VP Eastern Europe Carlsberg Group: Azerbaijani government makes big efforts for business development
Baku, Azerbaijan, June 20
Interview of Trend News Agency with Vice-President of Eastern Europe Carlsberg Group Lars Lehmann.
How successful was 2018 and the first quarter of this year for the company?
2018 was definitely a strong year both for Carlsberg Group and Carlsberg Azerbaijan in particular. It was a year when we continued gathering fruits of global Sail’22 strategy started in 2016, the main ambition of which is to make Carlsberg Group the successful, professional and attractive brewery on markets we operate, and we were really proud of 2018 figures. Talking about top-line results, we increased total volume for 4.8%, net revenue for 6.5% and operating profit for 11%. For Carlsberg Azerbaijan 2018 was also a very successful year. Carlsberg Azerbaijan managed to continue growth in volumes in all channels.
Talking about sustainability resulsts, I am proud to say that since its 2015 baseline, Carlsberg has reduced relative carbon emissions by 20% and water consumption by 9%, showing the Group’s determination to decouple growth from environmental impacts. And sustainability results of Carlsberg Azerbaijan are also amazing: within three years, the consumption of natural gas was reduced by 34%, water consumption by 43%, and electricity by 33%.
As you know, beer business is extremely seasonal and results are influenced by whether conditions. So first quarter is low season period, but still we have inspiring Group results.
In Carlsberg Azerbaijan, which is influenced by seasonality even more than other markets due to consumption peculiarities, results were a bit lower than we expected, but we are at the very beginning of high season, when we make more than 60% of annual volumes, so expectations and goals are high and local team works hard to achieve them.
How do you assess the investment climate and business sphere in Azerbaijan? What are the current problems in the local beer market?
Situation with business environment is quite good. We are very glad to see the big efforts that Azerbaijani government makes on business atmosphere development. Our business feels healthy in Azerbaijan market and we are planning to develop the brewery in upcoming years.
Till the very recent years we have been struggling from illegal alcohol market, however during last couple of years the alcohol drinks’ market is getting more and more transparent, and for us as an absolutely transparent company, which pay all taxes, this is very crucial competition factor.
We understand that despite the large-scale governmental projects aimed to whiten dark market, it takes time for business to realize that “old business mechanism” is no longer possible and it is absolutely realistic to be transparent, pay all taxes and still have profitable business.
But, doubtlessly, we believe that Azerbaijan is doing a good job in improvement of business atmosphere.
Azerbaijan is one of unique markets, where relatively large share of all beer volumes are sold in on-trade channel. And here, unfortunately, we still face problems with low quality fake beer. I believe it is a room for development of control mechanisms, which Government will focus on in nearest future, where we may share our experience.
Your company has been working in the Azerbaijani market for many years. What recommendations can you give for the development of the local business?
I believe that for business to be successful the main factor is constant development. World is changing rapidly and your business should develop at least as fast as the world, just to stay afloat. So the biggest recommendation to businesses here in Azerbaijan is to constatly invest in business, try to develop not only your product, but the whole category you work in.
Doubtlessly, for any kind of business the key success factor is human resources, so I would also recommend to invest in qualified personal and the experience exchange. Always being curious about innovations, using best practices from all over the world is definitely a straight way to success.
Looking back at more than 170s history of Carlsberg I can claim that it was at the main factor, contributing to grow from Brewery in Copenhagen to a huge international corporation presented in 140 countries.
I would recommend not to concentrate on immediate gain, but to focus on long-term business profitability and sustainability. This stands at the heart of Carlsberg’s founder J.C.Jacobsen’s philosophy. For more than 170 years these Golden Words have been engraved at the entrance of our headquarters in Copenhagen and they still remain relevant.
How strong is the competition in the Azerbaijani beer market?
It is not a secret, that Carlsberg is a biggest producer of packed beer in Azerbaijan. Competition creates a room for growth for all involved parties, and we are very glad to see competitors on market. But for us the most important factor here is a fair competition. Doubtlessly, there is a competition on local beer market, mostly with small breweries. And we always support fair competition and variety of choice for consumer.
What are the situation and trends in the global beer market?
For company, to keep growing dynamics it is crucial not just to follow, but to oversee and even create trends.
On markets we operate, we clearly see that people are willing to experience new tastes and flavors. Of course, you should constantly keep high-quality lagers in portfolio and it makes a strong basis of your beers, but now as never before we have crafts and specialties. We clearly see this trend all around the world and expect that it will come to Azerbaijan in nearest future.
Alcohol-free beers is one of the most attractive current trends. This trend meets lots of modern directions – it is healthy, cool to refresh and tolerant to people of different religions. So we expect that during upcoming years it will continue to grow steadily.
That’s why back in 2016 when our global strategy Sail’22 mentioned earlier was launched we analyzed all factors and possible directions of future development and adjusted our plans taking into account current and future trends. On all markets of Carlsberg presence, we are trying to make our portfolio rich and strong, and include basic sorts as well as add new and inspired by local traditions.
Does the local market greatly differ, for example, from the markets of the CIS or European countries? Does the Azerbaijani market have its own peculiarities?
As we operate on beer market, I would like to focus on beer market peculiarities. Definitely, yes. One of the main peculiarities of local consumptions is Azerbaijani consumers prefer light lagers.
It is very much influenced by weather conditions and seasonality and on our marketing communications we make special focus on high season level, offering additional products and making special summer campaigns, so that all categories of consumers find a beverage they like in Carlsberg Azerbaijan portfolio.
Another peculiarity is surprisingly cheap strong alcohol drinks, and especially vodka. In markets we operate we usually witness quite big price gap between strong and light alcohol drinks, which meets policy of promoting drinks with less alcohol percentage to reduce alcohol consumption in general, but in Azerbaijan this gap is very small. This forms a shift in consumption towards strong alcohol, and we believe that this is something to work with.
Also high growing speed of Modern trade – large supermarket chains. Currently, share of MT in Azerbaijan is no more than 10-15%, whilist in Russia it is 40% and in Western Europe even 60-70%. We forecast further growth of this channel and try to succeed in it. I believe MT is a channel, beneficial for all the parties: for business and government the benefit is total transparency, for consumer – large variety of choice. For us it also means the larger space to represent our broad portfolio and offer consumer different tastes.
In Azerbaijan there is a strong tradition of gathering together for some celebrations or just to have a fun time. For us this means a growth of HoReCa channel. And we are very happy, that our beer stands at the heart of these moments, and means more than just a beverage, but makes a part of consumers’ care free time and adds value to their celebrations.