Carlsberg Case Study

Mai Nguyen

Pro. Khan

Carlsberg's decision to expand into the Eastern European market and the Asian market (specifically Russia and China) via acquisition and joint venture could be explained as an attempt to reduce its dependency on the Western European market, the market that accounted for 61% of Carlsberg's revenue in 2007, however, was on the verge of stagnation. Looking back, it was easy to claim that this was a wise move on Carlsberg's part. The company is owing the majority of the market share in the Western Chinese market and is one of the biggest brands in Russia. However, back in the day when Carlsberg had a lot of trouble in both markets because it could not see eye to eye with its partners in the regions, it seems like the company would have performed much better had it been more careful in choosing who to do business with. The take-away from this case is that acquisition and joint venture is an extremely useful method for global corporates to expand as it gives them the insights and the networks that they need to do business in a local market; however, it could be a huge obstacle if the local business they choose is not compatible as it could lead to huge capital loss and slow-down in the expansion process.

In 2007, Carlsberg was one of the world leading beer breweries. The company had 33000 employees and a portfolio of 75 local breweries worldwide. However, despite being the world fifth-largest brewery, Carlsberg was at the risk of losing its position as one of the strongest brands and becoming an obvious takeover target for larger breweries. Carlsberg's primary market, the market that generated most of its revenue was becoming mature. Not only that, Carlsberg faced fierce competition from wine and spirits as consumers are becoming more health-conscious. Concerning the situation that Carlsberg was in, expanding into emerging markets was an inevitable decision for survival. Russia and China were the most suitable options at that time. Russia is a wonderful land for alcoholic drinks as it is famous for its alcohol consumption culture. Moreover, the new tax on liquor would indirectly create an opportunity for beer as the increased price of Vodka created a gap in the market that Carlsberg could fill as people wanted to find a cheaper alternative. Different from Russia, China was not the country with the most alcohol consumption; however, it was also not a culture against drinking. China is also the world biggest market regarding population and size so any company with an ambition to grow would not leave China out of the table. In terms of decision about globalization, I think Carlsberg did a great job in choosing the potential markets to penetrate.  

The company chose acquisition and joint venture as the method for penetration. This was a wise move as it allowed Carlsberg to capitalize on the insights and networks that its partners had in the local areas. In Russia, the company executed a merger with the Norwegian Orkla ASA's brewery. In China, the company also entered a 50/50 joint venture with a Thai company named Change Beverages Pte Ltd. However, things did not go well with both companies. After some strategic disagreement, Carlsberg had to pay a significant amount of money to buy Orkla out of the merger in 2004. This put the company in severe debt. In China, a disagreement between Chang Beverage and Carlsberg also led to Carlsberg withdrawing from the joint venture. Since Carlsberg unilaterally broke the contract, the company had to pay a compensation of kr 734 million, which put more financial pressure on the company. The failing joint venture did not only leave a financial damage on Carlsberg but also made its three years of effort went down the drain. While the company stuck in the lawsuit, many international competitors were making progress acquiring market share in the Southeast Chinese market.