If Carlsberg wrote grocery industry dramas, they could scarcely be juicier than the brand’s sensational delisting by Tesco last month, followed just weeks later by the announcement that UK CEO James Lousada was to leave the company.
Tesco’s move came after several miserable years for Carlsberg. In 2010, after a year of particularly strong growth, sales hit £299.9m – but after five years of decline, they are down to £212.6m, a drop of 29% [Nielsen 52 w/e 2 October 2010 v 12 September 2015]. Carlsberg Export has suffered even more harshly, losing 37% of its sales over five years.
The Danish brand isn’t the only standard lager suffering: Carling lost 12.6% of its sales (£43.4m) in the same window. Foster’s has been up and down, but this year lost £35.9m, 8% of its sales – the biggest fall of the three.
But what sets Carlsberg apart is its rock bottom average price of just £1.58/litre – the lowest of any major lager brand. The 3.3% year-on-year fall in price has undoubtedly been affected by the brand’s presence in the discounters; in December, Tesco slashed the price of Carlsberg products in a bid to match those in Lidl.
Retail expert David Sables says that while Carlsberg’s dalliance with the discounters may not have been the direct cause of the delisting, it helped create the circumstances. “It doesn’t help any brands if they have lines which are the same SKUs and are visibly cheaper elsewhere,” he says. “Carlsberg is at the cheap end of the range – I think in every aspect of their sales and pricing they are diluting the profit of these major chains and were always going to be the first to go.
“Having seen them in discounters, that contributes to the downward pressure on the line-by-line price. You end up with a deflation happening on that brand because of their presence in discounters. Which means the commercial argument for supermarkets to list the brand is undermined.”
A senior brewing industry figure, who supplies several multiples, told The Grocer that the delisting amounted to selling Carlsberg’s volume to its competitors. “In a declining market, it is quite possible that brands will be squeezed out,” he says. “My understanding is that they were asked to bid a very large sum of money to retain their listing. And it kind of gets to the point where if you’re already working on very thin margins, you cannot pay a large sum of money and not be quite clear what you’re getting for it anyway, and how long you’ll have whatever it is you’ve got. How confident can you be that the volume they’ll indicate to you will actually materialise?”
Chris Wisson, senior drinks analyst at Mintel, says that while Foster’s and Carling will benefit from the delisting, Tesco is likely to use the move to shift the balance of its beer offering. “Retailers are liable to cut back on mainstream beers which have few distinctive features in the eyes of the consumers, when shelf space is under pressure,” he says. “In place of Carlsberg, it should be lucrative for Tesco to transfer this shelf space to premium ales and craft beers, two categories showing value and volume growth.”
Wisson also warns that although most Carlsberg shoppers are likely to switch to other brands, the move could still be damaging to Tesco. “Providing value for money is one of the cornerstones of Project Reset,” he says. “Widely delisting Carlsberg risks removing one of the beers with the strongest value for money image.”
It isn’t just Carlsberg’s image as a value for money brand that resonates with consumers of course - this year’s relaunch of the famous ‘Probably…’ campaign appears to have gone some way to reigniting affection for the brand. Outdoor execution Probably The Best Poster In The World, which saw a beer-dispensing billboard erected in East London, won a Grocer MAP Award for its creator Fold7 earlier this month.
According to Carlsberg’s brands marketing director David Scott, the campaign has delivered a tangible difference among consumers too: spontaneous awareness of the brand is up 6% to 56% - placing it just behind Foster’s – while consideration is up 1% to 48% and brand preference up 2% to 10% [Carlsberg UK HPI tracking September 2015 v December 2014]. Scott is realistic about the effects of losing a major customer, but confident about the prospects of the brand.
“Losing distribution won’t drive growth,” he admits. “But from a consumer perspective we’d definitely like to see ourselves up there with the big five brands in the category. We’re very focused around the plans for 2016 and getting a real positive performance for the brand in both the grocery and convenience areas of the market.”
For the first six months, those plans are based around Euro 2016, for which Carlsberg is the official beer. It’s the biggest edition in the tournament’s history, with 51 games – 20 more than before – an estimated 12-16 million viewers for every England game, and after a long absence from major tournaments, the presence of Wales and Northern Ireland.
According to Sables, this could be a game changer for the fortunes of the brand. “If the marketing campaign is big enough, Tesco will be relisting at that point,” he says. ”They’ll be saying, there’s a point of difference about this brand now, so we need it back in.”
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