While Carlsberg’s chief executive remains confident on the company’s overall results and future, and as the Danish drinks giant comes to grips with difficult market conditions in Eastern Europe, even as its fourth-quarter sales may have missed expectations.
“At the end of quarter four, Russia was a bit weak – that has a cause (with there being) a ban on big bottles,” Carlsberg CEO’s Cees ‘t Hart said. The brewer had to prepare for the changes during the second half of 2016 with the ban starting on January 1, 2017.
“So what you see is in quarter three is strong sales and in quarter four, low sales in anticipation of and being prepared for that ban, and that has caused some lower sales in Russia but for the rest we are satisfied about 2016. It was a good year for Carlsberg.”
As part of the government’s effort to curb alcohol abuse, Russian lawmakers passed a law that would limit the size of plastic beer bottles to 1.5 liters or less, in June 2016.
Reuters reported that while for retail sales it’s expected to come into effect on July 1, 2017, the law came into force for industrial production at the beginning of 2017.
With a greater drop of 4 percent coming in for the fourth quarter, on the overall for Carlsberg, the Russian beer market showed a decline of 1 percent to 2 percent for 2016 overall.
Russian shipments rose 1 percent for 2016, the overall challenging macroeconomic environment in Eastern Europe impacted the company during 2016 and the drinks giant did note that while warm weather boosted market development in the second half of 2016.
“The (Russian) market went down significantly over a couple of years – so three, four years ago the decline was double-digit, a year ago it was single digit and in 2016 it was more or less flattish.”
“So in that respect you could argue that the market is bottoming out. We think that and estimate that the impact on the ban will be a minus five percent on volume in 2017.”
Given the low oil price, sanctions, and changes in the beverages and advertising space, the state of Russia’s economy has proved challenging in recent years. Including what a Trump presidency and Brexit will mean for issues such as trade, other issues around the world provide uncertainties for businesses going forward.
Carlsberg’s CEO said the company wasn’t going to reflect upon the geopolitical issues but recognized that these events were happening when asked about how the political environment was impacting the company.
“At the end of the day for a company like ours, the consumer confidence is the most important and we see that has not changed over the last 12 months – it’s relatively low still in Russia and in that respect we are waiting to read the market in 2017.”
Coming in slightly above analyst estimates, the drinks giant delivered a 2016 net profit of 4.49 billion Danish crowns when looking at the overall figures. To deliver mid-single digit growth during 2017, the brewer expects organic operating profit, looking ahead.
(Adapted from CNBC)