Carlsberg A/S is one of the world's largest brewing companies. Its two principal brands, Carlsberg and Tuborg, are the leading beers in Denmark and are also two of the most widely sold beers in the global market. More than three-quarters of the brewery's sales come from outside Denmark. The company operates brewing facilities in Singapore, Malawi, Germany, Italy, Hong Kong, Cyprus, and a number of other countries and maintains licensing agreements for distribution of its brands in others, so that Carlsberg and Tuborg can be found in 150 different countries altogether. Carlsberg A/S has interests in a few businesses outside brewing as well. Most notably, the company owns Royal Scandinavia A/S, makers of renowned fine porcelain, silverware, and glassware. Carlsberg also owns a 43 percent interest in Tivoli Gardens, a well-known amusement park in Copenhagen.
1873--1900: Carlsberg and Tuborg
Carlsberg A/S was formed from the merger of two venerable Danish breweries, Carlsberg and Tuborg. The original Carlsberg brewery was founded in Copenhagen in 1847 by Captain J. C. Jacobsen. The captain was interested in brewing technology, and he studied modern brewing methods extensively before he opened his shop, which he named for his son Carl. His constant work to improve the quality of his beer soon made his lager very popular. Carl Jacobsen carried on his father's passion for beer making, and he studied brewing both in Denmark and abroad before taking his place in the family business in 1871. Carl eventually established his own brewery, called New Carlsberg. New Carlsberg and Old Carlsberg were united in 1906, as both father and son willed their breweries to a charitable foundation J. C. Jacobsen had established in 1876. The Carlsberg Foundation assumed the running of the breweries, carried on scientific research in beer making through its Carlsberg Laboratory, and supported Danish history and the arts through the establishment of several museums.
Tuborg was founded in 1873 by a group of Danish businessmen headed by Phillip Heyman. The Tuborgs Fabrikker first included a glass factory and a sulfuric acid works, but Heyman spun off all but the brewery in 1880. Tuborg's Green Label pilsner quickly established a strong reputation in Denmark. By 1894 Tuborg was the major partner in an affiliation of 11 Copenhagen breweries.
1900--1980s: Penetrating Foreign Markets
Carlsberg and Tuborg signed an operating agreement as early as 1903, stating that they would share profits and deficits and contribute equally to financing new plants and installations. The two brands dominated the Danish beer market. Though Danes were dedicated beer drinkers, the market was relatively small, as the total Danish population was only around five million people. Carlsberg and Tuborg eventually decided to expand their sales outside the country. After World War II, the two breweries began intensive marketing campaigns abroad. As a result, their exports tripled between 1958 and 1972, and the two companies established breweries in other European countries and in Asia. To reinforce their growing export presence, Carlsberg and Tuborg combined under one name in 1970, becoming United Breweries Ltd. Under the terms of the charter, the Carlsberg Foundation was awarded a mandatory ownership of at least 51 percent of the shares of the new company.
United Breweries continued to expand its business by penetrating foreign markets. One of its most important markets was Great Britain. In 1970 the company set up a partnership with the British beer maker Watney to build a lager brewery at Northampton. This was United's biggest operation outside Denmark. By 1975 the Carlsberg brand lager produced there accounted for about 14 percent of British lager sales. The Grand Metropolitan group took over Watney in 1972, and in 1975 it sold its 49 percent interest in Carlsberg U.K. back to United Breweries, leaving the Danish parent with 100 percent control. Grand Metropolitan continued to distribute Carlsberg lager through its 7,500 pub outlets.
United Breweries took a different tack with its Tuborg brand, however. The largest British brewer, Bass Charington, distributed Tuborg, which was at first all imported directly from Denmark. Tuborg then was brewed under license at four Bass breweries, but that agreement ended in 1981. United took back independent control of Tuborg marketing in Britain, hoping to increase sales. The company also intensified its drive to market Tuborg internationally and in 1981 licensed a Hungarian brewery to produce the lager there.
United Brewery's two main brands were available in almost every European capital by the middle 1980s.
About 70 percent of United's beer was sold abroad, through direct exports, through licensed foreign breweries, or through breweries that the company owned. Despite its growing success in Europe, Asia, and Africa, United faced problems in its native Denmark. That country ranked eighth in the world in per capita beer consumption, and United had an 80 percent market share, but sales were stagnant. United worked under a fixed price system in Denmark, where it sold its products for the same price everywhere, regardless of volume. Some Danish supermarkets began to fight against what they considered United's monopolistic practices, by slashing beer prices to less than wholesale. United resorted to threatening to halt deliveries of Carlsberg and Tuborg to stores that discounted. Another problem with the Danish market was that younger drinkers were turning increasingly to wine. In an effort to win back its young customers, United entered into a distribution agreement with American brewer Anheuser-Busch to sell its Budweiser brand in Denmark.
Younger people were interested in American imports and more apt to experiment with a new brand than older drinkers. Anheuser-Busch also began to import the Carlsberg brand to the United States for United.
United Breweries diversified somewhat in the 1980s. It formed Carlsberg Biotechnology in 1983 and acquired interests in firms that made such things as ventilation plants and fishing industry equipment. The company acquired 83 percent of a German brewery in 1988, the Hannen Brauerei GmbH, and also bought Vingaarden A/S, a Danish wine and spirit maker. A separate financial branch, Carlsberg Finans A/S, was established in 1989 to manage the parent company's stock portfolios and pension funds. But by the end of the 1980s the company decided to sell off much of its nonbeverage business. United Brewery's name had been changed in December 1987 to Carlsberg A/S to give the firm a more distinct business profile. The renamed company consolidated its operations and gradually began to pare down its workforce to cope with what it perceived to be a mature beer market. Sales grew steadily throughout the 1980s, from DKK 6.31 billion in 1982 to DKK 10.48 billion in 1990.
1990s: Strategic Alliances
Carlsberg A/S continued to make investments in international markets in the 1990s. The company acquired a controlling interest in Unicer, the largest brewery in Portugal, in April 1991. Carlsberg subsequently sold its stake in a Spanish brewery, Union Cervecera, which had been losing money. Guinness bought out Carlsberg's 60 percent share, and then Carlsberg acquired ten percent of Guinness's interest in a larger Spanish brewery, La Cruz del Campo S.A. Carlsberg also moved to secure its crucial British market by forming an alliance with Allied-Lyons, a large brewing and wholesale company. Britain provided almost half of Carlsberg's worldwide profit by the early 1990s, and competition among brewers there had become increasingly stiff. Previous to the 1991 merger with Allied-Lyons, Carlsberg had only a four percent share of the British beer market, with 1990 sales of DKK 1.31 billion. The new firm, a 50-50 joint venture called Carlsberg-Tetley P.L.C., had an 18 percent market share, just behind market leaders Bass, with 23 percent, and Courage, with 21 percent. The alliance gave Carlsberg access to Allied's six breweries, its strong distribution network, and a larger brand portfolio. Carlsberg had to wait almost a year for the British antitrust agency to approve the deal, but when Carlsberg-Tetley began operations in early 1993, it had a secure place among the top three British brewers.
The situation in Britain, where three large companies including Carlsberg-Tetley controlled about two-thirds of the beer market, seemed a model to Carlsberg for what the global market was becoming. Global consumption of beer for 1991--92 was down, reflecting the European economic recession, and competition escalated among increasingly large international brewing companies. Carlsberg continued to strengthen its ties with foreign breweries, as it anticipated negative growth in beer consumption in the 1990s. Some of Carlsberg's slow growth in Europe was offset, however, by increased sales in Asia. Carlsberg had become the leading international beer brand in the Far East by the early 1990s, and Singapore, Malaysia, and Hong Kong were particularly good markets for the company. Carlsberg A/S also had modest sales in South Korea, Japan, Indonesia, and Nepal. Carlsberg's subsidiary Danbrew worked on construction of a Carlsberg brewery in Thailand in the early 1990s, and by 1992 Carlsberg beer was introduced to China and Sri Lanka.
In Denmark, Carlsberg undertook a major restructuring of its beer production facilities. In 1992 the company began to phase out its Tuborg brewery and transferred production to two other existing plants, in the interest of long-term operating economy. Carlsberg had been cutting its workforce since the mid-1980s, and this move further reduced the company's personnel. Carlsberg took another significant action concerning its home market in 1992, acquiring 80 percent of A/S Dadeko, the company in charge of the bottling and sale of Coca-Cola, Fanta, Sprite, and other soft drinks in Denmark.
Throughout the early 1990s, Carlsberg's British joint venture, Carlsberg-Tetley, was faced with intense competition and declining market share and profits. In 1996 Allied Domecq PLC, Carlsberg's partner in Carlsberg-Tetley, decided to exit the business, selling its 50 percent interest to the company's strongest rival, Bass Brewers. Carlsberg and Bass planned to merge the two companies, with Bass owning 80 percent and Carlsberg owning the remaining 20 percent. In 1997, however, Britain's Department of Trade and Industry blocked the merger on the grounds that it would operate against the public interest. Subsequently, the Department of Trade ordered Bass to divest itself of the Carlsberg-Tetley shares. Carlsberg bought the shares from Bass for approximately $183 million.
In 1997 the company ended its partnership with St. Louis-based Anheuser-Busch, which for 12 years had been the sole U.S. distributor for Carlsberg products. Subsequently, Carlsberg handed over U.S. distribution rights to Labatt USA, a subsidiary of Labatt Breweries of Canada. Carlsberg also became more firmly entrenched in the soft drink market in 1997, when it entered into a joint venture with the Coca-Cola Company. The partnership, named Coca-Cola Nordic Beverages, was developed to bottle, sell, and distribute Coca-Cola soft drink products in Denmark and Sweden. To obtain European Union Commission approval for the joint venture, however, Carlsberg was ordered to sell off its interests in Bryggerigruppen A/S, the Danish bottler of PepsiCo soft drink brands, and A/S Dansk Coladrik, the maker of Jolly Cola. In 1998 Coca-Cola Nordic Beverages expanded its activities to include Norway and Finland.
In 1998 Carlsberg acquired 50 percent of the shares of the Finnish brewing operation, Oy Sinebrychoff AB, of which it already owned ten percent. A Swedish subsidiary of Oy Sinebrychoff, Falcon Breweries, then assumed responsibility for brewing and marketing Tuborg beer in Sweden. The company's growth campaign continued in early 1999. In January, Carlsberg agreed to acquire full ownership of another of its joint ventures, Danish Malting Group, A/S. Under the agreement, Carlsberg purchased the 50 percent shareholdings owned by its partner in the operation, the U.S.-based ConAgra, Inc.
Carlsberg added to its already-strong Asian presence in the spring of 1999 when it signed an agreement to invest in the Hite Brewery, Korea's largest brewery. The Hite Brewery had a market share of approximately 50 percent in Korea, which ranked in the top 20 beer markets in the world. Once the transaction was completed, Carlsberg would become the second largest holder of voting shares, owning 15 to 20 percent of issued share capital. Also in the spring of 1999, Carlsberg announced its plans to sell off its Vingaarden A/S, the Danish wine and spirit producer it had purchased in 1988.
Source: International Directory of Company Histories, Vol. 29. St. James Press, 1999.
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