Carlsberg Group Business Model Review Report

By Danny Vojcak
The Carlsberg Group is the world’s 4th largest brewery group with a large portfolio of beer and
other beverage brands. Carlsberg A/S is involved in the production and marketing of alcoholic and non-
alcoholic beverages, the development and selling of real estate projects, and the operation of the
Carlsberg research center1. Carlsberg has over 40,000 employees and sells over 500 brands in more than
150 markets across 35 countries. Their primary beverage brands are Carlsberg, Baltika, and Tuborg.
Seventy-five percent of their volume sold was in 25 markets across Europe and Asia. Carlsberg’s
customer value proposition (CVP) is to brew for a better today and tomorrow by brewing beers that bring
people together while delivering value for shareholders, employees, and society 2. Carlsberg is also
expanding its CVP and becoming customers’ preferred beer by integrating sustainability into its Sail’22
corporate strategy and offering 100% distribution of alcohol-free brews by 2022.

Environmental and sociological factors are the primary drivers of change in the beverage industry.
Climate change and increasing resource scarcity, particularly in regards to water, are forcing beverage
companies to develop more efficient production processes 3 and invest in R&D for obtaining clean water.
Additionally, an ever-growing segment of consumers desires to purchase from companies that have
integrated sustainability into their corporate strategy 3. Finally, increasing consumer preferences for
alcohol-free brews is forcing beverage companies to expand their product offerings to include non-
alcoholic beverages.

The Carlsberg Group’s business model consists of its customer value proposition (CVP), profit
formula, key resources, and key processes. Carlsberg’s purpose is to brew for a better today and
tomorrow, and it creates value for society by offering beer and beverages. Their key resources include the
raw materials for making beer, electricity & water, their core products (Carlsberg, Baltika, Tuborg) and
their recognizable branding (ie their slogan “Probably the best beer in the world”). Carlsberg’s key
processes include their scientific and efficient malting, brewing and fermentation processes, their Sail’22
corporate strategy, their specific energy and water reduction targets, and their “Together Towards ZERO”
sustainability program. Carlsberg describes their business model as including sourcing, brewing &
bottling, distribution, customers, and consumers3. Carlsberg makes money by selling a high volume of its
beer and beverages to consumers primarily in Western Europe, Eastern Europe, and Asia.

Global megatrends including climate change and water scarcity threaten Carlsberg’s current business
model. Carlsberg’s business is heavily dependent on the availability of clean water; clean water, however,
is becoming scarce in some of the regions where Carlsberg’s beers are brewed 3. In addition, Carlsberg has
recognized that continuing to rely on carbon intensive fossil fuel energy for growth will lead to future

1
Forbes Media LLC. “Carlsberg on the Forbes Top Multinational Performers List.” Forbes, Forbes Magazine,
www.forbes.com/companies/carlsberg/.
2
Carlsberg Group. “IR Corporate Presentation 2018.” Carlsberg Group, 2018,
carlsberggroup.com/media/15311/2018-carlsberg-ir-corporate-presentation.pdf.
3
Carlsberg Group. “Carlsberg Sustainability Report 2017.” carlsberggroup.com/media/22505/carlsberg-group-
sustainability-report-2017.pdf.
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business risk3. Carlsberg has been heavily focused on their Sail’22 corporate strategy. This strategy
consists of strengthening sales in their core brands, positioning for expansion in Asia and big cities, and
delivering value for shareholders2. This strategy emphasizes growth, increasing the volume of beverages
sold, and achieving higher operating profits and return to shareholders. Increasing resource scarcity,
however, poses a risk to Carlsberg’s ability to continuously increase the volume of beverages sold.

There’s a big opportunity for Carlsberg to engage stakeholders in commitments to a sustainable

future. Carlsberg can take steps to reduce its overall greenhouse gas emissions. Consider the fact that
logistics emissions make up 14% of Carlsberg’s carbon footprint Carlsberg can use technology for better
route planning and sharing transport loads with businesses across industries to reduce the number of
vehicles on the road. Carlsberg is also in the process of implementing its “Together Towards ZERO”
sustainability program. This program calls for fully eliminating carbon emissions at their breweries by
2030, reducing water usage by half by 2030, offering 100% distribution of alcohol-free brews by 2022,
and achieving a year-on-year reduction in their accident rate 3. There is plenty of opportunity for Carlsberg
to work towards these targets and further refine their business model to become more sustainable.

Since 86% of Carlsberg’s total emissions lie outside of their breweries, they must find ways to
cooperate with their suppliers to make gains in this area 3. Another one of Carlsberg’s challenges is to
successfully switch to full using refillable bottles. Carlsberg refilled fewer glass bottles in 2017 than in
2016. This was because Carlsberg switched refillable bottles to one-way glass bottles in Russia due to
“dwindling return rates and the difficulties of maintaining an efficient return mechanism in Russia.” Thus,
relationships with others along with technological and practical barriers are some key challenges.

I recommend that Carlsberg focus on transitioning to a closed-loop circular economy. Carlsberg’s

value proposition and Sail’22 corporate strategy still includes a focus on increasing the volume of
beverages sold and increasing profits / shareholder returns 2. It is imperative that Carlsberg innovates to
decouple growth from resource use. Although Carlsberg’s “Together Towards ZERO” sustainability
program is a step in the right direction, such efforts to reduce water usage and carbon emissions are mere
efficiency-driven supply chain changes which are meaningless without a holistic strategy and value
proposition beyond increasing volume of beverage sales. Carlsberg should continue to search for and
invest in new wastewater recycling technologies. Finally, given that packaging accounts for 40% of
Carlsberg’s carbon footprint, I recommend that Carlsberg invest in innovative design to reduce packaging
impacts3.

Appendix A: Carlsberg Group PESTEL Analysis
Political
--Different governments & political authorities in countries
Carlsberg operates in decide when to issue permits for
water extraction & discharge
Sociological
--Consumer desire to purchase from & support companies
that have integrated sustainability into their corporate
strategy
--Growing consumer demand for non-alcoholic beverages /
alcohol-free brews
--Need highly skilled labor force, employs people in
sales/marketing, finance, procurement, & logistics
Environmental
--Climate change
--Increasing resource scarcity, especially water
--Carbon intensive fossil fuel energy
--Difficulty procuring raw materials
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Economic
--Corporate income tax, social security tax, environmental
tax, excise duties
--2017 Carlsberg paid 29.3 billion (DKK) in taxes
Technological
-- Opportunity for creative disruption; new methods of
delivering beer and beverages, new materials for longer
lasting containers, etc.
Legal
--Illegal in some areas to use cleaned wastewater as service
water
--Health & safety laws, employment law, different laws in
different countries Carlsberg operates in
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Appendix B: Carlsberg Group Business Model

Customer Value Proposition Profit Formula

--Stated purpose is to “Brew for a Better Today & --Revenue Model: high volume * affordable price
Tomorrow”
--Primary Markets: Western Europe, Eastern Europe, &
--Deliver beers & beverages that stand at the heart of Asia
moments that bring people together
--Economies of scale: Buy bulk, global scale
--Deliver value for shareholders, employees, &
society --Primarily focused on expanding and growing volume of
beverage sales
--Differentiate by integrating sustainability into
corporate Sail’22 strategy & by offering non-alcoholic
beverages

Key Resources Key Processes

-- Raw Materials: Malting barley & cereal cultivation --Scientific & efficient malting, brewing, & fermentation
processes
--Electricity & Water
--"Together Towards ZERO” Sustainability Program
--Core Products: Carlsberg, Baltika, and Tuborg
--Sail’22 corporate strategy
--Branding: “Probably the best beer in the world”
--Specific carbon emission reduction, water usage
--Bottling plants, transportation, distribution centers
reduction, and increased renewable energy targets
--Relationships with bars/restaurants