“We took our eye of the ball. We underinvested in the brand. Brand equity scores were beginning to decline,” James Lousada, chief executive of Carlsberg since the start of last year, candidly admits. “We had three years where we were investing in creative campaigns which were no where near our benchmark in prior years.”
To reverse that situation, concentration has gone back to its core, Lousada continues. “One of the key things we have done over the past 18 months is to go back to our bread and butter, which is Carlsberg. Over 50% of what we sell every day is Carlsberg Standard Lager.” To underpin that process, the group has brought back its iconic Probably campaign after four years, complete with a £12m media spend.
Lousada says: “Despite the fact that standard lager is going to decline – we know that it will come under pressure, it will plateau at some point – we need to defend that position. One of my challenges to the marketing team has been to encourage them to do things differently. The old way of spending X number of TV hours above the line and a little bit of poster spend and online needed to change. In the last three or four months they have started to find their mojo with a few ideas, such as the recent billboard campaign, which generated 60 million views in the first day.
Being fleet of foot
“Carlsberg was known as a leader in that field. We set up the Carlsberg news desk, which is a group that gets together weekly or daily to look at what we can grab in terms of news items and how we can respond quickly and embrace the digital world by being a bit quicker and fleet of foot. If you are predictable no one is going to see you, even if you are spending £12m. Our challenge is to stand out. It also gives confidence to the whole organisation; people within the business can be proud of the brand. This is a top five beer brand in the UK and we should be treating it and nurturing it with the respect it deserves.”
Historically Carlsberg has had the majority of its success in the independent free trade and the small multiple retails group sector, building relationships over time. Lousada says: “Our focus is to say that free trade is still the place to be. It is a dynamic part of the market. It is in decline for various reasons, but fundamentally it is a fantastic business for us and we are investing more people and tools of the trade in it. We see the free-trade sector as the main strategic priority for our organisation.”
The pub sector, thanks to the imminent introduction of the market rent only option, is in state of flux, with Enterprise and Punch looking to incorporate new models and agreements. This, Lousada believes, will provide opportunities and challenges in equal measure. He says: “We feel our proposition allows us to win with both sectors. I have been asked many times what the future will look like. And really no one knows. We have a great managed division that is winning in the managed on-trade. However that plays out, we know how to be successful in the managed sector.
“Inevitably there is going to be a transfer into pure free trade of some sort and again that is great for us because we have the best free-trade sales team in the UK and we are investing in it. We also have pretty strong relationships with Punch and Enterprise, so however things play out, we are intrinsically linked with those businesses and many others in the tenanted sector. I am pretty confident that we have the tools to win in any one of those categories. We know the businesses and people well. It comes back to having strong relationships and a good track record on doing business with them.”
No going back
On owning pubs, Lousada says “the horse has bolted” and that although it was before his time, the company, selling off 4,000 pubs, in retrospect “probably wasn’t the thing you would choose to do if you could see the landscape as it is today”. He says: “Getting back in and trying to be an operator is not something we are looking to do. Also because we offer all the logistics for some of the operators, there is much more of a symbiotic relationship there already.”
If not pubs, what about the opportunity for consolidation. Our talk comes days after SABMiller’s announcement of its acquisition of Meantine Brewery and Lousada doesn’t hide his admiration for Meantime or that fact that Carlsberg is continually looking at acquisition opportunities.
He says: “SABMiller got there and did the deal and congratulations to them because I believe they have bought a brilliant brand that has great potential. That’s not the only one though. We are always looking. We are interested in a number of brands, the questions are is it the right time to acquire them and is it the right price.
“I think SAB moved quicker than others, but there are other brands out there that will follow a similar cycle. The challenge will be how many brands can break through from being say a 10,000, 20,000, 30,000 hectolitre brand to being a Doom Bar. You look at the experience over the last 10 years and only one or two have made that leap. Molson Coors and Doom Bar will not be unhappy that the latter is now seen as a mass market brand. We look it in the same way. If we buy something, it has to have the potential to grow significantly.”
Building reputation
Unsurpisingly, the company’s success has been through mainstream wet-led pubs, and Lousada admits one of the group’s biggest challenges is to build its reputation in restaurants and slightly higher-end outlets. He says: “We have had significant success with our world beers. For example San Miguel gives us a licence to almost go anywhere. That brand in the food world is a really important one for us. The importance of food is played out in the way our brands are performing. The ones that are typically more associated with food occasions are growing faster than others.”
And what of the craft beer movement? Lousada agrees that the emergence of craft and the continued investment in big brands is keeping people interested in the wider category. He says: “I would agree that the sector is two or three years ahead in terms of innovation and range. Research we have done shows that more people are willing to try new things because they have opened their minds to new products. New stuff encourages us to try new stuff. We talk about craft because it’s the sexy side of it, but the innovation on core brands has been equally as strong with lower alcohol flavoured-beers, world and new origin beers, which have had just as big an impact on the overall trend within the beer category as craft has had.
“Beer had been lacking. Fifteen years ago the wine category led the way. It talked about provenance and style and flavours. It invigorated people to look at the category in a different way and I think beer lost its way a bit. Not now, as this is an exciting time for the UK beer market. The current range and portfolio mix on offer in the on-trade is incredible. It has awakened everyone’s imagination in the category. We have to embrace that momentum and continue to enhance our proposition to stay ahead of the market.”
