TEAM EASY ON BREWtal Growth - Carlsberg's growth initiative for 2022 - CBS Case Competition
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TEAM EASY ON BREWtal Growth Carlsberg’s growth initiative for 2022 13th of February, 2019 Consulting | 1
Introduction Successfully completed “Funding The Journey”
Accelerating growth by rolling out local experience stores and promote non-alcoholic brands
STATE OF THE BREW TAP(PING) INTO THE FUTURE BREWTAL GROWTH
Needs to accelerate growth through a two-
Carlsberg has succesfully completed ”Funding mDKK
pronged strategy that will allow Carlsberg to
The Journey” through the Sail’22 Strategy
respond to key changes in consumer
demands.
.. and is now looking for ways of differentiating in Roll out local experience stores all-over Europe,
order to grow revenue thereby getting closer to millennial consumers
Focus should however be towards on-trade and Accelerate sales of non-alcoholic brands by
high-value channels sponsoring key sports events and athletes
Open Experience Stores called 1847™ Accelerate non-alcoholic brands
Open up 31 experience sites across Western Competitors gaining strong presence within
Europe non-alcoholic alternatives across EU
1 Focus on national and regional craft beers Therefor - exploit increasing health trend 2
Full control of customer experience around Increase awareness of regional non-alcoholic
Carlsberg portfolio products beers through major sport events and
athletes
Case material
Consulting | 2
Insights Stagnation in core markets
Changing consumer preferences towards non-alcoholic alternatives, wine & spirits and specialty
beers are currently limiting Carlsberg's growth opportunities
Carlsbergs volume growth in Western Europe has stagnated.. ... due to ‘beer’ category becoming less relevant in the region
39 39 39 40 40 6%
4% Growth %
Wine
2%
Beer volume Growth %
0%
Billion liters Spirits
-2%
Growth %
-4%
Beer
2013 2014 2015 2016 2017 2013 2014 2015 2016 2017
Microbreweries are growing as consumer demands change... ... and non-alcoholic alternatives are increasing in popularity
Highly fragmented industry with
a few big players and a lot of
smaller breweries
16% of German consumers drink alcohol-free beer on a
Microbreweries used to be frequent basis
# of microbreweries: niche, however category is
Year 2008 → 2000 growing as consumer
Year 2017 → 7000 preferences change towards
more quality, local brew and Q3 in 2018, Western Europe saw a 58% growth
premiumization increase in sales of non-alcoholic beer
Carlsberg: 29% increase in
volume and revenue growth in
2017 from craft and specialty
Case material, Statista and Forbes.com
Consulting | 3
Insights Shift in demand due to Millennials
Major reason is that millennials are demanding more regionality, quality and whom are very
open-minded in terms of trying new beers and are therefor not particularly loyal towards brands
45% drink craft beer out of home at least once a week!”
Millennials in
“64% say they drink more craft beer than 2 years ago”
Europe say...
“66% drink craft beer for the taste”
How are millennials making their purchasing decisions?
High focus on Limited production
Swedish Organic malt, pale sustainable and superior taste
Oliver 100% ingredients 75% and others production
• 27 yrs old
• Cares about local brew
and sustainability Is the
Is the beer Distinct and
Is it organic? company BUY!
local brew? different taste
Yes Yes sustainable? Yes
Oliver has become tired of normal ‘lager’ ?
and has heard about the Nya Carnegies
“Hingstin Eko Stout” from Sweden
In order to capture the millennial craft beer trend, Carlsberg must leverage local presence and existing craft beer
portfolio
DSM – the craft revolution is brewing, Carlsberg.com
Consulting | 4
Insights Carlsberg can leverage existing capabilities in roll-out
Carlsberg therefor needs to turn these challenges into opportunities by leveraging some of its
already existing key capabilities
A deep pocket of finances
After two year of cost cutting, Carlsberg
is well positioned to engage in large
investments to drive future growth and
add value to the group
Strong product portfolio in non-alcoholic beer Experience from operating Jacobsen restaurants
Carlsberg already offers 57 different non- In house experiences with running physical bars/ stores
alcoholic beers within its portfolio for the Jacobsen brand
Similar in taste and feel to traditional pale lager Capabilities can be leveraged
brews, such as the K1664 Blanc in France while toward other business units
others are less traditional with various flavors
added, such as the Utenos Radler 0, a hugely
popular grapefruit flavoured beverage in Lithuania. Carlsberg enjoys great
capabilities across multiple
sections and customer
touchpoints that be utilize to
facilitate future growth
Global Demand Space Model Frontrunner w/ sustainability & transparency
Insights on consumer behavior about when “Giving back to society has been in the DNA of the
they drink what and why they do it. Carlsberg Group ever since our founder J.C. Jacobsen
established the Carlsberg Foundation back in 1876.”
Behavioral segmentation tool based on
consumer research studies in over 40 - FLEMMING BESENBACHER -
countries, gathering data from over 130,000 Chairman of Carlsberg Group and Carlsberg Foundation.
consumers.
Case material, Carlsberg.com
Consulting | 5
Insights A two-fold strategy will deliver both strategic fit and impact
Assessment shows that Carlsberg should focus on a two-pronged strategy entailing local
experience bars and event/athlete sponsorships
Several solutions have been assessed on feasibility and impact… …showing that two solutions will be supporting the growth strategy
4 1
CarlsConnect – the app
Rolling out experience- • Not feasible with conglomerate status and no
oriented craft bars considerable financial impact
2
5 GastroBeer
Leverage health trend • Simple and feasible, yet lacking significant customer
and push alcohol-free experience and profound impact
Financial impact
brands
3
1 Personalized bottle labels
CarlsConnect • A fun experience-oriented gimmick, however lacking
App universe with 2 impact. Can be utilized as side-kick in craft bars
rewards, codes, GastroBeer
personalization etc. Craft line for culinary
experiences across Europe
4
3 Experience-oriented craft bars
Personalized bottle and glass labels at bars • Carlsberg has key capabilities and can drive differentiation
”Freds Brew”, ‘Fabis Favorite”, ”Mighty Magnus” etc through unique experience with large uplifting impact
5
Accelerate alco-free brands
• Accomodates growing customer trend and allows
Feasibility & Strategic Fit Carlsberg to directly interact with customers
Sources: Team Easy On analysis; Case material
Consulting | 6
1847™ Crafted 1847 Crafted Takeaway
Opportunities lie within micro-brewing and expanding sales
”
channels with unique local-based experience bars
Key consumer trends on the craft beer scene… ”Winning in on-trade has always been about superior customer
experience for the customer and the consumer” - Cees’t Hart
• Expected CAGR of 11% for
1847™ concept will reshape how Carlsberg can
European craft consumption over
win the customer-experience game in three ways:
the next couple of years 1
• Through the 1847™ experience bars, Carlsberg will
• Under-30s driving the revolution differentiate itself and exploit the on-trade market even
• Sustainability, sophistication, taste further by leveraging a customer centric value
proposition
and local brew are in high demand
• Low brand loyalty - Local, sophisticated, original and experience-driven -
…will be catered through 1847 experience bars 2
• It enables Carlsberg to take full control of a customer
centric and loyalty-improving arena
Focus on local and regional brews and
furthermore leverage local pride • Furthermore allows Carlsberg to get direct touchpoints
with its customers and cater to local wants and needs
Customized labels to cater
sophistication and personalization 3
• Leverage first-mover advantage to create significant
Beer tastings, BrewMaster* tour, dining brand customer loyalty in low-loyalty sphere
experiences and more
‘1847’ • Utilize intelligence from direct customer interaction and
feedback
Sources: DSM Report 2018; Case material; Team analysis
Notes: *BrewMaster is a professional brewer enlightening customers on crafts
Consulting | 7
1847™ Crafted A customer journey shows key ‘Moments of Truth’
By catering to the specific demands within the experience bars, Carlsberg can raise brand
awareness around regional craft beers within their portfolio and drive future cross sales
3 5
1 Lock in
Gamification increases willingness to learn
Decides to try 1847 out
Pierre learns how
complex the process of
The three
producing beer actually Pierre visits a cafe a
enjoys a beer Furthermore,
Pierre decides to is and what an artform week after. He
Name: Pierre Brew tasting platter Pierre hears
visit 1847™ craft guided by a
it is based on recognizes the beers
bar in central Paris from the Carlsberg portfolio
Age: 27 years old BrewMaster on the list as from
straight after work BrewMaster products 1847™ and decides
Profession: Teacher with two close that you can try
to order this instead
friends to ”Brew Your 4
Preferred liquour: Wine of usual wine
Own Beer”
2
Tries some of the lesser known beer Recognize delicacy of making good beer
Gamification Offerings must
Ensure Pierre increases Foster and
Moments of drive unique
drops by in the Taste is king knowledge on facilitate uplift
Truth experience and
first place beer cross-sales
meet demands
Expected customer profile The overall concept can be extended by…
Female,
24% 1 Dining 2 Concerts 3 Product events
Dining experiences with Concerts – upcoming stars Niche-product events to
local and tailored craft supported by the drive loyalty and leverage
Male, beer offering Carlsberg Foundation word of mouth effects
76% Sophisticated
Urban
Sources: Team Easy On Analysis; Case Material
Consulting | 8
1847™ Crafted Successful role-out has to be well managed
After successful pilot-test in the Nordics, Carlsberg will be capable of entering physical store
space across Europeand execute a successful roll out
Carlsberg needs to drive visits to 1847 spaces through digital campaigns to
Role out of 1847™ experience spaces over 2,5 years time…. launch the initiative
Current followers: 30k
31 European cities Competitor Mikkeller:
174k followers
Other portfolio Brands
2019 Start with Nordics, then
expand into rest of
Europe Astra – 53k followers Must increase SoMe
2020
presence to reach
Cost per store: Kronenbourg1664 – millennials
2021
11 mil. € 3.3k followers
initial investment
Anticipated visitors:
10.5 mil/ year
Why SoMe? Goal: reach millennials How?
Influencers with lifestyle
Young people are more influenced by So-Me 1 image and qualified
than older generations knowledge
…will have to be carefully managed within the organisation
Influencers behavior on So-Me is Can effectively generate
Key actions: replacing existing expert systems brand awareness and
2 influence purchase
1 Create new 1847™ division within Carlsberg group decisions
What values to communicate? Clear link between the
2 Develop concept for first experience space and use same model for subsequent role-outs ambassadors’ life and
Local heritage of local brand 3 habits; and the value of
experience stores
3 Implement staff training programs to ensure that all new and old employees understand the Specialty experience Premium product
market that they work in
Euromonitor
Consulting | 9Sponsorship 1847™ Crafted Greater focus on non-alcoholic segment
Sponsoring key sports events and sports stars with alcohol-free beer
brands will tap into the increasing health trend
Consumers are increasingly turning to non-alcoholic alternatives
250 % YoY volume growth globally
200
150 5
100
50
“Changing consumer
0 0 patterns, lifestyle and
2012 2013 2014 2015 2016 health awareness are major
-5 factors propelling non-
alcoholic beer demand.”
non/ low alcohol beer total beer
Absolute Volume Growth (million liters)
Carlsberg should leverage its long time experience in sponsoring soccer and other sports to expand into other sporting events to
aggressively market non-alcoholic beer
How? Decisive factors
Over 22,000 racing events Promotion, sampling and exposure
Presence
held in Europe per year Create cross-selling effects
Emotion
Already have strong capabilities Goal
Opportunity to contact key Fulfillment
in sponsoring efforts that can be
target group on-site Getting people to talked about non- of needs
expanded towards sporting events
throughout Europe alcoholic beer and trying it
Carlsberg already has strong portfolio of non-alcoholic beers but has to engage in more extensive marketing efforts to stay on par with its
competitors
Euromonitor
Consulting | 10Sponsorship Sponsored events can be utilized as key promotions
Selecting large and exposed events is key in driving an impactful growth from sports
sponsorships
What is the value proposition fit for combining Through marketing effort at key sporting events throughout Europe, Carlsberg is able to achieve wide reach
non-alcoholic beer with sporting events? and get in touch with specific target group for non-alcoholic beer
Properties of non-alcoholic beer
• Ideal for regeneration after sport Sponsored Running event
• Mineral-rich electrolyte drink Carlsberg Nordic Copenhagen
Vasaloppet cross-country skiing
• Suitable for a balanced sports diet Marathon
Audience: 150,000 visitors
• Free of fat and cholesterol Two promotional
• Calorie-reduced Target group: on-site fans streams
Attendance: 5000 runners
Target group: amateur/ hobby athletes
Frequency: once a year 1. Sampling for
hobby athletes
competing
Carlsberg’s non-alcoholic beers offer not themselves
only a “second best” alternative but have
beneficial traits for athletic people Local Running-Club 2. Sponsoring
Tour de France professional
Aim: creating a community
Carlsberg should utilize this and tap even Key target group: Fans and TV Audience: events to get
Incorporated with 1847 experience places
stronger into the growing segment through 12 million roadside exposure
specific marketing 3.5 billion on TV
Already successful concept
Proof of Concept Mikkelller running club 12,000 members
High exposure
globally
Erdinger Alcoholfree has seen growth due to
marketing the brand towards sports
Euromonitor/ Erdinger
Consulting | 11Implementation By end of 2022, Carlsberg should be fully rolled out with strategy
Our analysis has identified 3 MWB’s, Carlsberg must focus on to realize the full potential of the
new strategy
2019A 2020E 2021E 2022E
Period Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Find prime locations
1 in 5 big cities
Sign lease and start
renovating stores
1847
1
Market concept stores
and prepare opening Start selling products to customers
Scale to rest of Western Europe and Core markets to capture full benefits
and host events with guest as well as BYOB 3 from increased brand awareness and tapping into microbrewery trend
comp.
Initiative
timeline Start prel. contact with
Copenhagen Marathon.
2 Hire FTE’s and begin creating
marketing
Negotiate contract with
Sponsor CPH Marathon 2
Prepare marketing
materials and goods
Develop relationship Host several sponsorships and possibly expand to more sports events for
with partner athletes
First two stores renovated and open Secure contracted sponsorship with Copenhagen Marathon Win in test markets and prepare expansion
It is imperative for Carlsberg to act fast. Once contract is aligned, Carlsberg can begin looking into Before committing fully, Carlsberg must test the
Must Win Battles 1 Especially given how competitive the market 2 creating and finalizing marketing campaign to create successful 3 strategy out in 5 well selected countries to
is, Carlsberg must have first 2 store by start awareness of health benefits coming from alcohol free product minimize risk of overcommitting too early.
2020. line.
Sources: Team Easy On Analysis
Consulting | 12Financials Carlsberg can reach growth target by 2022 with strategy
Given a successful launch, Carlsberg will be able to obtain their growth targets of 5% by 2022
with a full year growth of 5.4% Y-o-Y
1 2 3
Revenue forecast reveals required growth rate is obtained Scenario analysis and key performance metrics Key drivers
Operating profit Operating profit EBIT - %
Revenue impact forecasted to 2022 Revenue drivers
forecasted to
DKK in millions 2022 9,329 9,557 Brand awareness causing uplift in
9,173
8,876 8,748 8,921 base sales
Base growth Sales from 1847 stores DKK in millions
Sales uplift from brand awareness ~5.4% 14.6% 14.9% 13.8% 13.7% 13.5% 13.4%
10mm customers in total in 1847
stores avg. spend of €25.
Revenue growth rate 71,439 Incr. base sales
uplift
-170 bps 1847 Stores
67,791 Driven by higher
SG&A costs 2017A 2018A 2019E 2020E 2021E 2022E Based on avg. capital size of
65,122 1.5mm in EU and 31 stores in
63,332
2022. 75% consume alcohol and
~2.9% Scenario analysis 15% of these visit store from 5%
in 2020. 5mm customers visit 2
Incr. revenue from times/ year(1).
1847 stores
4.1%
5.4%
2% 5.4% 7% Uplift in base sale
Increased awareness will drive
Revenue growth Revenue growth Revenue growth
customers towards Carlsberg brands
in on-trade locations. Case study(2)
Worst Expected Best shows uplift of 20% from flagship.
Assumed 9% in 2022 in forecast to
be conservative.
Global beer market Base market share
share for Carlsberg
Incr. market share Market growth
2018 = DKK 510bn
Achieving growth target (5%) in 2022 1.80% 1.3% CAGR until 2022(#).
2022 = DKK 537bn
1.61% 0.19% Assuming Carlsberg portfolio will
Driven primarily by 3 factors being
grow in line with market. Growth split
1 Underlying market growth
2 Growth from 1847 stores
+19 bps 1.61% 1.61%
between on- and off-trade assumed
Driven by stealing market to be constant
3 Growth from uplift from awareness 1 2 3 share from primary
Total
competitors 2018A 2022E
Sources: 1) EC Europa, 2) IE University, 3) Case Material, Team Easy On Analysis,
Consulting | 13Financials Carlsberg can finance the initiatives through their excellent Cash Flow
Furthermore, Carlsberg’s financial capabilities allows it to self finance the initiatives and there is
no need to raise any external capital
Cost analysis of reveals a total investment cost of DKK 3,219bn over 3Y span Carlsbergs extraordinary financial capabilities allows to self finance the strategy
Number of stores built each year 2%
50%
2019 2020 2021 2022 Min.
Payout
Cash
2 8 10 11 Ratio
Balance
Investment in each store
1 Capex: DKK 99mm pr. Store opening (1)
Opex: DKK 61.5mm pr. Store / yearly(2)
Opex cost incl.: Rent (11%), Salaries(6%), Marketing (80%) Net Cash Flow forecast
DKK in millions
1847 stores Scale efficiency and practical knowledge
Slightly decreasing Opex as knowledge is learned in
opening and scale is reached through each store
Investment in sponsorship events
Marketing: €5mm pr. Event directly contributing to
the brand awareness of Non-alcoholic beers(3)
2
Beer grants for Copenhagen Marathon
12k participants in Copenhagen Marathon 2018 –
Sponsorship assumed 24k beers at DKK 2 COGS = DKK 48k(4)
Expected positive No need for
LFCF of DKK external financing
Total cost for both initiatives over 3Y period 102mm cumulative – strategy can be
from ‘19 – ‘22 self financed
amounts to DKK 3,219bn
Sources: 1) SF Curbed, 2) Nordstrom 10-K 3) Investopedia, 3) CPH Marathon website, Team Easy On analysis, Case materials
Notes: 1) Based on Apple capex for flagship store adj. 50% down to reflect Carlsberg realistic cost, 2) Nordstrom operating expenses adj. 80% to
Consulting | 14
Carlsberg sizeSummary Risks
Six key risks have been identified and associated mitigation strategies have been set up
Number Risk Mitigation
Highest
impact
1
1 Bars do not generate
uplift from cross sales
Expand in-store branding
to drive awareness
Critical
risk line
2 People lack interest in
experience craft bars
Aggressive marketing,
promotions, revisit events
3 Leverage first-mover ad-
Impact
2 Competitor replication
vantage and push more
4
4
3 Can’t make sponsorships Scale down and target
with major sport events smaller, local events
6
5
5 On-trade customers (bars)
will be unhappy with craft bar
Communicate intention
and cross-selling benefits
Lowest
impact
6 People prefer other non-
alcoholic beer
Expand R&D to refine
taste and product
Lowest Highest
probability Probability probability
LOW RISK MEDIUM RISK HIGH RISK
The risks are not severe and can me mitigated
Sources: Team Easy On Analysis
Consulting | 15You can also read
