World: Carlsberg stepping up efforts in alcohol-free beer
Carlsberg is to expand its range of non-alcoholic drinks and flavoured alcoholic sparkling waters, as the Danish brewer looks beyond beer for growth and taps consumers renewed focus on health in the pandemic, the Financial Times reported on October 19.
Cees t Hart, chief executive, told the Financial Times the worlds third-largest brewer was stepping up efforts in alcohol-free beer, where annual sales in most countries were increasing by 20-25 per cent. Zero-alcohol ranges share of the beer market could triple to 15 per cent in western Europe over the coming years.
He said Carlsberg was also developing fermented beverages a new category in between soft drinks and beer although he declined to say if the drinks would resemble the increasingly popular kombucha or fermented tea.
People were already more health conscious. That message is even more reinforced after coronavirus, Mr Hart said.
That is where we have an advantage in our portfolio. We are preparing the next generation of alcohol-free drinks . . . that is interesting for people that do not like beer or the alcohol taste.
Carlsberg has rebounded from a big early hit from coronavirus, becoming the first global brewer to reinstate its financial guidance in August, which it then lifted in an update the following month. It now expects full-year operating profit to fall by a high single-digit percentage, in line with the 8.9 per cent drop in the first half of this year, rather than a previous expectation of a 10-15 per cent decline.
Mr Hart said coronavirus had shown the brewer to be an extremely resilient company. Its underlying volumes fell 7.8 per cent in the second quarter, less than half the amount of industry leader Anheuser-Busch InBev.
Carlsberg said the alcohol-free category was set to grow five times faster than beer in the next five years and it had zero alcohol drinks for most of its main brands, such as 1664, Kronenbourg, Tuborg and Somersby. It has launched with Brooklyn Brewery an alcohol-free beer Special Effects in the UK that now accounts for 30 per cent of Brooklyns sales there.
It is also pushing into hard seltzers alcoholic, flavoured, low-calorie carbonated water that have proved highly popular in the US. It has launched a hard seltzer in Norway and one under its Somersby cider brand this month in Singapore.
Consumers are looking for an offering that is healthy, low- or no calories, and no additives. We have an asset: brewing, and knowledge of fermented drinks, Mr Hart said.
He added that alcohol-free beer alongside what Carlsberg calls local power brands such as Ringnes in Norway and Falcon in Sweden was one of the few areas of its portfolio to grow despite the impact of the pandemic, which caused the closure of bars and restaurants throughout Europe and Asia.
Trevor Stirling, an analyst at Bernstein, said Carlsberg was pushing hard on this, with some success. But he added that Heineken, the Dutch company that is the worlds second-largest brewer, appeared to be having a little bit more traction.
Mr Hart added that there were signs of changed consumer behaviour: people were buying more multipacks than single beers as they cut store visits, while they were also plumping for its local power brands owing to a stronger emotional connection with them than the global names.
Carlsberg, whose shares have rebounded by a third since their March lows but are still about 10 per cent below where they started the year, devolved power from head office to its individual country heads in China, India, Russia and much of western Europe during the pandemic. It also cut costs including jobs at its head office and focused on cash as it prepares for a long return to normal.
Carlsbergs big push into Russia more than a decade ago which once accounted for half its profit ended in relative failure but it has since bulked up in Asia, through not just China and India but countries such as Vietnam and Nepal.
But Mr Hart insisted the success of non-alcoholic drinks showed there were also possibilities in the more mature markets of western Europe. Are there opportunities for growth for Carlsberg? A wholehearted yes. Covid could facilitate a faster development of health consciousness that could translate into this kind of drink, he added.
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