Title The+GLOBAL+2019+Case.pdf ✅

2 CASE COMPETITION GLOBAL 2019 TABLE OF CONTENTS LETTER FROM THE CEO I am very proud to announce Carlsberg Group as the case company for the 2019 CBS Case Competition Global. It is my hope that the case challenge will expand your business knowledge and will allow for you to apply your academic and professional skills. I equally look forward to learning from your insights and solutions as I truly believe that great ideas can come from anywhere and anyone. Since the beginning in 1847, we still follow our Found- er’s unwavering belief in quality, perfection, and the importance of science to continuously perfecting the art of brewing beer and solving global challnges. We focus on our brands and the art of brewing, excite our consumers with quality brews and great experiences and take pride in continuously striving to improve at everything we do. We are brewing for a better today and tomorrow. 2018 was a fantastic year for Carlsberg Group. Among the highlights, we announced two profit upgrades and launched new sustainable innovations including the Snap Pack, which reduces plastic usage in our 6-pack packaging though innovative glue technology. But we can always do better and must leverage the newest technologies and innovations to be even more agile and competitive in the future. To do this, Carlsberg Group has embarked on a digital transformation journey, which plays an essential role in our business strategy – SAIL’22. Going digital is not just about increasing business efficiency, but even more importantly about delivering even more extra- ordinary customer experiences. Your challenge is thus to explore how Carlsberg can further disrupt traditional on-trade channels, such as bars, restaurants, and cafes in order to digitally engage with our consumers and ensure further revenue growth in the European region. I am thrilled to see what innovative ideas are generated by all the participating young talents. Thank you for your time and hard work! Best regards, Cees ‘t Hart CEO, Carlsberg Group CASE COMPETITION GLOBAL 2019 3 Cees ‘t Hart, CEO, Carlsberg Group Letter from the CEO 3 Setting the stage 4 Global beer market 6 Western Europe 9 Sales channels – Off-trade 10 Sales channels – On-trade 13 Competitive landscape 14 History & introduction to Carlsberg 16 Growing to become the world’s third-largest brewery 18 The Carlsberg Group purpose 20 The Global presence of Carlsberg 23 Current setup of Carlsberg Group 24 Carlsberg ́s position in Western Europe 26 Carlsberg Group’s strategy 29 Understanding the consumer – The global demand space model 30 Core beers 32 Craft & Speciality 35 Alcohol free brews 36 Together towards zero 39 Sustainable innovation at Carlsberg Group 41 The digital transformation at Carlsberg 42 Draughtmaster 44 Crafted by 47 Closing remarks 48 Appendix 52 Links for more information 56
4 CASE COMPETITION GLOBAL 2019 CASE COMPETITION GLOBAL 2019 5 differentiate themselves and pilot new services to customers and build brands. Brewing for a better today & tomorrow As the world’s third largest brewery, Carlsberg has been on an impressive growth trajectory since its foun- dation in 1847. Although this growth has, to a large degree, come from successful acquisitions, the values and mission set out by the founding family – to brew for a better today and tomorrow – are still upheld to this day. This is evident in the ownership structure, in which the Carlsberg Foundation owns a majority of voting shares and spends profits on scientific develop- ment and societal contributions. Brewing for a better tomorrow also entails an ambitious sustainability pro- gramme Together Towards ZERO. Carlsberg Group has committed to improving the environmental impact of its breweries by removing the carbon footprint entirely and reducing water usage by 50% by 2030. Over the past three years, Carlsberg has completed a successful round of cost-cutting to improve operational efficiency and is now ready to invest in its group-wide strategy aiming at securing future growth. Challenges in the European stronghold To sustain and fulfil these ambitions, Carlsberg must find a way to stay relevant in its core region, Western Europe, where mature economies and limited econom- ic growth mean that mainstream beer categories are seeing very low or flat volume growth rates. An integral part of how to do this revolves around the continuous development of a leading position within on-trade. This is not only because this is where the greatest value-add for brewers is found, but because on-trade channels, like bars, are unique channels where Carlsberg delivers its brew and serves the prom- ise of fresh and cold beer and where the brands are built. Therefore, the question you are asked to solve is the following: “How can Carlsberg differentiate and disrupt the on-trade scene, or find other high-value channels, to secure a 5% revenue growth in Europe by 2022.” You are tasked with formulating a three-year business plan, which should be scalable across Europe to allow Carlsberg to deliver on these goals. This will require innovative thinking, and you are encouraged to be creative. Additionally, a successful proposal should be in line with Carlsberg’s purpose and ambitions. onsumer preferences are developing faster than ever. Beer has always played an important role in many social settings and is often seen as a catalyst for people to share impor- tant moments, whether with colleagues after work, with friends in a restaurant or with a large crowd at a concert. As the preferred alcoholic beverage across the globe, beer brands are part of national culture and identity. But with the global health and wellness trend on the rise, consumers are increasingly choosing other ways to share these moments, in an attempt to lower their consumption of alcohol. When they do consume alcohol, Western European consumers are increasingly choosing categories traditionally perceived as more luxurious, such as various hard liquors or wine – a category that has seen impressive growth in recent years. In addition, within the beer category, consumers are increasingly moving towards more premium brews, putting pressure on the well-known, mainstream brands that account for the majority of beer consump- tion in Europe. With limited population increase and slow economic growth, these factors mean that beer brewers in devel- oped countries across the world, particularly in Europe, must adapt their strategy and adopt new ways of working in order to stay relevant with consumers. Important changes in recent years In recent years, the beer industry has consolidated significantly, through a wave of horizontal mergers and acquisitions. This is done to leverage scale, resulting in a few very large, cash generative players operating globally. At the other end of the spectrum, an increasing number of small breweries are popping up across Europe, catering to the demand for unique, local beer experiences. The industry is generally separated into two sub- segments: off-trade and on-trade. Off-trade refers to beer sold through an intermediary, such as supermar- kets, wholesalers and retail stores, but not consumed on premise. On-trade refers to the sale of beer for immediate consumption, such as in bars, hotels and restaurants where beverages are consumed on premise. While most beer is sold through off-trade, the greater willingness to pay a premium in on-trade channels means that this segment represents the majority of the market value. Beyond higher prices, on-trade also has other advantages. Due to breweries being closer to the final consumer, this segment is also the most promising when attempting to under- stand consumption patterns better – something many breweries are attempting to do with various digital solutions. It is also where breweries are best able to SETTING THE STAGE “How can Carlsberg differentiate and disrupt the on-trade scene, or find other high-value channels, to secure a 5% revenue growth in Europe by 2022.”
6 CASE COMPETITION GLOBAL 2019 CASE COMPETITION GLOBAL 2019 7 GLOBAL BEER MARKET he global beer market is valued at 510 bn EUR with a volume of 180 bn liters of beer. The global volume is expected to grow at 1,3% CAGR towards 2023, with almost all growth in the developing markets of Asia, Latin America and Africa, where people are increasingly consuming beer and wine instead of hard spirits, and increasing overall consumption due to rising wealth. The more mature markets of Europe and North America are expected to experience volume growth rates of less than one percent. While beer represents less than a tenth of total beverage consumption by volume – the largest categories being coffee and water – it represents more than 20% of value. While beer brands are, to a large extent, still local – most global volume is from relatively small national brands – the industry has seen vast consolidation in the past 20 years with the three largest global brewers accounting for almost 50% of global volume. The consolidation of the market has mainly been driven by M&A activity by the major players, perhaps best exemplified by the fact that five out of the world’s six largest breweries 20 years ago have since merged to become Carlsberg’s largest global competitor, the Belgium based AB-Inbev. One of the main reasons for this consolidation has been to achieve the neces- sary scale to stay profitable in the competitive beer market, but also to gain access to new markets, as most markets are dominated by local brands. Another important characteristic of the beer industry is that marketing plays a huge role, with brewers spending a large share of revenue on marketing and advertising. Generally, breweries spend between 5% and 10% of revenues on marketing. This money is typically spent on TV adverts and sponsorships of sports teams, music festivals and the like. 184,7 184,2 182,3 181,6 182,4 2013 2014 2015 2016 2017 GLOBAL BEER VOLUME BILLION LITERS 466 474 530 511 517 2013 2014 2015 2016 2017 GLOBAL BEER MARKET VALUE BILLION EUR AGRICULTURE - BREWING BOTTLING DISTRIBUTION Delivering beer directly to bars ... and picking up empty kegs Beer is delivered to a warehouse. DELIVERY On-trade Off-trade Retailers distribute to the stores themselves.