Carlsberg would like to include a buyback clause in its sale of its large Russian business. This would allow the third-largest brewer the chance to return to the country it has been exiled.
Cees ‘t Hart was the chief executive of the Danish brewer and stated to the Financial Times that Carlsberg was leaving Russia “full-stop” and that he hoped a sale agreement would be in place before June ends.
The Carlsberg boss stated that he would allow his successors to return to Russia if Russia takes a “different path”, something he didn’t expect for at least 10 or 15 years.
After making a huge bet in 2000s on Russia, Carlsberg’s Russian profits and sales topped half. Russia was responsible for only 10% of the group’s sales and 5% of its profits, due to restrictions on how beer can be advertised and sold.
Carlsberg stated that it would leave Ukraine shortly after Russia invaded Ukraine in February. However, it has not revealed who it is currently in negotiations over the sale.
Hart stated that the “reverse integration”, which is the process of separating the Russian operations and the rest of Carlsberg from each other, was more complicated than he thought, but that he was optimistic of reaching an agreement for a sale before the end of the quarter.
“Business leaders must look beyond the next year and the years after. My job is not only to see the next year, but also to think about the future. Hart stated in an interview that Carlsberg, a 175-year-old company, would be interested in making decisions about whether the successor to the successor has different options in 10, 20, and 30 years.
He said, “If Russia is a different nation in 10 or 20 year, we hope to have an opportunity to return.” It is unlikely that we will return in the near future, according to me. It might be different in 10-15 years, but that depends on many factors.
Hart’s comments come amid growing scrutiny over Russian companies that remain in Russia despite their vows to leave.
The Danish brewer will license to the new owner some of its most well-known international brands, including Tuborg, 1664, and Somersby cider. However, not the Carlsberg brand. Hart stated that it would not be able to receive future revenue from licensing. This was only part of the sale.
It’s a bit of an awkward catch-22. It can’t even be sold if we take out international brands. It would then be nationalized. Hart said that licensing could be criticized by the outside world if it is done.
Carlsberg had warned Tuesday that higher prices would hurt beer sales and could see a squeeze on profits.
According to the Danish group, beer has historically been a resilient category of consumer product. However, rising prices and high inflation will have a negative impact on sales, particularly in Europe.
It added that its operating profit could drop to 5% or rise to 5% this year.
Carlsberg published its full-year results on Tuesday. It reported a 17% increase in revenues to DKr70.3bn ($10.1bn), the highest growth rate in at least a decade, as it continued its recovery from the pandemic. Operating profits increased 13 percent to DKr10.7bn.
Hart stated that Carlsberg would need to increase prices by close to 10% this year in order to offset an increase in “low-teen” costs.