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TEAM EASY ON BREWtal Growth Carlsberg’s growth initiative for 2022 th 13 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 Europe say... “64% say they drink more craft beer than 2 years ago” “66% drink craft beer for the taste” How are millennials making their purchasing decisions? High focus on Limited production Swedish sustainable and superior taste Oliver Organic malt, pale 100% ingredients 75% and others production • 27 yrs old • Cares about local brew Is the and sustainability Distinct and Is the beer company Is it organic? different taste BUY! local brew? 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 brands 3 Personalized bottle labels impact 1 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 Craft line for culinary Financial Financial personalization etc. 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 • Utilize intelligence from direct customer interaction and ‘1847’ feedback Sources: DSM Report 2018; Case material; Team analysis Consulting | 7 Notes: *BrewMaster is a professional brewer enlightening customers on crafts 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 it is based on recognizes the beers guided by a from the Age: 27 years old bar in central Paris Carlsberg portfolio on the list as from BrewMaster BrewMaster straight after work products 1847™ and decides Profession: Teacher that you can try with two close to order this instead to ”Brew Your 4 Preferred liquour: Wine friends of usual wine 2 Own Beer” Tries some of the lesser known beer Recognize delicacy of making good beer Gamification Offerings must Ensure Pierre Foster and Moments of increases drive unique drops by in the Taste is king facilitate uplift Truth knowledge on experience and first place cross-sales beer 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