Carlsberg warns sales will suffer as prices rise to offset rising costs

Carlsberg plans to raise prices for its beer this year to cope with soaring costs, a move it says is likely to hurt beer sales as it becomes the latest company to pass on inflation to consumers. consumers.

The Danish brewer, which owns brands such as Tuborg and Kronenbourg 1664, said sales last year exceeded pre-pandemic levels but expected cost inflation and the continued effects of Covid-19 are weighing on its business in 2022.

CEO Cees ‘t Hart said in a statement Friday that the cost increases were “very significant. Our ambition is to offset this cost with higher revenues per hectolitre, but of course there is still some uncertainty.

“Many negotiations with customers are not yet concluded, we do not know the reactions of our competitors and we do not know what the impact of higher inflation will be on consumers. . . These are significant headwinds.

The world’s third-largest brewer has warned that price hikes “could have a negative impact on beer consumption”.

Carlsberg is the latest beverage company to report the effects of high commodity and transportation price inflation. U.S.-based Constellation Brands said last month it would raise prices for its brands, including Corona and Modelo, by more than normal 1-2% this year. Carlsberg’s big rivals, Heineken and Anheuser-Busch InBev, are due to release their annual results this month.

Manufacturers of food and household products have issued similar warnings: Procter & Gamble, for example, last month announced further price increases on its products that will take effect at the end of February.

Carlsberg said it expected costs per hectoliter of beer to rise by 10-12%, an increase it aimed to pass on fully to consumers through higher prices and changes to the range. of products sold.

The brewer was negotiating with retailers and hospitality venues, ‘t Hart said. “We are cautiously optimistic that we can reach agreements that will be mutually beneficial,” he added.

The company could more easily drive up prices for premium brands, where customers are less price sensitive, he added, while returning to socializing after the worst of the pandemic would benefit the group.

“There is a situation that we have never experienced. For two years people were more or less at home, but now they can go out, but it’s a bit more expensive. . . it is difficult to predict how this will play out,” he said.

The group reported organic revenue growth of 10% in 2021 and organic operating profit growth of 12.5%, prompting the board to propose a dividend increase of 9% to DKr 24 per share. It does, however, expect organic operating profit growth of zero to 7% for 2022.

The cost warning came after Carlsberg set out a growth strategy focused on premium brands and so-called super premium lines such as 1664 Blanc, as well as non-alcoholic beer – which it said was the one of the fastest growing categories – and not – beer brands such as Somersby Cider and Garage Hard Lemonade.

Non-alcoholic beer accounts for 4-5% of Carlsberg sales and is expected to double that figure in five years, ‘t Hart said.

The group’s shares rose 2.2% on Friday morning to DKr 1,088.

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