Myanmar Carlsberg Co Ltd

The case describes how Carlsberg contributes to building capacity in Myanmar by implementing high international standards within safety, anti-corruption, education and environment.

In February 2013, Carlsberg signed a contract to invest in a new brewery in Myanmar. Carlsberg is the first Danish company to set up in Myanmar, and the first producer in the world with permission to brew beer in the promising Burmese market.

The impressive new brewery is located in a new industrial zone in Bago, which is a couple of hours drive from . Only the very last licenses are needed before Myanmar Carlsberg can start brewing beer in 2015.

Myanmar Carlsberg brews three brands of beer, Carlsberg, Tuborg and the new local brand “Yoma”, which in Burmese translates to “Mountain chain”.

A complicated political system Myanmar Carlsberg is a joint venture between Carlsberg and Myanmar Gold Star (MGS) Breweries. This is the same partner Carlsberg worked with in the 90s, which was the last time the company was active in the country. Carlsberg owns 51% and MGS owns 49%.

“It would have been extremely difficult to start up in Myanmar without a good partner” says Daniel Sjoegren. Daniel Sjoegren is the former Managing Director with a long international career in Carlsberg. Daniel has been in charge of the complex process to start-up business in Myanmar.

“We had to have more than 200 different licenses from different authorities in order to start building the brewery and producing beer. And to be honest, these licenses have not been given as quickly as we would have liked” Daniel Sjoegren continues.

Myanmar Carlsberg awaits the very last licenses and therefore have had to postpone the expected start in December 2014 to medio 2015.

“I think the initial romance period is over in Myanmar. The period where western companies rush to the country hoping to make good business in a very short time” Daniel Sjoegren explains. “Now the focus is more on working long term and professional with developing your business. I think that the moment we experience companies like ours start making money, we will see a snow-ball-effect, which will attract more serious companies to the country”.

As other companies, Carlsberg experience that the political system in Myanmar is immensely complicated. Laws and regulations are under rapid construction, they constantly change and information is difficult to obtain. Therefore, it is important to have a high level of flexibility in a company’s business plans. Carlsberg also has a vast expert knowledge of starting up in emergent markets, which has been useful during the process.

Zero tolerance in terms of corruption “Our policy of zero tolerance in terms of corruption has obviously given some challenges. What it has meant is some delays. But that's all", explains Daniel.

Carlsberg is currently translating the Group’s CSR policies and Code of Conduct into Burmese. All employees are trained in anti-corruption, and it is made clear to all that Myanmar Carlsberg does not accept or offer any kind of bribe.

“It is a journey, as bribing is a deeply rooted part of society in Myanmar. All our employees need to understand that at Myanmar Carlsberg we consider corruption as damaging for our business. This is a culture we are consistently building across our group and this also on Myanmar” Daniel explains.

Myanmar is a high-risk country in terms of CSR In 2013 The Danish Institute for Human Rights (DIHR) was invited by Carlsberg to assist in the development of an assessment of human rights risk for Carlsberg Myanmar. This project’s objective is to support Carlsberg in implementing human rights due diligence in its operations in Myanmar. It aims at ensuring that:

• The key human rights impacts of Carlsberg´s operations across the value chain in Myanmar are identified; • Carlsberg staff and management are made aware of and sensitized to human rights risks and actual and potential impacts in their value chain in Myanmar; • Actions plans are designed by Carlsberg to address potential adverse impacts.

“The partnership has given us an insight into the CSR context that we are in, and which processes we need to have in order to manage these challenges..” Daniel notes and continues:

“It has been valuable for us to use a third party as the Institute for Human Rights. They have challenged us during the process" concludes Daniel Sjoegren, who is awaiting the final report.

On Group level Carlsberg’s CSR efforts are put into practice with a long list of policies, training material, guidelines and processes, which Myanmar Carlsberg will implement as they move forward:

“I have received massive support from very competent people in the Group, people who have been through this process before in Asian countries”, Daniel tells. “I am fully covered in terms of legal questions and screening of business partners relating to international trade sanctions.”

A million man hours and no injuries In August 2014, Carlsberg celebrated the milestone of reaching 1,000,000 man hours without any injuries during the construction of the new brewery. This impressive result does not only live up to Carlsberg’s global goal of “Zero Accidents”, it is also a ground-breaking result in Myanmar, and strikes a chord with authorities, partners and other companies.

The result is achieved by a consistent and systematic effort. It started with a clear signal from management on a rainy day at the end of 2013, a short while after the first sod was cut.

Daniel Sjoegren tells that he at one point received a call from his Supply Chain Team from the building site in Bago, informing him that more than a hundred workers had arrived at the site without safety shoes, helmets and other safety gear. “How are we to handle this?” they asked the Managing Director.

“On the one hand, we want to get started and meet our deadlines” Daniel Sjoegren explains and continues: “On the other hand, we do not want to compromise on safety. I decided to send all the workers home with a picture in their hand, showing them how they should dress when they are on Carlsberg’s grounds”. The picture shows a Carlsberg employee with a helmet, safety shoes and appropriate work clothes.

This incident was a critical milestone for Myanmar Carlsberg’s work with safety. Afterwards an intensive and systematic training programme for all employees with access to the building site was conducted. Numbers from December 2014 show that Myanmar Carlsberg have spent 7,200 training hours. The training was not only given to Carlsberg’s own 146 employees but also to employees of the contractor and sub-contractors. In total, almost 2000 employees have gone through the safety training. Besides this there are daily talks, weekly presentations, meetings and discussions of safety and work environment. It has been necessary to create an awareness amongst the employees that it is in their own interest to return home safe after work – every day.

When an employee has gone through the training program he receives a formal certificate. Employees who have made a special effort to further Carlsberg’s safety culture receives a diploma and are honoured by their colleagues and management at a ceremony.

“Even though our safety organization now is in place, we are aware that working with work environment and safety is a continued process, which demands constant focus” says Vaibhay Khedkar, who is Supply Chain Director and has the overall responsibility for the safety work.

Today, no person will have access to the brewery without a thorough briefing about the safety procedures and an order to wear safety shoes and helmet.

Education is international business It is a great challenge to recruit qualified employees in Myanmar. After 50 years of military dictatorship and with an educational system that is run down, there is a great lack of well- educated and English speaking employees in Myanmar.

“Besides this the recruiting processes are complicated and opaque and they take a long time to manage” Daniel Sjoegren explains.

Myanmar Carlsberg’s experience is that the ambition level amongst the applicants is surprisingly low. Myanmar Carlsberg represent a business oriented and competitive behavior, which is a new mind-set in Myanmar. To achieve the “Winning Behaviors” that Carlsberg stands for, a great investment in upgrading professional skills, team building and international business understanding is needed.

Currently, there are 56 employees at the brewery. The management team is in place. They were hired several months ago and are now working on upgrading their professional qualifications and building up a team. The competency development scheme is put into a system with individual plans and clear KPIs for all employees. The international experts, recruited from other Carlsberg companies, will systematically be replaced by local managers and soon as their level of competences is sufficient.

“We are in the process of developing a Myanmar Carlsberg culture from scratch. We are flexible in relation to the culture that we are working in, but the goal is clear. We are working towards becoming a team, which is pulling in the same direction and share the Carlsberg values of a “Winning Behaviours”, says Vaibhav Khedkar, Supply Chain Director and responsible for the implementation of Carlsberg’s values and high standard of quality. Winning Behaviours includes five values: empowerment, social responsibility, team spirit, winning spirit and focus on customers.

By December 2014, Myanmar Carlsberg had almost 150 employees. It is expected that the number of employees will more than double as the beer market develops. Studies show that for each employee hired at a brewery, 9 new jobs a created in relating sectors such as agriculture, logistics and sales. In other words, it is expected that Carlsberg will create nearly 3000 new jobs in Myanmar within the next few years.

Myanmar Carlsberg is convinced that their greatest contribution to sustainable development in Myanmar is achieved by doing what they do best, which is to create new jobs and upgrading the competences of the people of Myanmar. Therefore, this is the main strategic focus of Myanmar Carlsberg’s CSR strategy.

Next year “Carlsberg Supply Chain Academy” will open. The Academy is developed in partnership with national universities. The goal is to educate young people for jobs in international business, which ensures a pool of talent in the future for Myanmar Carlsberg and furthermore gears Myanmar for international business.

Carlsberg has already had a look at the Academy-to-be, as 100 engineer students attented a day of education at the brewery.

The government in Myanmar has followed the construction of the new brwery with great interesst. The partnership with the government in Bago is strong. There are well-founded expectations to Carlsberg’s contribution to the upgrade of capacity in Myanmar, and this will qualify the country as a player on the international busess scene.

The brewery is a flagship The new brewery in Bago is an impressive sight. It is not just a flagship in Myanmar, it is also constructed in line with Carlsberg’s own ambitions of “Efficiency Brewery”, the first of the three pillars in Carlsberg’s global CSR strategy. The design is done by the Group’s specialist in Switzerland, and focuses on resource efficiency, safety and a build in opportunity for later expansion.

The brewery is constructed using the newest technology within water- and energy efficiency. A new high-tech lab has been established in order to monitoring the quality of the beer.

The production of one litre of beer includes a considerable amount of water. As the only brewery in Myanmar, Carlsberg has invested in a new high-tech water treatment plant, which is located on the grounds. The brewery utilises groundwater in the production of beer, and the plant ensures that the waste water is cleaned to a suitable level, reused as process water or lead out in the fields by a kilometre-long pipeline, in order for it to seep back into the ground. This way, the water consumption is reduced considerably and the brewery is ensuring that the groundwater level is intact.

The brewery utilises a long list of technologies to optimise the energy efficiency. As an example, the newest membrane-technology is used for the filtering of the beer, waste is transformed into energy and the cooling system is geared to reduce the energy consumption.

“Sustainable packaging” is the second pillar in the Group’s CSR strategy. Myanmar Carlsberg has mapped an existing bottle collection system in Myanmar, and will partly connect to this system and partly construct their own for the reuse of casks for draft beer.

Carlsberg was the first company to build a factory in the new industrial zone. The mayor in Bago proudly shows the brewery to visitors. Even before production is started, the Carlsberg name is synonymous with an outstanding company, which takes care of the environment and the employees. - a showcase and inspiration for other companies in Myanmar.

Despite Myanmar Carlsberg’s high ambitions and standard, despite not being able to sources equipment locally, despite using local contractors and workers, despite of the legal challenges and despite of flooding, Carlsberg has succeeded in constructing the brewery within the estimated year – which is the same time frame for a brewery in Europe!

The competences local contractors and workers have acquired during the building process they will be able to use in other international building projects. Yet another piece of building the capacity in Myanmar, which can help attract international business.

“Responsible drinking” Myanmar Carlsberg has not yet started focusing on the last pillar of the Group’s CSR strategy, “Responsible Drinking”.

The distribution system is mapped. When the production of beer starts in 2015, the marketing team will start launching Carlsberg, Tuborg and Yoma in Myanmar in fierce competition with other beer companies.

Responsible Drinking will be part of the message – a message which no other producer of alcohol has ever communicated before in Myanmar.

As a paradox, Myanmar has among the lowest consumption of beer per citizen in the world – only five litres compared to almost 80 litres in Denmark. In Myanmar, beer is seen as exclusive stimulant compared to the locally produced liquor, fx Mandalay Rum. The reason for the massive investment is the prospect of developing a promising beer market.

“We do what we do best in Myanmar Carlsberg. We live up to our global goal for responsibility, we create good jobs for the population, and we do what is best for the environment. And we do it at the same time”, Daniel Sjoergen finishes from his office in Yangon.

Fact boxes

Company profile The is the fourth largest brewer in the world. The Group employs 40,000 people and is characterised by a high degree of diversity of brands, markets, and cultures.

The history of Carlsberg begins in 1847 when J.C. Jacobsen established his state-of-the-art brewery on a hill outside Copenhagen.

The business is focused in Western Europe, Eastern Europe and Asia where it holds strong market positions. The rest of the world is mainly serviced through export or licence agreements.

Carlsberg consists of an extensive portfolio of more than 500 beer brands. The flagship brand, Carlsberg, is one of the best-known beer brands in the world, and Baltika, Carlsberg, Tuborg and Kronenbourg are among the biggest brands in Europe. In addition, the company has a wide range of leading beer brands in local markets.

Carlsberg Group CSR strategy Carlsberg has been working strategically with CSR since 2008 and CSR is an explicit part of the Group business strategy. Carlsberg focus on 8 areas across the value chain and dedicate extra focus on three key priorities, namely “Responsible Drinking”, “Sustainable Packaging” and “Efficient Brewery” (reducing water, energy and CO2 emission at production sites).

Carlsberg has defined new targets for the next three year period, 2015 - 2017 The targets reflects the ambition of further integrating CSR into value chain and business strategy.

Timeline

2012: EU’s sanctions against Myanmar are removed and Carlsberg starts researching the possibilities of starting the production of beer

2013: Carlsberg signs, as the first Danish company, a contract permitting them to start producing beer in Myanmar. Carlsberg enters a joint venture with its original partner Myanmar Golden Star (MGS) in order to construct a new brewery.

2013: October 11 2013, the first sod for the large brewery in Bago is cut.

2014: Carlsberg sets new standards for safety at the workplace n Myanmar. August 2014, the company celebrates the milestone of 1,000,000 work hours without any accidents.

2015: The new brewery is finished. Carlsberg starts producing beer in 2015. Carlsberg launches three brands in Myanmar, Tuborg, Carlsberg and the new local brand Yoma.

Three pieces of good advice 1. Use your unique competences as a company in order to benefit Myanmar. This creates the greatest value from your CSR efforts.

2. Contribute to building competences in Myanmar. The country is on a journey of development and there is a great need for a competence boost.

3. Demonstrate a consistent zero-tolerance in relation to all kinds of corruption. Do not go native, accepting corruption as a part of the culture.

Three quotes Daniel Sjoegren, Former Managing Director: “Anyone can donate money for a good purpose in Myanmar. I think that the way we as an international company can create the greatest positive impact in a country, is by having CSR initiatives that are linked to our business strategies and our competences.

Daniel Sjoegren, Former Managing Director: “It is possible to do business in Myanmar without using corruption. It only takes more patience.

Vaibhav Khedkar, Supply Chain Director: “About 2,500 employees have been involved in the construction of the new brewery. They have all been trained in safety after the newest international standards. I believe this is a significant contribution to the Burmese society.

Interviewees

Daniel Sjoegren Former Managing Director MYANMAR CARLSBERG Co., Ltd. Building 15, 3rd Floor, MICT Park, Hlaing Township, Yangon,Myanmar, Postal Code - 11051 T: (+95) 01 4413448 , (95) 01 4413449

Read more

Carlsberg Group Company Website

Carlsberg Group CSR Report 2013

Carlsberg Group - Economic Contribution to Society

Carlsberg Group Business Ethics Policy