CARLSBERG ANNUAL REPORT 2012 MARKET OVERVIEW 3 2 1 OUR MARKETS Denmark Norway Sweden Finland Poland Germany The Baltic StatesUnited KingdomFrance Switzerland Italy Portugal South East Europe Russia Ukraine Kazakhstan Belarus Azerbaijan Malaysia Singapore Hong Kong China Vietnam Laos Cambodia Nepal India Population (millions) 5.6 5.0 9.5 5.4 38.2 81.8 6.5 63.1 63.4 8.0 60.9 10.7 30.5 141.9 45.4 16.7 9.4 9.2 29.0 5.4 7.2 1,353.8 90.4 6.4 15.3 31.0 1,223.2 Est. GDP/capita PPP (USD) 37,738 55,264 41,750 36,458 20,976 39,059 23,3704 36,728 35,520 45,286 30,116 22,991 21,636 17,698 7,598 13,921 16,008 10,684Asia 16,942 60,883 50,709 9,146 3,545 3,005 2,398 1,306 3,851 Est. real GDP growth (%) 0.5 3.1 1.2 0.2 2.4 0.9 2.4-4.5 -0.4 0.1 0.8 -2.3 -3.0 -6.0-1 3.7 3.0 5.5 4.3 3.9 4.4 2.1 1.8 7.8 5.1 8.3 6.5 4.6 4.9 Infl ation, avg. consumer prices (%) 2.6 1.0 1.4 2.9 3.9 2.2 2.4-4.4 2.7 1.9 -0.5 3.0 2.8 0.9-5.9 Europe Eastern 5.1 2.0 5.0 60.2 3.0 2.0 4.5 3.8 3.0 8.1 5.1 3.6 8.3 10.3 Western Europe OUR OPERATIONS Breweries 1211324111125 103111 1--405 66 2116 Employees 1,643 1,261 946 827 1,239 581 1,004 1,665 1,508 1,287 328 661 1,782 8,864 1,787 421 597 239 687 74 200 6,625 832 1,095 1,457 354 615 OUR POSITION Market position (no.) 1 1 1 1 3 1 7 1-2411412-312211 22215 28 1113 Market share (%) 54 53 33 53 18 18 33-40 15 29 43 7 48 15-28 38 29 33 26 69 44 20 24 50-55 38 98 64 74 7 Primary competitive climate (int./local) Local Local Local Int. Int. Int./local Local Int. Int. Int. Int. Int. Int. Int. Int. Int. Int./local Local Int. Int. Int. Local 5 Int. Local Int. Local Int. CONSUMPTION CHARACTERISTICS1 On-trade share of market, approx. (%) 26 26 21 15 13 18 4-9 58 21 43 40 60 22-55 8 11 33 3 20 74 54 42 45 50 60 60 80 17 Per capita beer consumption (litres) 78 46 50 88 99 106 76-99 73 29 59 29 50 32-75 64 59 29 52 6 6 20 24 39 38 32 27 2 2 1 2012E. Sources: IMF, Canadean and Carlsberg estimates. 2 Estonia, Latvia, Lithuania. 3 Bulgaria, Croatia, Serbia, Greece. 4 Weighted average. 5 Western China, incl. Chongqing. 6 Excl. Habeco. 7 Northern Germany (Schleswig-Holstein, Hamburg, Lower Saxony). 8 Incl. Habeco. MANAGEMENT FINANCIAL REVIEW STATEMENTS 6Letter from the Chairman 59Consolidated fi nancial statements 7CEO statement 132 Management statement 11 In the spotlight: EURO 2012 133 Auditors’ report 12 Our regions 135 Supervisory Board 18 In the spotlight: Asia 138 Parent Company Carlsberg A/S 20 Our strategy: Preparing for the future 30 Value chain – CSR 32 In the spotlight: Thirst for Beer 35 Risk management 38 In the spotlight: Sustainable packaging 39 Corporate governance 46 Remuneration report 50 Executive Committee 52 Shareholder information 54 Financial review DISCLAIMER This Annual Report contains contain the words “believe, then current expectations or actual results to differ production- and distribution- can arise, and it may not be forward-looking statements, anticipate, expect, estimate, forecasts. Such information materially from those ex- related issues, information possible for management to including statements about intend, plan, project, will is subject to the risk that such pressed in its forward-looking technology failures, breach predict all such risk factors, the Group’s sales, revenues, be, will continue, will result, expectations or forecasts, or statements include, but are or unexpected termination nor to assess the impact of earnings, spending, margins, could, may, might”, or any the assumptions underly- not limited to: economic of contracts, price reductions all such risk factors on the cash flow, inventory, products, variations of such words ing such expectations or and political uncertainty resulting from market-driven Group’s business or the ex- actions, plans, strategies, or other words with similar forecasts, may change. The (including interest rates and price reductions, market tent to which any individual objectives and guidance with meanings. Any such state- Group assumes no obligation exchange rates), financial acceptance of new products, risk factor, or combination respect to the Group’s future ments are subject to risks and to update any such forward- and regulatory develop- changes in consumer prefer- of factors, may cause results operating results. Forward- uncertainties that could cause looking statements to reflect ments, demand for the ences, launches of rival prod- to differ materially from looking statements include, the Group’s actual results to actual results, changes in Group’s products, increasing ucts, stipulation of market those contained in any without limitation, any differ materially from the assumptions or changes in industry consolidation, com- value in the opening balance forward-looking statement. statement that may predict, results discussed in such other factors affecting such petition from other breweries, sheet of acquired entities, Accordingly, forward-looking forecast, indicate or imply forward-looking statements. forward-looking statements. the availability and pricing of litigation, environmental statements should not be future results, performance Prospective information is Some important risk factors raw materials and packaging issues and other unforeseen relied on as a prediction or achievements, and may based on management’s that could cause the Group’s materials, cost of energy, factors. New risk factors of actual results. Editors Carlsberg Group Communications Design and production Kontrapunkt Photos Nana Reimers Translation and proofreading Borella projects This report is available in Danish and English. In the event of any discrepancy between the two versions, the Danish version shall prevail. 4 Management review The Carlsberg Group is the fourth largest CARLSBERG brewer in the world. Our extensive port- folio of beer brands provides a beer for GROUP every occasion and palate. Our fl agship No. 4 brand, Carlsberg, is one of the best- 4th largest global brewer known beer brands in the world, and Baltika, Carlsberg, Tuborg and Kronen- bourg are among the biggest brands in Europe. In addition, we have a wide range of leading beer brands in local markets. Our business is focused in Western Europe, Eastern Europe and Asia, where we have strong market positions. The rest of the world is mainly serviced through export or licence agreements. 2012 in brief 9.8 DKKbn operating profi t • Successful execution of Carlsberg’s EURO 2012 sponsorship across all regions. • Rejuvenated Tuborg achieved strong Pro rata beer volumes results in Russia, China and India. Western Europe Eastern Europe Asia • Carlsberg teamed up with a group of global beer, wine and spirits producers to commit to joint actions against the harmful use of alcohol. 5.9DKKbn free cash fl ow Carlsberg is the second largest brewer WESTERN in Western Europe. The region mainly comprises mature markets and is gener- EUROPE ally characterised by well-established 40bp retail structures and a strong tradition of Market share growth beer consumption in most markets. Beer consumption is generally fl at or slightly declining. However, the uncertain macro- environment has had a slightly negative impact on consumption and has also led to a shift from on-trade to off-trade consump- tion. The main focus is twofold: increas- ing market share through improved value management, superior in-store execution and driving international and local premium brands; and simplifying our business model, 5.1 increasing effi ciencies and taking out costs DKKbn operating profi t while providing superior customer service and top-quality products. 2012 in brief • Challenging consumer dynamics and bad weather in Q2 and July led to a market decline of around 3%. • Overall market share up, driven by the continued focus on the commercial agenda. • Operating margin impacted by higher input costs, bad weather 25 and country mix. Breweries in 18 countries Carlsberg Annual Report 2012 5 Carlsberg holds a strong no. 1 position in EASTERN the region’s main market, Russia, and very strong positions in the other markets in the EUROPE region. The Russian beer market was fl at in 38.2% 2012, having experienced declining volumes 2012 Russian market share over the past few years due to the macro- economic downturn following the fi nancial crisis and unavoidable, signifi cant price increases. Value growth has been healthy and consistent. We expect the Russian beer volume market to revert to positive average annual growth rates. Ukraine is the second largest market and Carlsberg holds a strong no. 2 position. Volumes in the region are driven by increasing disposable incomes, improving consumer dynamics and con- sumers aspiring to brands and innovation. 4.3 DKKbn operating profi t The retail universe is in a developing stage with traditional trade still dominant. 2012 in brief • Flat Russian beer market impacted by short-term disruption from closures of non-stationary outlets. • Russian market share up sequentially in 2012, driven by implementation of Group tools, including value management and portfolio optimisation. • Buyout of minorities in Baltika Breweries completed. RURussia – the Group’s largest market Carlsberg’s Asian portfolio of businesses ASIA consists of mature markets such as Malaysia, Hong Kong and Singapore as well as investments in growing beer markets 9% such as China, India and Vietnam.