaknesses

Carlsberg needs to create new products since they only rely on Carlsberg and Tuborg as their two international beers. The company should make some of its other brands strong as well. Market penetration for the company is still low, and it needs to increase its revenue and market share, especially from emerging markets. Despite the company having a reliable financial base, the company also experience decreasing profits and revenues since 2014 (Bhasin, 2019). This trend can impact the company’s future success and ventures.

1. External Analysis
2. Analysis of General Environment (Opportunities/Threats)

Opportunities

            Among the opportunities of the company include emerging markets, and the company should focus on the higher disposable income of individuals in emerging markets. The company should position and market itself in these markets to increase their revenue and market share (Bhasin, 2019). Carlsberg can also engage in mergers and acquisitions among emerging markets to acquire local brands and add their brands to improve their revenues.

Threats

Among the threats faced by the company include competition from other global companies. People are also trading up from drinking beeras a result of higher disposable income and opting for more wine and whiskey. Most government’s strict and new rules for drinkers can also impact the brand’s revenue.

2. Analysis of Industry Environment (Five Forces Model)
3. Buyer Power

In the beer industry, buyer power is more favorable when the buyer has several options of whom to buy from, and unfavorable when the choice is low (Lee, Kim & Park, 2012). Organizations must, therefore, must create a competitive advantage for more buyers to buy from them than from other organizations.

1. Supplier Power

Supplier power is high when the buyers have a few choices concerning which to purchase from and low when they have several options of suppliers.

• The Threat of substitute services or products

In the beer industry, a high threat of substitute occurs when the product has many alternatives and low when the product has few alternatives (Lee, Kim & Park, 2012). The beer industry faces several challenges, including the alternative of alcohol drinks among the youths in developed nations, as well as health concerns that make people shift to wine and other related drinks.

1. The Threat of new entrants

According to the five forces model, the ease of new competitors to enter the market increase the threat of new entrants while barriers to entry reduce it (Lee, Kim & Park, 2012).In the beer industry, entry barrier is a service or product feature that acts as a baseline for entrants into the market, and all new entrants must offer the product to survive and compete, with few substitutes for the offered products offered.

1. Rivalry among existing competitors

The five forces model states that a greater rivalry occurs among existing competitors when there is fierce competition in the market and low when the competition is more self-satisfying.

3. Analysis of Competitors

Among the top competitors of the company include Anheuser-Busch Inbev, which is a Belgo-Brazilian group and leader of the beer market. Anheuser-Busch Inbev has a similar management structure to that of Carlsberg but has operations in more geographical areas, including Latin America South and North, Northern America, Europe central, as well as west and East Asia pacific. Heineken is also Carlsberg’s competitor with operations in 71 countries globally. According to Kölking, van der Waal, & van Dalen (2016), the Dutch group has a diverse beer collection with international, regional, and local specialties ranging from brands like Desperados, Birra Moretti, Amstel, Sol, Sagres, Ochota, to mention a few.

III) Strategic Options

Focus on moving from the west towards central China and Russia through acquisitions can enable the company to acquire the region’s potential emerging market in those countries (Hit, Ireland &Hoskisson, 2007). Other strategies of the company include better marketing strategies to market its product portfolio, especially in developed economies and a focus on profitable brands among developing nations. According to Murray, Breton, Britton, Cranel& Grant-Braham (2018), the company can also engage in sponsorship programs to promote its brand, either through sports including global events like UEFA Champions league, or through music events.

1. IV) Intra-Option Analyses
2. Option 1: Status Quo (No change in the current strategy)
3. Pros

The company can easily gain influence in the potential emerging markets of Central China and Russia if the strategy is successful. The company can also increase its revenues and market share in the respective countries. The company’s higher market share can also promote its ability to introduce a new product into the market due to a higher market base.

2. Cons

The company’s investment in Russia’s Baltic Beverages Holding’s (BBH) production capacity, logistics, and infrastructure to gain influence in Russia can be expensive. Moreover, the company may require more time to gain influence for markets in Central China due to the existing competition. Lastly, the price factors that have dominated the Chinese market can impact the company’s revenue, along with barriers to entry, which are considered to be high.

1. Option 2: Better Marketing Strategies for its Portfolio
2. Pros

The company will improve its revenues due to increased sales of its products. Carlsberg also stands to gain more influence on markets in developed economies. The company will also maximize its profits by focusing only on profitable bands in developing markets where they have less interest.

2. Cons

More revenue will be required to finance the massive advertisements in both developing and developed economies. There is no guarantee that the company will capture the market in developed economies due to competition from other brands, as well as other similar industries like wine and whiskey. Lastly, investing more in their profitable products among developing countries may also not be a guarantee for improved outcomes since the region is not reliable.

1. Option 3: Sponsorship through sports and music events
2. Pros

This approach can be effective in reaching out to a huge consumer base at a go. Moreover, such events have a huge number of beer consumers, thus enabling the company to make more sales and advertise their other brands as well. The company can also improve its CSR by promoting peace and harmony through the events, as well as appreciating local and international talents.

2. Cons

More research is needed to understand the market base and the sports or music events that can relate to the products to achieve the best possible outcomes. Facilitating such events may also be costly to the company as it may consume huge finances. Lastly, competition from other brands, including Heineken and Budweiser, may reduce the company’s efforts in using this channel as an improvement strategy.

1. Inter-Option Analysis and Recommendation

            Concerning feasibility, the first option can be successful when properly implemented, and it rates eight on a scale of 1-10. The second option rates six, while the third option rates seven. Based on financial risk and reward, the first option rates six, the second option also rates six, while the third option rates five. Concerning the option’s strategic fit, the first option rates seven, the second option rates six and the third option rates eight. The first option ranks the best with a score of 22, the second option with a score of 18, while the third option has a score of 20. The first option has the highest rating.

1. Implementation Plan

            To implement the first option, the company needs to have adequate revenue to finance its acquisition of Russia’s BBH, with more research on the impact of the Russian government on alcohol and beer. The company’s move to impact Central China’s market would similarly require huge investments, and the company would need to be patient on their success due to competitive, regulatory, and operational challenges posed by those markets.

VII. Plan for Assessing the Performance of the Firm after Implementation

To measure the success of the implementation strategies put in place, the company can divide its progress into milestones achieved with time, including the completion of certain projects like construction of several breweries in Central China. The company can use establish quantifiable performance measures, like profit growth or revenue realized over a certain time, to assess the performance of the strategic options.

Conclusion

In summary, Carlsberg is a Danish beer company with several brands, including Carlsberg is the  flagship brand, and there are other brands like Kronenbourg, Tuborg, Somersby cider, Baltika, and Grimbergen. The company seeks to expand its operations, especially in potential emerging markets in Russia and Central China. Among the company’s competitors include Heineken and Anheuser-Busch Inbev, which have significant market share in the beer industry. The company can achieve its strategic option by improving on its investment revenue in acquisitions as well as in more research to penetrate markets which are fragmented and have more barriers to entry.

References

Bhasin, H. (2019, January 22). SWOT Analysis of Carlsberg – Carlsberg SWOT analysis. Retrieved from https://www.marketing91.com/swot-analysis-carlsberg/

Hit., A.M, Ireland, D.R, &Hoskisson, R.E. (2007). STRATEGIC MANAGEMENT Competitiveness & Globalization: Concepts and Cases. Retrieved from:  file:///C:/Users/HP/Downloads/Documents/Strategic%20Management%20Concepts%20and%20Cases%20Competitiveness%20and%20Globalization%20by%20Michael%20A.%20Hitt%20R.%20Duane%20Ireland%20Robert%20E.%20Hoskisson%20(z-lib.org).pdf

Kölking, L., van der Waal, G., & van Dalen, W. (2016). HEINEKEN ALL OVER. Linked in, 12.

Lee, H., Kim, M. S., & Park, Y. (2012). An analytic network process approach to operationalization of five forces model. Applied Mathematical Modelling, 36(4), 1783-1795.

Murray, R., Breton, M. O., Britton, J., Cranwell, J., & Grant-Braham, B. (2018). Carlsberg alibi marketing in the UEFA euro 2016 football finals: implications of Probably inappropriate alcohol advertising. BMC public health, 18(1), 553.