Niche Brands Help Carlsberg Catch Up To Craft Beer Trend
Paul Davies, Vice President, Craft & Speciality Beer, Carlsberg Group, travels to Belgium every three months to pray with the fathers of Grimbergen Abbey. Beer drinkers answered his call in the first quarter, lifting shipments of Grimbergen ale by 25 percent.
Carlsberg is leaning on niche brands such as Grimbergen to try to reach drinkers increasingly shunning mass-market beers for small-batch brews. Beer from the abbey established in the 12th century plays a key role in the Danish company’s plan to expand sales of its higher-end brands, which are more profitable than its namesake lager.
In courting connoisseurs, Carlsberg is seeking to catch up to rivals Anheuser-Busch InBev NV and Heineken NV, which have been snapping up craft labels across the U.S. and other countries. The Danish beermaker is taking a different approach, seeking to breathe new life into established brands such as Grimbergen, which it has owned since 2008, while working with independent brewers to develop new ones.
“We’re creating our craft propositions not from the big-company machine down, but almost from the grass roots up,” Davies said in an interview at a brewhouse and bar for its Jacobsen brand in Copenhagen, where the company tests new beers with aromas of clove, spice and banana.
Gaining share in the craft and specialty trade has become more vital for Carlsberg to offset a slump in Russia for its high-volume business. It’s that country’s largest brewer, controlling more than one-third of beer sales through its acquisition of Baltika Breweries in 2012. Carlsberg forecasts Russia’s market will contract by about 5 percent amid restrictions on the size of plastic bottles and an economic downturn.
Carlsberg’s sales in the first quarter beat analyst estimates in part due to demand for Grimbergen, whose volume grew 29 percent in France and 32 percent in Switzerland. During the period, the brewer began advertising the brand on television in the French part of Switzerland and expanded retail distribution in the country. It stepped up discounting in France and introduced new packaging for Grimbergen Elixir, made with three kinds of malt. Carlsberg plans to begin exporting Grimbergen to China in the second half.
Chief Executive Officer Cees ’t Hart is seeking to double annual sales volume of Grimbergen to more than 2 million hectoliters, Davies said. The company aims to increase craft, specialty and non-alcoholic output to account for 10 percent of volume in the medium term from about 5 percent now.
Fatter margins are a major incentive. The craft, specialty and non-alcoholic beer segment’s average net sales per hectoliter are 2.5 times the level of Carlsberg’s core business, offering greater profitability despite higher production costs. In contrast to the more streamlined process for mass-market beers, the company uses 10 types of yeast and 20 kinds of malts and hops for Jacobsen, said Birgitte Funch, senior technical brewer at the Carlsberg research laboratory.
Carlsberg is pushing into craft brewing as the sector’s growth shows signs of easing in the U.S., where the trend originated. The volume of beer from American small and independent brewers grew 6 percent last year, less than half the 13 percent increase a year earlier, according to the Brewers Association.
Amid a slowdown in the growth of niche brews, the company shouldn’t ignore its namesake lager or another mainstream brand, Kronenbourg, said Tobias Bjorklund, an analyst at Danske Bank. After buying nine U.S. craft beer brands, including Goose Island and Four Peaks Brewing, Anheuser-Busch is devoting $2 billion in capital spending to bolster its flagship brands like Budweiser.
“You also have to support the big volume drivers at breweries to optimize the balance between volume and value,” Bjorklund said by phone.
In addition to driving profitability, Carlsberg says teaming up with craft brewers can help in less immediately measurable ways by providing insights about food trends and making inroads with beer drinkers. The Danish brewer opened its first microbrewery, Nya Carnegiebryggeriet, in partnership with Brooklyn Brewery in Sweden in 2014 and has expanded the concept to other cities, including Trondheim in Norway.
Nya Carnegiebryggeriet hosts lectures on yeast fermentation that fill to capacity, Davies said. The brewery, named after Carlsberg’s Swedish beer brand Carnegie, offers a range of beers that include an unfiltered lager, a “Nordic sour” and a strong dark ale.
At the Grimbergen Abbey, Davies meets with the fathers to discuss new releases. Their continued involvement in Carlsberg’s brewing lends authenticity to a brand whose heritage is a big part of its appeal, he said.
“They’re very active in the business and taste all the brews,” Davies said. “They’re really into their beer, they’re really into their food.”