Carlsberg’s turnaround plan in Russia bears fruit

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Danish brewer Carlsberg (CARLb.CO) said a drive to focus on its top brands and major supermarket customers had revived sales in its key Russian beer market in the teeth of tougher regulations and rising taxes.

Like other big brewers, Carlsberg is relying on emerging markets and price rises to offset sluggish demand in western Europe and stiff competition in mature markets.

But its leading position in Russia has been hampered by a government drive aimed at curbing alcohol abuse, with measures taken including excise tax increases and a ban on advertising in all media, including the internet.

The world’s fourth-largest brewer said on Wednesday its share of Russia’s beer market, where its brands include top-seller Baltika and Tuborg, rose to 38.9 percent in the third quarter from 37.9 percent in April-June.

Its Russian beer sales rose about two percent, contrasting with a 2-3 percent fall in the market overall.

“We are seeing clear signs that we are on the right track in Russia,” chief executive Jorgen Buhl Rasmussen told analysts.

A year ago, Carlsberg replaced the head of Russian division Baltika Breweries to address slowing sales.

It has increased its focus on best-selling brands, cutting out those which have not sold well, and taken a more targeted approach to marketing in a country which is seeing a shift from small, local stores to large supermarkets.

“The market share data for the third quarter is an indication that these initiatives are starting to bear fruit,” Rasmussen said.

A BATTLE FOR GIANTS

With the improvement in the third quarter, Carlsberg has increased its market share in Russia for three consecutive quarters following a string of declines.

Rivals including Anadolu Efes (AEFES.IS), which is owned by world No. 2 SABMiller (SAB.L), and Dutch group Heineken (HEIN.AS) lost market share in the quarter, while Anheuser-Busch InBev (ABI.BR) held its ground, Carlsberg said.

Carlsberg shares were up 3.8 percent at 537.5 Danish crowns by 1250 GMT, one of the biggest rises by a European blue-chip stock .FTEU3.

“The result is particularly positive in Russia,” said Sydbank analyst Morten Imsgard. “I see this as a sign that they are in control of the Russian business.”

Group operating profit rose almost 10 percent to 3.6 billion crowns ($618 million) in the quarter, compared with a forecast for 3.72 billion crowns in a Reuters poll. Sales grew to 18.8 billion crowns against a forecast 18.6 billion.

Eastern Europe and Asian sales cushioned continued sluggish demand in western Europe, where sales contributed 55 percent of total group revenue while eastern Europe made up 32 percent.

“The positive is that they grew in Russia in the third quarter,” Alm Brand analyst Stig Nymann said.

Carlsberg kept its 2012 outlook for operating profit before one-off items to be at the same level as in 2011 when it reached 9.82 billion crowns.

($1 = 5.8276 Danish crowns) (Editing by Dan Lalor and Mark Potter)