Ravn says portfolio of beers changed the dynamics within Carlsberg and immediately made it more exciting for clients to work with it. MD understands a constant need to stay on top.
But whatever job pressure that lurks deep inside an executive, that surely isn't visible from Soren Ravn's veneer.
The 39-year old managing director of Carlsberg Brewery Malaysia Bhd (Carlsberg) looks relaxed as he steps in for this interview with StarBizWeek.
It's been exactly three years since he assumed this position when he sits down for this meeting, and during that period, the beer maker has managed to chart growing sales despite a challenging, competitive environment.
Still, Ravn, who is the youngest managing director in the history of Carlsberg Malaysia, realises that there's still much to do.
In an industry which is largely dominated by two players of which Carlsberg is currently number two, Ravn understands that there is a constant need to stay on top of the game.
“In 2010 when I came in, I decided to continue with the company's strategy at that time, which included using a wide portfolio of products to reach more customer segments,” he says.
Some of the 100 fans enjoying the live semi-final match at Donbas Arena in Donetsk, Ukraine for the UEFA Euro 2012.
Ravn says that portfolio of beers changed the dynamics within Carlsberg and immediately made it more exciting for clients to work with it.
It also upped its ante on selling its premium brands owned by the group like Somersby Apple Cider and Kronenbourg as well as its third-party brand, Asahi Super Dry.
Upping the ante
The acquisition of Luen Heng allowed Carlsberg to move beyond being a one-brand company where sales of its flagship Carlsberg was the mainstay of its business.
It also meant that the company would have more arrows in its quiver when it came to taking on the competition predominantly in the form of Guinness Anchor Bhd (GAB).
“Our competitor had earlier transformed into a portfolio company rather than remaining a one-brand company.
“They gave us a hard time when they first started to invest in their three key brands against our one brand. They made very good progress and we were fighting hard.”
“We sort of finally realised that there was no way we could just rely on our number one beer, we had to have a portfolio to flank it. Then was when we started to get back some momentum.”
“But I could see that in terms of profitability we would never be able to match our competitor because what they did brilliantly was selling premium brands that were locally produced.”
In other words, GAB managed to sell their brands at a premium pricing using local production costs.
“That gave them a lot of money and they could use part of that money to whack us in the mainstream segment,” he recalls with a slight wince.
What happened next served Carlsberg well enough.
“We started to identify some of those premium brands that we had and assessed whether we could move them to local production so we could get a similar margin for our premium brands and we ended up with the two that we preferred Kronenbourg and Asahi.”
In December 2011, Asahi became Carlsberg's first premium beer brand to be produced locally and it started local production of Kronenbourg 1664 and Kronenbourg Blanc in the middle of last year.
“We then managed to get long-term deals in place and then really started to attack the premium segment.
“And that is what has been driving our growth over the last couple of years.”
To get scale and to match its competitor, Carlsberg has continued to focus on its core range.
“What we want is to have all our outlets carry Carlsberg's Green Label, Kronenbourg, Asahi and Somersby, and then we want the Luen Heng portfolio to differentiate and spice things up.”
In totality, Carlsberg has 20 plus different beers, a large wine range and five to six key spirit brands.
“We try to mimic what our competitor has done but we also have something that they don't have which is Luen Heng.”
Revenue mix
Currently, about 80% of Carlsberg's revenue is from the mainstream segment which is primarily the Carlsberg Green Label. The balance of sales comes from premium beers and other brands.
Ravn says the company is looking to “quite dramatically” increase the contribution of its premium beers and other brands to around 40%. “That would be a healthy balance. We will like that to be the case in 5 years.”
Still, growth of its core products will not be sacrificed.
“Whenever Asahi is placed in an outlet, we will also put in our mainstream Carlsberg products and because Carlsberg has such a presence, it could get maybe 50% of the outlet's sales. That means that even though sales of our premium brands are growing, sales of our Carlsberg mainstream products will also grow.
“What we want is to grow our volume faster than the market, our revenue faster than volume and our profit faster than revenue.” “Basically, we need to take a 2% to 3% volume growth and turn it into a 6% to 7% revenue growth and a double-digit profit growth. That's our ambition,” Ravn says.
This will be achieved largely by growing its premium beers segment and improving efficiency processes across segments, including cutting wastage in raw material usage and of working hours. “We are also running a marketing effectiveness programme, which will look at the returns of our marketing investments. It's something we have to do with all the brands that we have. We need to make sure that we have scale.”
Because the company now has more product types, it can target different segments and collaborate with customers to host different types of social events.
“Our Somersby, for example, is very popular with the female crowd,” says Ravn. The beer maker would only be “looking at” a possible price increase in the next couple of months amid a trend of increasing raw materials. Carlsberg has not made a decision on that yet.
The last time it increased its product prices was in May last year when it bumped up prices by an average of 3%. But as Ravn has said before that with or without a product price increase, the company intends to outpace growth of the local beer industry by focusing on improving efficiency and leveraging on its product portfolio.
The beer market is likely to grow this year, albeit by single-digit, tracking the growth trend of the past few years. “We hope that after the general election, the Government will still consider excise duties as being too high as it is the second highest in the world. “I don't think there is much justification of going any higher than that.”
Brewing in the Lion City
Carlsberg's Singapore business, which currently contributes 25% of Carlsberg's total revenue, is growing nicely, Ravn says “Singapore is different compared with Malaysia because it is a much more open economy. There are no import duties and basically everybody can play even if you don't have a brewery.
“Singapore has high beer prices but everybody can come in and with players from China and Thailand around, there are a lot of cheap products coming in.” That basically means that competition is relatively stiff in the city-state.
Carlsberg has a 20% market share in Singapore and has been growing its volume better than the market in the 5% to 7% range in the past few years. It intends to continue to do this by riding on its product portfolio and selling more of its premium beers as it has been doing.
“We actually moved ahead of Malaysia in introducing our premium brands there. “Basically we are fighting against all these one-brand importers there. We can lock in outlets which then only carry our brands and this is how we outgrow the market.”
As a percentage, so far over the last two to three years, Carlsberg's volume in Singapore has been growing faster than in Malaysia although both markets have been growing profits by double-digits. “I expect we would be able to continue with a similar growth momentum for both Malaysia and Singapore; maybe there is more natural growth in Singapore but it also has many more players.”
Expansion plans
Carlsberg is growing its volumes and production by brewing beers it had not done in the past but there's no reason at the moment to look and add space or pour big money into its brewery in Shah Alam, Ravn says.
“We have always managed to squeeze out some capacity by looking at where the next bottleneck production is at. We expand capacity gradually every year without any heavy investment.”
The company also has some flexibility because Carlsberg, as part of a big group in Asia, has many breweries in the region. “Our strategy is to give priority to domestic volume, then Singapore, and then exports in order to fill up our brewery and get good scale.”
As for investing in new brands, in terms of portfolio composition, the company is happy with what it has.
“We will be focusing on our current premium brands which are Kronenbourg, Asahi and Somersby, and will be investing in these brands over the next two to three years. “In terms of new brands, Luen Heng may bring in some new things.”
The good thing about Carlsberg's model is if something exciting is happening in the world, it can move “very quickly” with Luen Heng, says Ravn. “They can just try out the brand and see if it works well. We can also sell it via the Carlsberg sales force and then if we feel we can really hit jackpot with the product, we can consider local production.”
Delving into investments, Ravn is looking forward to launch its sponsorship of the English Premier League (EPL) from the 2013/14 season. Carlsberg, which was the beer sponsor for Euro 2012, made a “very expensive” investment for that event, he says, with a laugh.
The company found that although the Euro championship was a great platform for sales, the timing of the matches was a problem here, with most matches being played in the wee hours of the morning. “The beautiful thing about the EPL is that the timing of the matches is fantastic, on Saturday and Sunday evenings around 9pm, and everyone has at least a match one wants to see every week.“With 5 billion viewers throughout the season, this sponsorship is excellent for our brand.” Carlsberg has entered into a three-year partnership with the Premier League as the official beer partner of the Barclays Premier League. The partnership kicks off in August.
Carlsberg shares ended up 14 sen to close at RM13.80 yesterday.
