AAEAAQAAAAAAAAMGAAAAJDY0YjI4NTNiLTYwNTMtNDM2MS04OWJjLWFlMzM5ZGJkZjg3NA

2 Charts Show How Carlsberg Beer Failed – And Then Won Big in China

Facebooktwittergoogle_pluslinkedin

Carlsberg beer in China is one of those business stories that everyone should know. Take a look at the below picture. It is of Carlsberg China circa 2002. This was after +15 years of business in the PRC. They had some imports but were still a tiny China operation overall. And they were facing increasingly dominant SOE brewers like Tsingtao and Beijing Yanjing. Around this time, management basically gave up on the China market and appeared to be exiting. Around 2000 (or so), they were letting go of staff, selling facilities, closing offices and so on.

AAEAAQAAAAAAAAKXAAAAJDNiMDBiYmFlLTAzMmEtNGVhZi04NWUyLThmNjE2NmY4ZTJlMA

But in 2003-2004, they reversed their decision and management re-entered China. And they did so in a very surprising way. They abandoned most all the major China markets and went deep into the West.

They ignored Shanghai and Beijing and went deep in the wilderness of Yunnan, Xinjiang and Tibet. Keep in mind, these are still the poorest and least developed regions of China today. But in 2004, they were pretty much the end of the world. The picture at the top of this post is a good image to keep in mind when thinking about these markets.

From 2004-2006, Carlsberg went on a stunning brewery acquisition and deal binge in the West. They went first to Yunnan. Then to Tibet. Then to the other Western provinces. In just a few years, they had bought or JV’d with almost 20 breweries. By 2006, Carlsberg China looked like the below chart.

AAEAAQAAAAAAAANkAAAAJDUyZDI4YzE2LTcyYWEtNDJlMi1hMjI5LWU3NjdmM2FjZTNjNQ

The strategy was very clever. It was basically to avoid the increasingly entrenched competition of the major markets. And instead, to get to the West first and try to grab market share. This had a lot to do with the economics of beer, which lends itself to regional economies of scale.

Fast forward to today and Carlsberg now has over +50 breweries in Western China – and they are a market leader in most all of these regions.

Thanks for reading. jeff

—————

I write and speak about “how rising Chinese consumers are disrupting global markets – with a special focus on digital China”.

Photo by Matt Ming (creative commons, link here)

Facebooktwittergoogle_pluslinkedin

Comments are closed.