Carslberg UK was in serious trouble in 2008 – until Dr Isaac Sheps arrived. He tells Liz Hamson how he dragged the second-biggest brewer in the off-trade back from the brink

Speak to most beer company bosses these days and the conversation is not so much beer and wine as beer and whine. But not Dr Isaac Sheps.

We're sitting outside The Charlotte Street Hotel in London the week after England's ignominious exit from the World Cup, and the Carlsberg UK CEO is pondering the seemingly perennially high level of promotional activity in the beer market.

Yes, it's bad for brand equity, but there's not much you can do about it, he shrugs, searching for a metaphor to illustrate his philosophical outlook and finding it in a children's story.

"Alice in Wonderland, she's playing croquet with the queen and the queen is changing the rules all the time so she can win and Alice says: 'You cannot play like that.' And the queen says: 'This is the way we play here.' It's the same with business. You come to a market and this is the way you play. We adjust ourselves to the market because we cannot change it and it's not our role to change it."

What the beer industry can do, believes Sheps, is change the way it plays. And that's exactly what CUK has done since he was "asked urgently to come over and try and fix it" in October 2008.

When he joined, the UK was the least profitable of Carlsberg's businesses. Profits were so low that by Sheps' own admission, it could very easily have gone into loss.

Today, however, it is second only to AB InBev in the off-trade and, although it is still only the fourth-biggest player in the on-trade, it has closed the gap on the third (AB InBev again). Its sales to the end of May were up 8.9% in the off-trade and 2.2% in the on while total market sales slumped 0.7% in the off-trade and 8.7% in the on [British Beer and Pub Association]. "We have doubled our profits and now we are going for triple," boasts Sheps.

It's a remarkable transformation by anyone's standards and very much testimony to Sheps' unique skills set and background. Born in Romania to Austrian and Hungarian parents, he describes himself as Romanian-Israeli, lives in London, works for a Danish company and speaks five-and-a-half languages (the half is German). Oh and as well as the day job, he's a part-time academic. His PhD is in economics (he also has an MBA) and next month he's off to Bucharest to lecture on quality management (his specialism).

Fortunately for CUK, he has also applied his intellectual prowess to tackling its problems. It was not in good shape when he took over, he admits. "The mood was totally bad," he recalls of his first few weeks at the company's Northampton HQ. "People were saying: 'That's how it is, we are doomed, nothing can be done'."

Even Sheps had doubts, which weren't exactly assuaged when a year ago a Danish newspaper described his task as "mission impossible". By that point, however, he'd already sized up what was wrong and started addressing the issues.

The biggest conundrum was why CUK was doing so much better in the off-trade than on-trade, boasting almost twice the market share, at 17%-18% versus 9%, when, of its 1,800-strong workforce, just 400 were dedicated to off-trade. Clearly, the on-trade side of the business needed some help.

So Sheps promptly merged the two sales teams and reviewed its on-trade contracts, shedding those that weren't profitable. He also reduced the company's workforce by 250, a rationalisation that he stresses was very much top-down. "We had six directors. Now we have five and I don't have a PA I have a joint one with one of my directors. The funny thing is, we have fewer sales people, but are selling more."

Although his strategic aim is now to grow on-trade to get CUK's "right share" of the market, it won't be at the expense of the off-trade, he insists, highlighting the integrated nature of the new approach.

"We looked at it from both angles. We looked at how we can change the mix of what we are selling and who we are selling to. We started pushing San Miguel and Tuborg. It's no secret it's more profitable for us and the retailers. The other part of the equation is packaging. When the packaging is smaller, the margins are better. We were in the vanguard with this idea and now everybody has picked it up."

That's not to say they're promoting small packs any less aggressively than any other pack sizes. Yet, despite the fact it's such a deal-driven category, Sheps disputes the link between cheap supermarket booze and the nation's supposed binge-drinking culture and balks particularly at suggestions that beer is chiefly to blame.

"Alcohol consumption has been falling for six years," he says. "Also, I find it a bit strange that in the UK, whenever you talk about binge-drinking, you see pictures of people with a beer in their hand. People don't do it on beer, they do it on cheap vodka and wines. You'd need a whole night to do it! When would you go out?"

Sheps is ambivalent about whether a ban on below-cost selling or the introduction of minimum pricing would make any difference, saying of the latter: "I don't know if it's good or bad really, to tell you the truth. But Sir Terry said it's a good idea. He's the biggest guy in retail, so if he says so, maybe it's a good idea, he should know."

While not overtly opposed to minimum pricing, Sheps is averse to government interference. "Governments should let economies work. When they interfere, economies get worse," he says, though he's not holding out much hope that the coalition will do that. He suspects it will plump for the path of least resistance and go for a below-cost ban based on the simplest of the four definitions: duty plus VAT.

A better way to address the binge -drinking problem in the long term is education, he suggests. "It takes time. It may also be more expensive, but it's the only way to really change behaviour."

If Sheps has not been very vocal when it comes to such issues, preferring to leave the big pronouncements to the likes of Drinkaware and the BBPA, that's because he'd rather focus on the task in hand: driving growth at CUK. Sheps concedes that it took its foot off the NPD gas for a while. "When people are more aware of how they spend money, they don't do trials, they buy what they know," he says, justifying the lack of activity. "It's not like when you buy a shirt and can return it!"

However, he argues, Tuborg and San Miguel are "very innovative in a way" and have both been successes. NPD is now very much back on the agenda, he adds. CUK has already launched ladies' spritzer Eve into the on-trade and Sheps hopes to be able to "talk more" about an off-trade roll-out in the autumn.

He is also excited about the prospect of bringing other beers from Carlsberg's 500-strong international portfolio to the UK (Eve was developed in Switzerland). "We have different varieties of Carlsberg and Tuborg you don't see here," he adds. "Now we have three Carlsbergs here. We could have four or five."

There will inevitably be casualties. The discount brand Skol has been withdrawn from the on-trade and although it will remain in the off-trade for the foreseeable future, its performance will be monitored, reveals Sheps.

"We are keeping it for take-home because there is a need for such a brand and it is selling. But if in the future, the sales drop, the sales drop," he says bluntly. "From my first day here, my focus has been on value not volume. If we have a losing beer, sorry, we don't need it."

Neither can it afford to have capacity it doesn't need, which is why next June it is closing its Tetley brewery in Leeds, outsourcing its keg ale production to Coors in Tadcaster and expanding its Northampton facility to handle its lager production.

So did Carlsberg consider pulling out of the UK when things were at their lowest ebb? "I don't think it was ever in the pipeline but if we hadn't improved the business, it could have happened," says Sheps starkly. "Big global companies don't do business for sympathy."

Even when the links with the UK are as strong as Carlsberg's. As the self-confessed history buff point outs, its first-ever export was in 1868, to Edinburgh. "And Special Brew was developed especially for Churchill when he visited Denmark in WW2, because he liked spirits, so they did him a strong beer. Now it doesn't sound very politically correct."

You could say the whole beer category struggles to sound politically correct these days and the deep discounts during the World Cup haven't helped. Sheps insists that it has been as restrained as it can be with deals but as the England team's official beer, Carlsberg was always going to capitalise ( it was the number one beer during the tournament and its market share peaked at 19.5% in the week ending 27 June, according to Kantar Worldpanel).

Being part of what Sheps describes as "the best portfolio in this market" no doubt helped, and despite the threats on the horizon, he is upbeat about CUK's and the market's prospects.

"I do think the British economy will recover and faster than some people say. This is an opportunity because the moment people feel more chilled out, the future looks better and markets start to work better. Also the market is going through a rationalisation process, so the bad operators are getting out. You'll end up with a more stable market, a stronger market."

Under Sheps, the market has certainly got a more stable, stronger Carlsberg.

Snapshot: Dr Isaac Sheps 
Age: 61
Family: Married with two sons and two step-daughters
Education: MBA and PhD in Economics
Career: Prior to CUK, Sheps was CEO of Carlsberg South East Europe. He joined Carlsberg in 2004 and before that was president and CEO of United Romanian Breweries.
What do you do in your free time? I play tennis. I also like to travel. My wife and I love exploring this unbelievable city of London.
What's your typical working day like? There is no typical day. When I go to the office I commute (I live near Euston). Often, I don't go to the office though, I like to see customers. We have 18 depots and I like to be hands-on. Recently, all the managers went to Croydon. We arrived the day before, stayed overnight and at five in the morning went out with the draymen all day. I couldn't believe how you get those kegs down into a cellar. You cannot lift them. You roll them and then throw them down. It's amazing!