Exploring Corporate Strategy – Classic Case Studies
The Brewery Group Denmark:
Faxe, Ceres and Thor
Flemming Agersnap
The case study explains the strategic moves of Brewery Group Denmark (BGD), a small Danish brewery fighting for a position in a world market. The case shows how small companies can co-exist with giant competitors in an international context and how a coherent international strategy can be built whilst allowing for different local strategies. BGD is an example of a firm which has achieved a distinctive position in highly competitive industry by focusing on importing Danish beer into selected markets, through a network of alliances. The case provides an opportunity to consider the strengths and weaknesses of the company’s strategy and options for the future development.
…
It is better to be dominant in a small niche than to be marginal supplier in a big market. (Claus Nielsen, international sales director, BGD)
Denmark is a beer-drinking country with a long tradition of brewing beer. The Danish brewing industry is dominated by the Carlsberg Group, holding a market share of 70-75 per cent and a worldwide position with sales and production in many countries.
In the Danish market there were four mid-size breweries and a number of small ones competing with Carlsberg. In 1989 two of the mid-size breweries merged their brewing activities into a joint venture ‘Bryggerigruppen’, the Brewery Group Denmark (BGD). This made it the second largest brewer in Denmark and was the background to significant international expansion.
The Brewery Group Denmark (BGD), Faxe, Ceres and Thor
Together BGD supplies about 15 per cent of beer consumed in Denmark, although its share varies within the various Danish regions. Located in Aarhus, Jutland, Ceres has a strong market position there for many years and over the last 30 years it had merged with breweries in neighbouring towns. One of these breweries was the Thor brewery in Randers. In 1996, Thor had a strong position in the northern part of Jutland. Located on Zealand, Faxe had only a small local market, but it had long been an important supplier to restaurants and retails in Copenhagen.
This case study was prepared by Flemming Agersnap, Copenhagen Business School. It is intended as a basic for class discussion and not as an illusion of either good or bad management practice. ©Flemming Agersnap, 1996, 2001.
Exhibit 1 Financial statistics for BGD, 1989-95
1995 1994 1992 1990 1989
Turnover (DKK million) 2.274 2.204 1.977 1.607 1.624
Export share (%) 59 59 52 51 43
Profit before tax (DKK million) 103 93 46 16 -19
Return on equity (after tax) (%) 18 18 12 7 -8
Number of employees 1.089 1.005 1.039 824 930
At the early stage, both Ceres and Faxes felt a need for growth in order to obtain sufficient volume gain in production and subsequent reductions in costs. They first expanded the domestic market to become national distributors, but any substantial growth could be obtained only though exports.
Exhibit 1 shows the financial data for the years after the establishment of the joint venture.
Organisation and Management
Exhibit 2 shows the organisation structure of BGD. After the merger in 1989, the positions of chief executive officer and of international sales director were filled with people with previous experience of breweries. Claus Nielsen came with a background from the international pharmaceutical industry. Hiring manager from outside also solved the problem of choosing a candidate from one of the two existing sales organisations.
BGD was formed as a limited company, where the Faxe and the Ceres companies each owned 49 per cent and their common bank 2 per cent. All beer and soft drinks activities were transferred to BGD. The parent companies also had a few other small activities beside BGD. Both companies were listed separately on the Copenhagen Stock Exchange. The Faxe brewery had a controlling capital owned by the founding family, whereas the Ceres Company had no such controlling shareholder group. Carlsberg owned 38 per cent of the predominantly nonvoting B-shares of Ceres, but without a seat on the board of the company. Carlsberg declared that it had no wish for more active role in the management of the Ceres or BGD, rather its involvement was said to be an investment for financial reasons. Others argued that the investment could be seen as a defensive investment guarding against a foreign acquisition of Ceres.
INTERNATIONAL DEVELOPMENT
Despite the dominance of Carlsberg, in its annual report BGD could lay to being the largest Scandinavian beer exporter. This was because Carlsberg placed emphasis on licensing agreements or local production for its foreign markets, while BGD’s strategy was export led: ‘Eighty-three out of every hundred bottles of beer that we produce are sold in foreign markets.’ By 1995 the percentage of export sales by region of the word was as follows: Western Europe 63 per cent, the Americas 10 per cent, Eastern Europe 22 per cent, others 5 per cent. The development of BGD’s operations in some of these markets is now reviewed.
Italy
More than 30 years ago, Ceres entered into co-operation with a slaughterhouse for pork (Tulip) in a neighbouring Jutland town. This slaughterhouse specialised in select meat cuts and canned meat for different markets. The co-operation led to export to Italy based on the transportation of meat and beers in refrigerated vans. Ceres joined this co-operative venture at the invitation of the slaughterhouse, but in 1996 beer export accounted for 75 per cent of turnover and more than 95 per cent of profit – and the joint sales company in Italy had been bought fully by BGD, though still acting as agent for the slaughterhouse. Claus Nielsen commented:
We are the largest exporter of beer to Italy and dominate the ‘duplomolto’ [strong beer] segment. Our success has been largely due to our marketing strategy. For 30 years we have been concentrated on the on-licence trade – restaurants, discos, bars and so on. We have achieved a very strong position in such outlets, which has given us a strong brand presence in Italy. In these outlets we have strongly promoted out bottled Ceres brand at point of sale. We would prefer people who go to restaurants and discos to be holding our bottle with our brand name on than drinking draught beer out of a glass without a brand name on it. In the last ten years we have also started to develop our presence in the off-licence retail trade – the shops selling beer. As in so many markets, the retailers have become more powerful, but a good indication of our brand strength is that we are able to resist the pressure they put on us for increased discounts. If they want to press us for such discounts, we simply refuse. They can delist us if they like, but they have to come back again because of the strength of the brand.
The Italian culture also helps us. Most young men do not get married unlit they are about 30 and live at home until then. This means that there is a great deal of disposable income for men in their early 20s; and they spend a lot of money in restaurants, discos and bars, where we are strongly represented. They also prefer our brand, which is a premium, strong beer. The trend in Italy away from wine drinking has also helped us. It has become less common to drink wine heavily at lunch, for example. But Italians do like to have a drink and our beer is a good deal stronger than Italian beer. So they can feel good about not drinking wine, but drink a couple of Ceres instead. It looks better, but has much the same effect.
Ceres concept in export markets such as Italy has been to emphasise the origin of the beer, that the beer is imported and to emphasise premium and strong lager beers.
The Caribbean
Ceres also found and developed a market in the Caribbean islands for malt beer. A Ceres manager on vacation in the Caribbean observed that some of the locals were drinking a rather distinct type of beer, dark and sweet. When it was analysed back at the brewery, it turned out that the beer was very much like Danish malt beer, an almost non-alcoholic beer. Exports started and a market niche was developed in that region.
The product, Vitamalt, is rich in vitamins B and D and proteins. Claus Nielsen explained:
In the Caribbean you have two markets for beer: those who drink alcoholic beer and those who do not drink alcohol at all. Our market is for the non-alcoholic market people who do not drink because of their religious beliefs, as well as a significant percentage of women and children too. The product is also believed by some to have aphrodisiac properties.
In a few markets in the Caribbean, local production is beneficial because of high import duties, and Heineken produce Vitamalt in the Bahamas under licence. However, Vitamalt became so successful that both Heineken and Guinness approached BGD with a view to licensing the product for production elsewhere in the Caribbean.
In fact, Vitamalt has a market not only in the Caribbean, but also in many other parts of the world where there are people of Caribbean origin. Sales are high in London, Amsterdam and Paris, for example.
Germany
On the border between Germany and Denmark, a special border trade had developed, since Danes could avoid paying the high Danish duty on beer by purchasing it in Germany. At times this trade has accounted for approximately 10 per cent of Danish beer consumption. Ceres dominated the border market.
Before the joint venture, Faxe also developed a market in the wider Germany for canned beer. In the 1970s Faxe bought tapping equipment for canned beer; for environmental reasons, canned beer was not allowed to be sold in Denmark, but it is accepted in Germany. And canned beer is especially suitable for supermarket chains. This development (plus bottled beers) created a comparative strong position for Faxe in the German market – considering the low level of German imports of beer. Its beers were sold partly in ordinary retail shops and supermarkets, but increasingly also in restaurants.
The Baltic States
The changed political and economic situation in the former Communist bloc has opened up many sales opportunities. Following the break-up of the Soviet bloc, the Baltic states of Estonia, Latvia and Lithuania wished to become more closely linked to other Nordic states, a move encouraged by the governments of the Nordic countries. Trade delegations were organised from Denmark, and BGD took part in the first of these. ‘We realised all the breweries were worn out and the quality of the beer was poor, but the population liked beer.’ As a result, BGD appointed two distributors in Lithuania.
We often appoint two distributors when we start up in a country to see which will be most successful. Here we agreed that both could import the Faxe brand and compete in Lithuania; one would also export to Latvia and the other to Estonia. It has been very successful. Unfortunately we also found that a good deal of the product was crossing the border into Russia, and we got complaints from our Russian distributors about this. We have to change the contract with our distributors in the Baltic States to prevent exporting Faxe to Russia. What we did was to provide them with another brand each, providing they did not export Faxe to Russia. They also have the right to export the other brand to Russia
Elsewhere in Western Europe
In 1993 BGD bought a small British brewery, Cain’s, located in Liverpool, England, and with an established local market. Besides involving a transfer of brewing technology, the acquisition of Cain’s brewery opened up more possibilities for pub sales of BGD beers in that region, though still as imported beer. Similarly, Cain’s traditional English beer was introduced into Denmark and European countries as a supplement to the BGD range.
There are also markets for beers in Holland, Belgium, Austria and Switzerland. Yet as Claus Nielsen said, ‘Why bother when we know we won’t get any result?’ These beer markets are very competitive, but also stagnating. He continued:
We were about to move into Spain, but I said: Stop, Stop. Look how much the others have invested. Carlsberg has lost DKK 500 million. Heineken and all the other big ones are there. Why enter that fight? Why not look to the nice neighbouring country, Portugal, where imported beers account for less than 1 per cent of beer consumption? They are an extraordinarily kind and pleasant people to work with. Let us focus on these 10 million people and try to gain a foothold there. So we were established there before anybody else with imported beer.
Brazil
A fast- growing market for BGD is Brazil. Traditionally, the Brazilian market has been protected by high import duty, varying from 8 to 60 per cent depending on the economic situation of the country. Furthermore, the Brazilian government had been very restrictive and avoided and foreign capital. Big Brazilian breweries took advantage of the situation and set very high prices. But partly as a consequence of the GATT negotiations and partly to counteract inflation, the Brasilian government planned to open the country for imports. The entrance of American and European breweries into the market led to a price reduction of about 80 per cent. Claus Nielsen explained:
There was an opening coming up and I could see there was an under supply. We took the step with imported beer before anybody else and were successful. It was a combination of timing, of finding the right partner and of the change in regulations.
We though of using our Caribbean concept, malt beers, since the northern parts of Brazil resemble the Caribbean climate and population. However, a closer study and an awareness of the culture of Brazilian society led us to act differently.
Brazil is a multiethnic country, although many Brazilians get angry and agitated when one wants to distinguish between the European and African parts of the population. Such distinctions do not exist for the Brazilians. Now I have been there several times and differences do exist. For me it was like walking around in Africa and in the ethnic parts of London and Paris. Those who understand and adapt to the differences will obtain benefits in this market. And that is what we have done. So in the end we have emphasised a European approach – also because of the partner we found.
We were very lucky with the partner we found. Café Bom Dia is a company with a distribution network covering all relevant segments of the market. It is a modern coffee roaster with ISO 9000 certification of quality; the biggest in Brazil. They have a distribution network covering coffee shops and supermarkets and delivery to 90,000 restaurants. And today our beers are placed on their vans.
They know – or we tell them – that if they choose Heineken or Carlsberg, these breweries in a few years’ time will start local production and take over the distribution. The big ones enter as ‘big brothers’. They chose us – we have been very lucky and the sales volume is growing rapidly.
There is also a benefit with regard to the cost of distribution. They are one of Brazil’s biggest coffee exporters and we have arranged to use their empty containers to ship product into Brazil at a lower cost than we would normally incur.
I have never – like other breweries – entered a market together with other breweries, not even local ones, in a joint operation. It may give an easy start if the partner has the set-up, knows how to distribute the beer – and has the same target group. But one only gets the share of the market the partner allows one to get. I want to find a partner where we complement each other instead of competing. It can be a soft drinks distributor – or a coffee distributor. In India we will enter a contact with the biggest tea distributor.
Russia
By 1996 BGD was also operating in Russia
The Russian market is huge and the demand for beer very high; but there had been no investment in the breweries and they produced very low-quality beer. In 1993 we began with a number of distributors in order to handle the problems of distribution. However, eventually it became clear there were two performing really well and we were approached by both of them for sole distribution rights. Given the way in which business is done in Russia, this is not a straightforward matter. We eventually decided on one distributor who is also a major distributor of other food products to cash ‘n’ carries and small shops in the cities. It also has associates who can handle distribution elsewhere in Russia; and it is a very sophisticated operation in terms of the education of their management and their computer and distribution systems. It is proving to be immensely successful: for example, we have 80 per cent retail penetration in Moscow.
Russia is now our biggest export market, in terms of volume.
Initially we found problems because of transport costs to Russia. There was one major container distributor from Denmark who quoted extremely high costs of distribution. We overcame this in a rather novel way. We decided in the summer to ship our products direct to Moscow by river using barges with loads of 2 to 6 million bottles. Keeping transport costs down in beer distribution is extremely important.
China
The Chinese market for beer is growing at around 10-20 per cent per annum, and Claus Nielsen saw it as one of the most attractive markets for the near future.
It is of course a huge market, but we had to be very clear about our positioning. Most of the people in China are not that wealthy, but there is a percentage of the population which is. China has become one of the largest markets for Rolex watches, Mercedes cars and French XO Cognac. We decided to position Faxe as a premium product and target geographic regions where there was high disposable income. Our distribution strategy was also important. Most western companies have tended to go through Hong Kong, where they can find English-speaking distributors. But of course it adds to cost of distribution. We wanted to export to China direct. Most organisations we contacted wanted a joint venture arrangement for manufacturing and the building of a brewery. This is of course not our strategy; we can only deal with export beer, so we were not prepared to do this. We spent three years finding the right distributor and eventually did so. It is a government-owned organisation, regionally structured, selling mainly liquor and tobacco, but not beer until now, to tax-free shops throughout China. We began in September 1995 and we are doing well. We also distribute Ceres through the more traditional route via a Hong Kong distributor.
The MARKETETING CONCEPT
BGD did not intend to compete directly with the big international breweries on their major markets, with standard-type beers. It looked for niches for special forms of distribution or special products. The core of BGD’s international marketing concept has been to emphasise that its beers are imported. There was no local production of its brands outside Denmark and its beers are alike in all countries. As Claus Nielsen says: ‘The big breweries adapt their brands to the various markets. Let them have these markets. If we are to get any distinction, it must be tied to the fact that our beer is always the same Danish beer.’
So BGD emphasised the development of its sales organisation in the various markets more than price and production costs. in this way, its beers could be seen as competing more with beers like the Dutch Grolsch beer than with widely sold beers from, for example, Heineken or Carlsberg. The consumer might think of the beer as something to be chosen for a special occasion and not as a daily standard product.
The types of customer and the consumption patterns of the standard beers and of special beers were quite different. Although in a specific country the market for expensive imported beer might be small, it could be an attractive size for BGD. Furthermore, imported beers were acquiring an increasing market share worldwide, even though by 1996 they exceeded 10 per cent of the total market in only a few countries.
BGD IN DENMARK
Like Carlsberg (and Tuborg), BGD had a wide assortment of beers, ranging from non-alcoholic beers and ordinary beers to premium beers and strong beers. Alongside their traditional beers the two breweries introduced a number of specialities, such as Dortmunder beer (Ceres), draught beer in cans or special bottles (Faxe), and Christmas and Easter beers. BGD had not produced and sold discount beers to the big retail chains.
In the Danish market, Faxe had intended to launch draft beers in cans. When distribution in cans was banned, Faxe launched draft beer in special dark bottles with a different shape than ordinary beers. The dark brown colour of the bottles was necessary because the draft beer was more sensitive to sunlight than ordinary beers. It was a success at the time, since many smaller restaurants and bars did not have beer-tapping equipment. Gradually the price on this equipment has fallen and many restaurants and bars have got beer taps, so this special market has almost vanished.
In 1996 the ban on canned beer was up for reconsideration. The EU understood the environmental reasons behind the ban. However, in Sweden, canned beer has been allowed provided there is a ‘pawn’ on each can which is refunded when the empty can is returned. This system which is similar to the present Danish one for bottles ensures that the cans are recycled. It is actively debated whether, by such a system, cans represent a heavier burden on the environment than bottles. The cans have a high return rate (to cash the pawn) and are reused through a melting process. The bottles are directly reused, but the washing of the bottles requires many chemicals and considerable amounts of water.
The major reason that the EU wanted the ban lifted was that is seen as a trade barrier. It is difficult for a foreign brewery to tap beer in the special Danish bottles and to handle the bottle return system. If the ban is lifted, canned beers are expected to account for only about 10 per cent of the market. But it would be far easier for a German brewery to enter this market niche.
In the Danish market, BGD also sells a number of soft drinks, some under its won brands and others under licence to tap and sell, such as Pepsi Cola and 7-UP.
INTERNATION MANAGEMENT
With so many international opportunities to consider, Claus Nielsen commented:
I have a well-functioning organisation with seven regional managers and their staff and the most efficient shipping/transportation department in Denmark, exporting more than 15,000 containers a year. I only want to expand at the pace of adding a new colleague each year. He or she has a chance really to get versed in the job and to get attention from the organisation. Then soon they may get their own independent area of responsibility. So physically we cannot enter all the potential markets, not even all the promising ones. We must focus on some and leave the others till we have the organisation to enter them. We aim at structured and well-studied approaches, but sometimes it is incidental information that tells us where the best potentials surface.
I like to run a very flat structure. The regional executives have total operating control over their regions. It is my job to set up new businesses around the world – I spent a lot of time in China in 1995, for example – and deal with overall strategy, price setting and yearly budgets. They run the businesses. It does mean a lot of travel; I try to visit all major markets at least once a year. In 1995 I spent 150 days out of Denmark.
MANAGING THE BGD JOINT VENTURE
The joint venture mainly had an impact on the organisation of sales and distribution, but not on production. In the domestic market, a number of depots were merged and considerable cost savings achieved. In the international markets where Faxe had a significant export market Ceres was virtually absent and vice versa. Faxe was positioned in one way and Ceres in another, so they complemented each other without overlap. The success was evident. In 1989 exports were DKK 514m and in 1995 DKK 1,522m.
Although the sales organisation became fully merged, the production units remained separate according to the old company structures, with breweries in the towns of Faxe, Ceres and Thor, and brands exclusively brewed where they were first introduced. This was said to be necessary due to special requirements as to water and yeast as well as local knowledge of the brewing processes.
Just for fun we have tried to let the Ceres people brew some Faxe beer. It didn’t taste the same. Similarly, Faxe people have tried to make Ceres Dortmunder. It didn’t work either. We do not want any risk of mixing pf the years, so they are kept apart. The water supply is also very different. Carlsberg has a brewery in Copenhagen and on in Fredericia, Jutland, where they brew the same beer brands, but experienced brewers can tell where one of these beers is brewed.
The absence of merged activity in production was also attributed to the existing cultures and loyalties among managers and workers. Traditionally, the two breweries have been staffed at the top levels by ‘brewers’ – people with a pharmaceutical, chemical or engineering background at university and later trained within the trade and with formal education from the special advanced Scandinavian Brewing High School. This tradition had created a high professional standard and intimate knowledge of the trade, but had also meant a certain level of closure to other forms of training and experience from other consumer goods industries. Similarly, the experienced brewery workers had developed a competence in, for example, adjusting the beer taste and a strong attachment to the specific brewery.
This has meant that the brewers have emphasised their wish to have full discretion in running a brewery and have been reluctant to consider more integrated operations. However, the expansion in sales volume required the full use of capacity, utilising established production patterns.
THE DANISH BREWERY GROUP A/S: 1998-2000
In 1998 The Brewery Group Denmark became The Danish Brewery Group A/S. Claus Nielsen also left the company. The following extracts from the annual reports provide an explanation of developments in some key areas of their business.
1998
On 22 April 1998 and with effect from 1 January 1998, the former Brewery Denmark A/S merged with the holding companies Jyske Bryg Holding AS, Faxe Bryg Holding A/S and Rolink A/S with Jyske Bryg Holding AS as the Continuing Company. After the Merger, Jyske Bryg Holding AS changed its name to the Danish Brewery Group A/S. Through this transaction, The Danish Brewery Group A/S obtained a direct listing on the Copenhagen Stock Exchange and the ownership structure was considerably simplified.
Domestic market
In general, the Danish market was affected in 1998 by the cold and rainy summer as well as the industrial dispute which culminated in a 2-week strike in the spring of 1998.
Total beer sales in Denmark declined by some 7 per cent in 1998. In addition to the above-mentioned factors, Danish beer consumption is generally showing a negative trend.
The competitive situation in the in the Danish market has further intensified and in 1998 the Danish Brewery Group A/S had to see slightly declining market shares in the segment, whereas stronger beer types and duty-free beer have gained ground.
Total consumption of soft drinks is estimated to have decreased by 3-4 per cent in 1998 caused, it must be assumed, exclusively by the strike and poorer summer weather than in 1997
Russia
The year was characterised by the turbulent situation in Russia with the crisis in August obstructing continued sale of import beer – including Faxe – in the Russian market. Since that time, Faxe has not recorded any sales to this market. The loss of the Russian market is estimated to have reduced export sales by some 7 per cent of total export volumes.
UK
In the UK market Robert Cain & Company Ltd, recorded declining sales with a reduction of volumes from 1997 by some 13 per cent, primarily due to intensified competition on brand products due to, among other factors, the strong British currency favouring imports from continental Europe. In spite of the competition, the subsidiary continued improving its operating results in 1998 primarily due to improved production efficiency. Investments in Robert Cain’s brand products continued in 1998, evidenced by, among other things, the opening of another four pubs.
Germany
The German market showed a positive trend and Faxe Premium remain the top selling import beer brand in Germany. In general, the German market is characterised by a considerable number of breweries, excess capacity and few strong retail chains, which produces keen competition among breweries.
Italy
The sales increase in Italy continued in 1998 with both sales and earnings meeting expectations. Considerable resources have been allocated also in 1998 to strengthening the company’s brand products and product development.
Malt products
Sales of the Group’s malt products are still on the increase in established markets such as the Caribbean and the UK as well as in development markets in Africa, etc.
1999
At 1 July the Danish Brewery Group A/S acquired 50 per cent of the share capital of the Swiss company Drinktech Holding AG through a new issue of share of CIIF 5.5 million. Through interests in the breweries in the Caribbean, Africa and the Pacific, this investment is expected to reinforce the position of the Danish Brewery Group A/S on malt products.
During the autumn, the Danish Brewery Group A/S successively acquired a total of 95.2 per cent of the share capital of the Lithuanian brewery AB Vilniaus Tauras. At year end, the total investment in Vilniaus Tauras share amounted to some USD 4.8 million. Also in Lithuania, a 50 per cent share of the distribution company UAB Bartos Prckyba, which handles the sale and distribution of the Faxe products in Lithuania, was acquired.
Domestic market
The decline in Danish beer consumption continued in 1999 as a 2 per cent decrease of consumption from 1998 is estimated. However, the Danish Brewery Group A/S’s sales increase slightly from 1998 and overall the Group’s beer brands have managed to win market shares in 1999. In particular, Faxe beer and the newly launched ‘ROYAL’ de luxe products comprising ROYAL EXPORT, ROYAL SELECTION, ROYAL STOUT and ROYAL ALL MALT have gained significant ground.
Russia
The overall level of international sales in 1999 matched that of 1998 in spite of the Russian foreign exchange crisis in August 1998 putting a stop to the exportation of beer to Russia. Viewed in isolation, the loss of this significant market has resulted in a 10 per cent reduction, approximately, of international volumes in 1999
UK
In the UK market, Robert Cain & Company Ltd achieved considerable sales growth partly due to supplying a UK chain with private brand, and partly due to satisfactory growth in respect of Cain’s own brands.
The position development of Robert Cain & Company Ltd continued in 1999 due to the increased level of activity and continuously improving production efficiency.
Germany
The Danish Brewery Group A/S’s subsidiary succeeded in 1999 in increasing sales significantly due to increased distribution in retailing. Also sales to the retail trade at the German/Danish border have shown satisfactory development.
Italy
In 1999 sales in Italy were more or less at the 1998 level, whereas earnings were affected by the costs of terminating agency agreements. Considerable resources are still being spent on developing the Company’s brand products and on product development.
Malt products
In 1999 the development of the Group’s malt products was primarily characterised by growth in Africa, where Ghana has entered into a licence agreement for the production and marketing of Vitamalt.
2000
On 11 September 2000 the Danish Brewery Group submitted a cash bid to the shareholders of Albani Bryggerierne A/S. Upon the expiry of the bid period, the Danish Brewery Group held some 87.1 per cent of the share capital and some 71.8 per cent of the voting rights of Albani Bryggerierne A/S.
Through the subsequent compulsory bid for the remaining share of Albani Bryggerierne A/S and other purchases on the market, the Danish Brewery Group’s share of Albani Bryggerierne A/S had by the end of 2000 been increase to 90.8 per cent of the share capital and 74.3 per cent of the voting rights.
The Danish Brewery Group acquired the remaining 50 per cent of the share of the Swiss Company Drinktech Holding AG which is now wholly-owned by the Danish Brewery Group.
Domestic market
For the Danish Brewery Group (excluding Albani Bryggerierne A/S), beer sales in Denmark went up by some 3 per cent. The Danish Brewery Group thus reinforced its market position on beer in the Danish market as it is estimated that total beer in Denmark in 2000 declined by some 4 per cent.
Increased sales of the Group’s brands concern the lager products from Faxe, Ceres and Thor as well as the ROYAL series, whereas low-alcohol-free beers have showed a decline.
Excluding Albani Bryggerierne A/S, total group sales of soft drinks in Denmark remained at the 1999 level. … Overall, the Danish Brewery Group has strengthened its market position as it is estimated that total soft drinks sales declared by some 3 per cent due to, among other things, a wet and cool summer.
UK
Excluding malt products, the Danish Brewery Group’s sales in England declined by 14 per cent, and the financial result of Robert Cain & Company ltd are not satisfactory. The sales decrease is due to a significant reduction of private brands sales to certain UK retail customers – a decrease that has not been offset by a positive development for the Cain brands, both in the (hotel, restaurant and catering) and the retail sectors, and for Faxe Premium.
Germany
The German market is still characterised by declining beer consumption (estimated at -2 to -3 per cent), and intensified competition due to considerable excess capacity in a highly fragmented industry. … Sales in Germany went up by 9 per cent from1999 (excluding Albani and Maribo). Overall and considering the keen competition in the German market, the financial results of the German activities have been satisfactory – and better than in 1999.
Italy
Developments in Italy have been highly satisfactory with a total sales growth of 8 per cent in 2000. The new product Ceres North Light, which was launched in 2000, accounts for about half of the growth, but also the main product in the market, Ceres Strong Ale, showed satisfactory growth. Accordingly, the extension of the product range has a positive effect on the existing product portfolio.
Malt products
Own-produced malt drinks are primarily sold in England, the Caribbean and the USA. Sales of own-produced products showed and increased of 16 per cent in 2000 (including Albani’s malt sales in the fourth quarter).
Products produced under licences are sold in the Caribbean and in Africa. Volumes in the Caribbean have been slightly increasing, whereas Africa has been affected by a decline in Ghana.
Total malt drinks sales increased by 1 per cent over 1999. Sales of malt drinks amounted to 7 per cent of the total volume of international activities in 2000.
Some 140,000 hectolitres of the Vitamalt brand were produced under a licensed in Nigeria in 2000 compared to 125,000 hectolitres in 1999.
Turnover from international activities amount to DKK 1.8 billion, equal to 62 per cent of the Group’s total turnover. International turnover has increased by 15 per cent over 1999, including 2 per cent accounted for by the Albani and Maribo products.
Summary financial statistics, 1996-2000
Key figures (DKK million)
2000
1999
1998
1997
1996
Turnover
2849.9
2469.5
2453.2
2560.7
2293
Profit before tax
189.7
226.1
159.1
139.5
126.4
Return on equity after tax
19.2
27.5
20.8
16.2
14.6
Number of employees
1731
1282
1119
1142
1096
International activities in 2000
Growth over 1999
Turnover
Sales
Market area
2000 DKK M
2000 – khl
Turnover
Sales
Northern Europe
Sweden
17.6
47.6
-3%
15%
Greenland/the Faroes/Iceland
12
58.6
7%
-11%
Other markets, Northern Europe
3.9
2.4
-54%
-18%
Total Northern Europe
33.5
108.6
-11%
-2%
Western Europe
Italy
550.5
367.5
11%
8%
Germany
363.9
815.8
15%
13%
England
344
323.4
-2%
-14%
France
28.2
33.9
12%
0%
Other markets, Western Europe
23.3
60.7
189%
491%
Total Western Europe
1309.9
1601.3
10%
8%
Eastern Europe
Lithuania
128.1
262.7
516%
326%
Poland
67.7
113.8
39%
41%
Other markets, Eastern Europe
1.7
5.9
-39%
-22%
Total Eastern Europe
197.5
382.4
173%
154%
Other markets
Tax-free
56.2
110.9
-38%
-41%
Caribbean
25
17.5
-10%
-13%
Middle East
11.4
23.3
208%
183%
USA/Canada
9.9
12.5
169%
54%
Africa
2.4
3.9
-68%
-31%
Other markets
1.8
3.1
18%
-16%
Total other markets
106.7
171.2
-21%
-26%
Malt
Caribbean
48.9
99.2
18%
6%
England
36
33.4
22%
14%
Africa
7.9
12.5
18%
-59%
USA/Canada
6.9
8.9
-9%
12%
Other markets, malt
16.1
24.6
44%
68%
Total malt
115.8
178.6
20%
1%
TOTAL
1763.4
2442.1
15%
13%
source: year-end report 2000 of Danish Brewery Group A/S
Credit:ivythesis.typepad.com
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