Department of Economics Author: Bachelor ThesisAnne Mette Lund Madsen Gina Helland Hauge Advisor: Valdemar Smith The International Beer Industry – Opportunities for Carlsberg The Aarhus School of Business 2009 Abstract In this thesis there has been an evaluation of the strategy followed by Carlsberg in the Western and Northern European beer market and the objective was to find out if their current strategy is the right one for the company. This market was chosen because it is stagnating and challenging for Carlsberg, especially due to the financial instability in the world markets.
When investigating this, there have been used internal and external analyses. Due to Carlsberg’s current strategy concerning growth and expansion, merger theory has been taken into account as well. The Western and Northern European market is a market where Carlsberg faces great challenges and it is therefore important for them to maintain market share. One objective in Carlsberg’s strategy is to lower their debt and increase the cash flow in order to stabilize their share price and ensure investors that Carlsberg is a favourable investment. This seems suitable in the current market.
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It also creates opportunities for the future where Carlsberg can be able to pursue their long-term strategy of growth and expansion through mergers and acquisitions. In the long-run, Carlsberg have many opportunities, however, there are some obstacles for achieving their goals, such as their ownership relations and their large debt. Their current debt will eventually be lowered if they choose to do this, but the ownership relations are more binding and cannot be dissolved easily. The investigation and research that has been conducted shows that Carlsberg should follow their current strategy on the Western and Northern European market.
Carlsberg’s future depends on how they manage to utilise their opportunities as well as maintain or increase market share. Table of contents 1. Introduction1 1. 1 Problem statement1 1. 2 Delimitations2 1. 3 Evaluation of sources2 1. 4 Outline of the paper2 2. The international beer industry3 3. The creation of Carlsberg4 3. 1 Historical background4 3. 2 The company today5 3. 3 Carlsberg’s current strategy6 4. Merger theory7 4. 1 Vertical mergers7 4. 2 Horizontal mergers8 4. 3 Effect on stock price9 4. 4 Horizontal boundaries10 4. 5 Oligopoly models11 5. Game theory and price setting in the beer industry13 . External Analysis15 6. 1 Carlsberg’s main competitors16 6. 1. 1 Heineken16 6. 1. 2 Anheuser-Busch InBev16 6. 1. 3 SABMiller16 6. 2 PESTEL analysis17 6. 2. 1 Political17 6. 2. 2 Economic18 6. 2. 3 Social19 6. 2. 4 Technological21 6. 2. 5 Environmental21 6. 2. 6 Legal22 6. 3 Porter’s 5 forces23 6. 3. 1 Bargaining power of suppliers23 6. 3. 2 Bargaining power of buyers24 6. 3. 3 Threat of new entrants25 6. 3. 4 Threat of substitutes25 6. 3. 5 Industry rivalry25 6. 4 Summary of external analysis26 7. Internal analysis27 7. 1 Seven elements of resource-based sustainable competitive advantage27 7. 1. Prior or acquired resources27 7. 1. 2 Innovative capabilities28 7. 1. 3 Being truly competitive29 7. 1. 4 Substitutability29 7. 1. 5 Appropriability30 7. 1. 6 Durability30 7. 1. 7 Imitability30 7. 2 Summary of internal analysis31 8. SWOT analysis31 8. 1 Strengths32 8. 2 Weaknesses33 8. 3 Opportunities33 8. 4 Threats35 9. Future prospects36 10. Conclusion39 Bibliography42 1. Introduction The world today is changing very rapidly. Opportunities arise and disappear instantly and it is therefore important for modern companies to follow suit and seize the opportunities present for them at the time.
In this context the strategy of a company becomes relevant. Companies develop strategies to ensure that the employees know what to achieve and are working towards the same goals. As the speed of changes and information increase in the world, it becomes important for a company to be able to react fast and adapt their strategy. This is one of the reasons why we have chosen to write about the strategy of a company. In our choice of company to analyse we considered several large Danish companies that are successful and well known in most parts of the world.
We considered Lego, Vestas and Arla as well, but we found that Carlsberg was the most interesting company due to different factors such as their ownership relations and their capability to grow through mergers and acquisitions. Additionally, we found that Carlsberg was a firm of a certain size and with relatively reliable and easily accessible information. For example, they provide the public and stakeholders with company information on their webpage and a great deal of text and articles have been published on the company’s dealings during the years.
Carlsberg is part of the Danish society and it is one of the country’s most exposed brands internationally (Falk-Sorensen 2009). Carlsberg is a company with several interesting opportunities in the world market and they are facing some interesting years ahead. Therefore we think it is vital for them to have the right strategic approach to the different markets and that they face the challenges ahead. In the assignment we will focus on the strategy in the Western European market as the market is stagnating and therefore challenging for Carlsberg.
This is one of the largest markets for Carlsberg. It is important that they maintain their position in the market since this is a market with a high level of competition. All of the large international players are in this market, which makes it a difficult market for Carlsberg. 1. 1 Problem statement By the use of strategic analyses, an evaluation of the strategy followed by Carlsberg in the Western European beer market will be conducted to investigate if their current strategy is the right strategy for the company.
This will in addition to external and internal analysis include theory regarding mergers and acquisitions. To get a complete picture of Carlsberg’s opportunities, the strategy for the entire organisation will be taken into consideration when concluding on the findings. 1. 2 Delimitations Carlsberg has a wide range of products from non-alcoholic drinks like sodas and Ramlosa to alcoholic drinks like cider and a wide variety of beer (Carlsberg Danmark- Produkter). In this assignment the focus will be on the Western European beer market with a view of the beer market as a whole.
This assignment will therefore not contain any information or analysis e. g. of licensing agreements with Coca Cola or thorough analysis of markets such as the growing Russian or Asian markets. Any financial results will contain results from beer sales only. Information for the analysis will not go back more than 5 years as we would like to focus on the present and the future of the company. 1. 3 Evaluation of sources For information on Carlsberg and other breweries that are mentioned in this assignment, we have chosen to use the company websites and articles published on the companies.
The majority of numbers are from the annual reports from the companies as we believe these numbers are the most reliable. We have used databases recognised by educational institutions, e. g. Science Direct and ELIN. We have also used newspaper articles from recognised national and international newspapers, as well as material from books on strategy and economics that are being used in the lectures at ASB. 1. 4 Outline of the paper This paper has been written in close collaboration by the two authors and we are both accountable for all the content of the paper.
We start out by introducing the industry and Carlsberg as a company as well as their strategy. As Carlsberg’s strategy is concerned with growth and expansion to a large extent, we will go through merger theory and the application on Carlsberg. We will also look briefly into game theory to obtain knowledge about the beer industry inter-relations and to consider how Carlsberg determine their prices. We will move on to the external and the internal analyses of Carlsberg, where we go through the PESTEL analysis, Porter’s five forces and the seven elements of resource-based sustainable competitive advantage.
We will summarize the internal and external analysis in a SWOT-analysis as this show the main points and learning from the different analysis. We will look at the future prospects of Carlsberg in the Western European market and finally we are going to conclude on our findings in this assignment and try to advise on the future strategy of Carlsberg, based on the knowledge we have obtained through working with the company. 2. The international beer industry
Beer is regularly enjoyed by people around the world and there is a long history of brewing in the world, it is said to date back to almost 5000 years ago in China. It was also an important food item in the Imperial Egypt of the Pharaohs (Fosters Group- history of beer). Today, beer is the most consumed alcoholic beverage in the world, and it is the most popular drink, next after tea and water (Nelson 2005:1). The main ingredients in beer are water, grain, with barley being the most common type, hops and yeast (Professors’s house).
Additionally, all beer can be classified as either a lager or an ale. Whether the beer is an ale or lager is defined by the type of yeast used in the brew and the temperature at which fermentation takes place (Foster’s Group- about beer). Beer has been an integral part of society for centuries in many European cultures and it is of major societal, economic and cultural importance in the European Union. Production and consumption patterns differ widely from one country or region to another, particularly when looking at the different kinds of beer (Brewers of Europe).
There has been a constant decline in beer consumption patterns in Western Europe and North America since the second part of the 1990’s, but there has been a strong increase in consumption in the growing and emerging markets like Russia and China (Larimo, Marinov & Marinova 2006). However, the global beer market overall is growing, and according to research, by 2012 the market is forecasted to have a value of $446. 4 billion which is an increase of 11. 2% since 2007. Europe is the leading region in the beer market, with a 49. % share of the markets value (Research and Markets). In the 1990’s Anheuser Busch was the market leader in the world. However, there have been a number of acquisitions, mergers, strategic alliances and joint venture formations among the major players in the industry. The largest brewer in the world, Inbev, was created in 2004 after a merger of Brazilian Ambev and Belgian Interbrew (Larimo, Marinov ; Marinova 2006). Anheuser-Busch acquired Inbev in 2008 and the company is now named Anheuser-Busch Inbev and is now by far the largest brewery in the industry (Bowers 2008). . The creation of Carlsberg 3. 1 Historical background J. C. Jacobsen is considered the founder of Carlsberg. In 1847 he founded the brewery in Valby just outside Copenhagen and to this day this is still where they have their headquarters. The first beer was introduced to the market on November 10th 1847. Since then Carlsberg has grown substantially and has become one of the world largest breweries. In 1876 the Carlsberg Foundation was created to manage Carlsberg’s Laboratory and to support culture, art and social sciences in Denmark. J. C.
Jacobsen left his brewery Old Carlsberg to the Carlsberg Foundation, and after his death in 1887 the Foundation took ownership of the company. In 1902 the Foundation was given ownership of New Carlsberg, which Carl Jacobsen, the son of J. C. Jacobsen, had established in 1882. In 1903, Carlsberg joined forces with Tuborg and established an agreement saying that the two breweries would be working closely together, but still remain as two independent companies. The agreement stated that they were to collaborate on investments as well as share the profit from sales.
They also agreed on merger possibilities in the future. In 1906 the Old Carlsberg and the New Carlsberg joined forces and became what is now known as Carlsberg Breweries (Carlsberg Group- History), (Carlsberg Group- Carlsberg Foundation). In 1970 Carlsberg and Tuborg merged under the name of De Forenede Bryggerier A/S, but in 1987 the company changed the name to the current name of Carlsberg A/S (Carlsberg Group- History). Until recently the Carlsberg Foundation was obligated to hold at least 51 % of both the share capital and the votes of the company.
In 2008, Carlsberg changed the basis of the foundation by allowing them to own as little as 25 % of the share capital but still retain 51 % of the votes. This provided a capital gain for the Foundation, which made it possible for Carlsberg as a whole to make acquisitions (Lassen, Hansen 2008). In April 2008, Carlsberg together with Heineken acquired Scottish & Newcastle (S&N), the largest British Brewery. This made them the 4th largest brewery in the world and gave them 100 % ownership of Baltic Beverage Holding, BBH, which is the biggest operator on the Russian beer market.
BBH was originally a 50/50 joint venture between Carlsberg and S&N (Carlsberg’s annual report 2008:34). 3. 2 The company today Carlsberg is today owned by 20. 000 private and institutional investors and is listed on the OMX Nordic Exchange Copenhagen A/S (Carlsberg Group- Carlsberg at a glance). Carlsberg had an operating profit of 7. 979 billion DKK in 2008 and the annual beer sales amounted to 109. 3 million hectolitres. Carlsberg’s total world market share amounts to approximately 5 % (Carlsberg’s annual report 2008:6, 72). Today the Carlsberg Group is operating in a variety of different markets around the world.
Their primary markets of concern are Western and Eastern Europe, Russia and Asia, with Western Europe being the mature market, while the other markets are in the emerging and growth stages. In Russia, Carlsberg is a strong market leader and there is a positive growth in this region, which leads to opportunities in the future. The Asian market is an emerging market and a more difficult market because they do not have the same traditions when it comes to beer consumption as in Europe. The Asian market is a more risky market as it is difficult to predict if the trend will continue or die out.
On the Western and Northern European market, Carlsberg is positioned as the second largest brewery and they are leading in several of the individual countries in the region (Carlsberg’s annual report 2008:15). 47 % of Carlsberg’s total beer volume is sold on the Western and Northern European market and 43 % on the Eastern European market. The remaining 10 % is being sold on the Asian market (Carlsberg’s annual report 2008:1-3). Carlsberg has a portfolio that consists of more than 500 brands, and four of them are among the ten biggest brands in Europe (Carlsberg’s annual report 2008:8, 18).
The company has a wide variety of products including soda, mineral water, chocolate milk, beer, ciders, juice, smoothies etc (Carlsberg Danmark- Produkter). This means they are much diversified, however, their primary sales come from the sale of beer and soda. Several of the products in Carlsberg’s portfolio are products that they distribute after agreements with manufacturers such as Coca Cola and Cocio. Our focus will be on the beer sales of Carlsberg and not on the whole product portfolio. Carlsberg competes on the market of beverages with many different companies selling beer as well as other beverages.
Their main competitors in the international beer market are Heineken, Anheuser Busch InBev and Sab Miller. In the Nordic countries, the competitors consists more of small breweries such as Royal Unibrew and Hancock in Denmark and Hansa in Norway, while in the rest of Western Europe they compete mostly with the large international players. This is consistent with the fact that Carlsberg is marketed as a premium beer outside the Nordic countries. In the Nordic countries Carlsberg is considered to be more of a mainstream beer.
Here Carlsberg wishes to increase the share of premium beer in their portfolio (Carlsberg’s annual report 2008:30) On the Western European market Carlsberg is competing on brand, quality, marketing and innovation (Carlsberg’s annual report 2008:10). As the Western European market is stagnating, it is important to strengthen their position in the market through dynamic marketing, constant innovation, positioning of products and continued efficiency, to remain competitive. Carlsberg has implemented an Excellence program in Western Europe starting from 2003.
This program is meant to increase the focus on costs and increase efficiency. This has meant that Carlsberg has been looking at their divisions and breweries and has shut down the ones that were not necessary (Christensen, Otkj? r 2008). The program has looked at areas such as production, procurement, logistics and administration. An objective of the program is to create growth and gain market share on the European market (Bjerrum 2008), (Carlsberg Group- Excellence Programmes) 3. 3 Carlsberg’s current strategy
Today the overall strategy for the Carlsberg Group is expansion and to become significant in the markets they are in, whereas the company subdivision in Western Europe wants to create value and increase efficiency. This should be done through strengthening their brands, being innovative and expanding their portfolio. Efficiency can be improved through the implementation of the Excellence program and network optimization. Due to the expansion strategy, Carlsberg is keeping an eye out for small breweries to acquire or merge with, since this might help them gain market share or provide them with a key position in that particular market.
After the takeover of S;N, Carlsberg has full ownership over BBH which gives them a strong position in the Eastern European market (Carlsberg’s annual report 2008:15). Even though expansion through acquisition and mergers is an important strategy for Carlsberg, they will not be able to make large investments in these activities in the near future as they have a large debt after the acquisition of 50 % of S&N (Carlsberg Group- Strategy). 4. Merger theory In this section we want to look into what motives firms have to merge and also look into what kind of mergers that are relevant for Carlsberg in elation to their strategy. There are three different kinds of mergers; horizontal, vertical and conglomerate mergers (Martin 1994:258). We will not be examining conglomerate mergers as we do not find them relevant for Carlsberg at this time. There are a number of motives that might play a role in merger activity. What is considered the most general motive is that the purchasing firm considers the acquisition to be a profitable investment. Mergers are often also thought of as an alternative form of investment.
Firms will make acquisitions when it is the most profitable means of enhancing capacity, obtaining new knowledge or skills, entering new product or geographical areas, or reallocating assets into the control of the most effective managers or owners. Another view of decisions to merge is that it is a part of a broader strategic plan aimed at positioning the firm to achieve some long term goals (Pautler 2003). In Carlsberg’s case it is part of their strategy to expand so in their case it is obviously a part of a strategic plan to grow and become larger. 4. 1 Vertical mergers
Vertical mergers are mergers in the vertical channel. A firm can choose to make or buy in different stages of the channel (Besanko et al. 2004:138). A vertical merger would therefore be between e. g. a supplier and a manufacturer or a manufacturer and a wholesaler. Some companies control all the activities in their value chain, while others control very little and buy in a lot of services and parts. One of the reasons why firms merge vertically could be that they want exclusive rights to the supplies, distribution channel etc. or that the firms have some synergies they will be able to utilize. Besanko et al. 2004:109-110,151) In relation to this, Carlsberg can consider integrating forwards or backwards. Their supplies consist primarily of raw materials and packaging, bottles and cans. Raw materials are supplied by many and are bought at a market price which is kept down by strong competition. This will not be easier, cheaper or more efficient to produce internally than to buy it. Raw materials are not differentiated products that Carlsberg wants exclusive rights to either. In relation to the supplies of bottles there are only some suppliers.
Carlsberg have the possibility to switch between suppliers to get a good price, but the suppliers also need to have capacity to cover all of Carlsberg’s needs and demands. Carlsberg might be able to integrate backwards in the supply chain and buy up the suppliers of these products. In these years though, Carlsberg is selling out the parts of the business that are not related to their core business of producing beer, so they will probably not be inclined to acquire completely new areas of business (Carlsberg’s annual report 2008:30) Forward integration in the supply chain seems rather unrealistic as well.
Carlsberg has no clear incentive to start running supermarkets, shops or bars. They have a complete and excellent distribution network and cover wide areas of sales. If forward integration was an issue Carlsberg might have luck with setting up stands in front of concerts and other events, where people have to stand in line to get in. For Carlsberg to start selling their beer in selected stores will probably not be a success. Beer as a product is not a high priced product that people will go far to purchase. Beer is a product you buy in a supermarket along with the rest of your daily groceries.
Carlsberg enjoy good profits from having a great distribution network and being present in most supermarkets, bars, pubs and restaurants. 4. 2 Horizontal mergers Horizontal mergers are performed between companies in the same industry at the same horizontal level. This could be a merger between 2 manufacturers or 2 wholesalers. The key reasons for horizontal mergers are to gain market share, increase market power and efficiency and utilise synergies between the firms (Martin 1994:261). Among these synergies we find economies of scale and scope, and acquiring complementary strengths such as innovative or marketing capabilities.
As this assignment is mainly concerned with horizontal mergers we will be looking deeper into the reasons for horizontal mergers. Market power seems to be a primary motivator for mergers. The possibilities of market power effects are greatest in the case of horizontal mergers (Pautler 2003). Carlsberg has merged horizontally several times and we can see that the effect on market power and market share have been positive. The company has gone from being the 6th largest company in the world to being the 4th largest in just a year and their sales volume has increased with 33 % on a world basis (Carlsberg’s annual report 2008:6).
Efficiency is increased when merging horizontally as fixed costs of administration can now be spread over a larger output. This will happen if firms are able to take advantage of any available economies of multi-plant operations (Martin 1994:266). Efficiency can be increased by increasing output and reducing production costs. Merging firms can also acquire new products and new technologies. Carlsberg has merged and acquired companies several times. These events have increased the product portfolio of Carlsberg and have given inputs regarding innovation and new product development.
Synergistic effects may be realised in relation to two merging firms, if either firm is in possession of some excess resources or capacity that the other firm may be able to utilise (Martin 1994:266). For synergistic effects to be created, the firms must have some complementary resources. This could include one of the firms acquiring innovative or marketing capabilities from the other firm, if they find it unique and beneficial. If the companies operate in different geographical markets the merger might provide an easy access to new markets. The synergistic effects can include economies of scale and scope.
Economies of scale exist if the firm achieves unit cost savings as it increases the production of a given good (Besanko et al. 2004:74). For Carlsberg, this can be achieved by buying large batches of raw materials and supplies as well as producing large batches. The unit price for the materials and supplies will be lower and the production costs will decrease by spreading fixed costs over a larger batch. Studies have shown that mergers often come in waves. However, there are more explanations as to why mergers take place, than reasons for why they come in waves (Gugler, Mueller & Yurtoglu 2005:1).
According to Gorton, Kahl and Rosen, merger waves can be attributed to the fear of being driven out of the market or being taken over. If two firms in a market merge, other firms might start to acquire each other as a defensive strategy and to survive in the market. By buying other firms they believe they will be less likely to be taken over themselves (Gorton, Kahl & Rosen 2005). However, Carlsberg is not in a position where they have to be thinking about this, since the ownership of the company does not make it possible for other companies to acquire Carlsberg.
Due to the Carlsberg Foundation and their number of shares and votes, Carlsberg cannot be taken over, unless the company have to file for bankruptcy. 4. 3 Effect on stock price When the market discovers that companies consider a merger there is an effect on stock price. For the target firm there will almost always be an increase in the stock price. The increase happens before the possible merger and it is due to expectations of better future opportunities and a better management of the resources of the company. Evidence has shown that the acquiring firm will not benefit as much as the target firm in relation to stock price increases.
In some cases the stock price of the acquirer even fall in the event of an acquisition (Pautler 2003). This might not seem logical as one would think the acquirer would expect an increase in stock price as well to gain from the acquisition. It seems that the acquiring firm gains in different areas than the stock price. They might have the opportunities to enter new markets, increase prices of existing products and obtain new knowledge and technologies. Generally there are a lot of different studies showing different effects of merger on stock price and profit for the acquiring firm.
Some show positive and some show negative effects but most of them are uncertain and insignificant. The effect depends on the industry composition and how the firms manage to benefit from the merger. From stock price charts we see that Carlsberg’s net income increased significantly after the acquisition of S;N. The net income increased to 1. 42 billion DKK in the second quarter of 2008 from 1. 04 billion DKK the year before. Analysts had only expected an increase to 1. 28 billion DKK and it seems that Carlsberg has been able to benefit from the acquisition (Bhatia 2008).
These numbers of income were numbers from before the financial crisis hit Europe and therefore the best option we have of examining the effects of the acquisition. The financial crisis has obviously affected the stock prices and net income of most companies, among these Carlsberg, that went from having a stock price of 550. 53 DKK on the 16th of May 2008 for a Carlsberg B share to 151 DKK on the 20th of November. Due to the instability and uncertainty in the financial markets, it would make no sense to do an analysis from the numbers of today (Carlsberg Group- Share price). 4. Horizontal boundaries Within most industries there will exist an ideal size of a company. This size is determined by the horizontal boundaries of the firm. The horizontal boundaries identify the quantities and varieties of products and services that are produced. They differ markedly across industries and across the firms within them (Besanko et al. 2004:72). At some point, economies of scale turns into diseconomies of scale and the synergistic effects become less dominant than the disadvantages. Firms will realise that it is hard to manage firms that are too big and too differentiated.
For companies in the modern world, it is a recurring task to evaluate the size and width of the company to try and find the optimal size and composition. When looking at the international beer industry, it seems that this industry is composed of several large international players as well as small microbreweries, which seems to function well in their areas of expertise. The small suppliers produce locally and their products are being sold in local stores and supermarkets whereas the larger companies operate in the world market and supply to almost all outlets.
The large players see opportunities in the small breweries as it can help them create a good position in the local markets, and the industry is therefore filled with mergers and takeovers. Carlsberg is today one of the large international players, but by far not the largest. As mentioned earlier, in 2008 the largest brewery in the world Inbev acquired one of the other international players, Anheuser-Busch and today this is the largest brewery in the world (Bowers 2008). Although it has only been 6 months since the acquisition, it seems as if it has been a success.
Based on this we believe Carlsberg has continued opportunities to grow and expand. In this industry it seems firms should remain small and concentrate on local markets or become giant firms to compete on the world arena. Additionally, it also seems that the medium sized firms without any further potential to grow are taken over by the large firms. Carlsberg should aspire towards growing and keeping pace with its competitors. On the other hand, Carlsberg need to be aware of and consider their limitations in the current market. The financial crisis has limited most companies in the world and the beer industry is no exception.
The world’s largest player, Anheuser-Busch Inbev is currently selling out its non-core activities and breweries in markets, where they do not see prospects and wish to establish themselves now (Kragballe 2009). This is done in order to bring down their large debt of $45 billion and focus on their main markets (Neal 2009). Even though Anheuser-Busch InBev is currently selling divisions such as Beck’s in Germany, Carlsberg has dropped out of the race. Carlsberg’s chairman of the board Povl Krogsgaard-Larsen explains that Carlsberg considers the purchase price of 5-7 billion DKK as being too large for Carlsberg in the present situation.
He further explains that Carlsberg do not wish to invest in the current year, due to the large debt and the financial market as a whole (Kragballe 2009). 4. 5 Oligopoly models The beer industry is an oligopolistic industry. What characterises an oligopolistic market is that only a few firms account for most or all of total production (Pindyck, Rubinfeld 2005:441). In the beer industry, Anheuser-Busch InBev, Heineken, SabMiller and Carlsberg produces most of the volume in the industry, while there are a lot of small players as well, particularly in the local markets.
An oligopolistic market usually has high barriers to entry and therefore few new entrants (Pindyck, Rubinfeld 2005:441). To start up a brewery, a lot of capital will be required to buy plant, machinery etc. Besides this, know-how of the business and how to brew is an important part of brewing. When evaluating Carlsberg’s products, it is clear that Carlsberg competes on price and not on quantity. This is on the basis of a consideration of Carlsberg’s products in a supermarket. A supermarket would not try to sell Carlsberg’s products at any price just to sell out, but would consistently demand a relatively high price for the products.
This is because Carlsberg is a quality product, but it is also because beer is not an easily perishable good. Easily perishable goods tend to become cheaper the closer they come to the expiration date. Therefore, we believe the Bertrand model is more relevant for Carlsberg than the Cournot model. In the Cournot model, each firm decides simultaneously how much to produce and the price is set according to the total output of all firms (Pindyck, Rubinfeld 2005:443). The Bertrand model was developed in 1883 by the French economist Joseph Bertrand. The Bertrand model applies to firms that produce homogeneous goods.
All firms treat the price of its competitors as fixed and they decide simultaneous which price to charge for their product. Thus the firms choose prices instead of quantities (Pindyck, Rubinfeld 2005:449). When the products are homogeneous, a single firm will not be able to raise the price of their product without losing market share. On the contrary, if the products are differentiated, the firm can raise the price somewhat above the average level without losing all sales. The more differentiated the product is, the less market share the firm will lose (Martin 1994:264).
According to the market power hypothesis, after two companies in an industry have merged horizontally, they will enjoy increased market power and they will automatically charge higher prices for their products regardless of the prices charged by other firms. This will shift demand towards the other firms’ products, and they will in turn charge higher prices as well to maximize profit. In a price-setting market, firms that merge always enjoy an increase in profit and market power after the merger. (Martin 1994:265), (Pautler 2003) In April 2008, Carlsberg and Heineken announced the upcoming takeover of S&N.
Since the partial takeover, Carlsberg’s sales has increased by 33 % in volume and one can assume that it has increased market share in some key markets such as France, Russia and Eastern Europe. Partly due to the acquisition of Anheuser-Busch by InBev and partly due to the partial acquisition of S;N, Carlsberg has advanced from being the 6th largest brewery in the world to the 4th largest at the end of 2008. Efficiency gains and cost savings have been incurred due to close down of old, worn down breweries that did not bring enough value to the company and the production.
The acquisition was therefore contributing with better plants that added value. 5. Game theory and price setting in the beer industry We have chosen to consider game theory in this assignment as it would be interesting to see how Carlsberg determine the price of their products and how they interact with their competitors. In this section we consider Carlsberg’s premium beer products as this is how they market themselves in Western and Northern Europe (Carlsberg’s annual report 2008:19). The beer industry in this section is considered as the premium beer market.
Game theory can explain how markets evolve and operate and it is particularly interesting to see what happens when oligopolistic firms must set and adjust prices strategically over time (Pindyck, Rubinfeld 2005:473). Game theory became known in 1994, when John F. Nash Jr. , John C. Harsanyi and Reinhard Selten were awarded the Nobel Prize in the field for their pioneering analysis of equilibria in the theory of non-cooperative games (Nobel Prize). It all began in 1944, when John von Neumann and Oskar Morgenstern published their book “Theory of Games and Economic Behavior”.
Their work provided a systematic way to understand the behavior of players in situations, where their fortunes are inter-dependent (Brandenburger, Nalebuff 1995). A game is any situation in which players make strategic decisions. Such a game includes firms competing with each other by setting prices, as is the case with Carlsberg in the beer industry (Pindyck, Rubinfeld 2005:473). An important objective of game theory is to determine the optimal strategy for each player. The optimal strategy will be the one that maximizes expected payoff, which in Carlsberg’s situation would be profit (Pindyck, Rubinfeld 2005:474).
The main thought of game theory is allocentrism, the importance of focusing on others. It is important to put yourself in the shoes of others and actively shaping the game you play (Brandenburger, Nalebuff 1995). In game theory there are two economic games that firms can play; cooperative or noncooperative. Players can negotiate binding contracts that allow them to plan joint strategies in a cooperative game. As for a noncooperative game, negotiation and enforcement of binding contracts are not possible.
Since the firms do not have an agreement on the price of the products, they have to take each other’s behaviour into account when setting prices independently (Pindyck, Rubinfeld 2005:474). A firm has to consider the price setting carefully, as a low price might set off a price war in the industry. On the other hand a firm can set a high price and the competitors might undercut the price. This will result in lower sales and lost profit for a period of time (Pindyck, Rubinfeld 2005:484). Carlsberg is part of a noncooperative game, where they try to set prices to maximize their own profit.
It could be beneficial for the players in the industry to agree on setting a high fixed price to increase the total profit of the industry. This kind of agreement is illegal though, and the firms are forced to participate in the noncooperative game (EU Business). There are several different kinds of noncooperative games, including sequential games and repeated games. We assume that Carlsberg is part of a repeated game, where firms take action and receive payoffs over and over again (Pindyck, Rubinfeld 2005:484). A repeated game can take very different forms depending on the period of time it is played.
If the game is in a finite period, the players will try to charge a high price until the last month. As they know their competitors think the same way, they will want to be the first to charge a lower price and gain market share and sales. Therefore, the result will be that every player charges a low price every month in the fear of losing market share (Pindyck, Rubinfeld 2005:485). There are also infinitely repeated games where price is set month after month, forever. In this case it will make no sense to undercut the prices of their competitors.
If the company knows when the game is finished, they will try to finish with the best market position. They can achieve this by any means necessary as they know the action will never be retaliated. In an infinitely repeated game, this way of playing and undercutting your competitors will result in a price war. Because the game is infinitely repeated, the cumulative loss of profit that results must outweigh any short-term gain that accrued during the first month of undercutting. Hence to undercut in an infinitely repeated game is not rational (Pindyck, Rubinfeld 2005:484-485).
According to this theory, one can argue that Carlsberg is following an infinitely repeated game. This is based on the fact that the beer industry is an ongoing and stable industry that has existed for centuries. This industry does not seem to have an imminent end. Furthermore it seems without knowing for sure, that the price level of the beer industry is stable, meaning the companies are not dumping prices to undercut their competitors. As mentioned earlier, Carlsberg competes on price but will not sell out their products at any price. The competition in the beer industry is a different kind of competition.
Although price is an important factor, quality, consumer awareness and product variety are also important when consumers choose their products. It is important to differentiate oneself from the rest of the companies in the industry. As part of their strategy in Western and Northern Europe, Carlsberg wishes to premiumise their portfolio so they might be able to charge a higher price for the products in the long run (Carlsberg’s annual report 2008:20). In this industry and for Carlsberg in particular, it seems that the optimal strategy is to set prices at a stable level, neither too high nor too low.
It is important to maintain market share in the long run and not lose position in the market. For Carlsberg this is particularly relevant in the Western and Northern European market, where there are many competitors for a stagnating market (Carlsberg’s annual report 2008:14). The importance of setting the price at a stable level and maintaining market share is due to the infinity of the game, which makes the companies decide their strategic path. The strategic path can be altered due to an unexpected event. If, for some reason, the beer industry was predicted o come to an end and the game would become finite, the strategic decision would be completely different and the industry and the price setting would change. As this is not the case though, the companies in the industry will engage in fair competition. We consider this to be one of the reasons why Carlsberg focus on innovation and continually premiumising their beer products (Carlsberg’s annual report 2008:20). 6. External Analysis In a strategic analysis of a firm it is important to look at the external as well as the internal factors affecting the company and its markets.
Strategists say that an understanding of the competitive environment is an essential element of the development of corporate strategy. Most organisations compete against each other hence a study of the environment will provide information on the nature of competition. Additionally, most organisations will discover opportunities that they can explore and threats that need to be looked into. Finally networks and other linkages can be discovered and they can strengthen an organisation in the environment.
There will always be a certain risk and degree of uncertainty as to how accurate the strategy can be on the basis of acquired information about the environment. Hence, it is difficult to predict the future (Lynch 2006:78-79). We start by examining the external factors. There are several different angles to writing such an analysis. We have chosen to use the models PESTEL and Porter’s 5 forces for the external analysis as well as to take an overall look at the main competitors in the external environment for Carlsberg.
The financial results stated in this section are not directly comparable as every firm and country has different ways of stating the terms of profit. The results are not used for the analysis, but are more an indicator of the size of the companies and therefore, it does not affect the analysis. 6. 1 Carlsberg’s main competitors 6. 1. 1 Heineken Heineken is the largest brewery and distributor on the European market and it is one of the world’s leading breweries in terms of sales volume and profitability (Heineken International- Company strategy profile).
Their portfolio includes approximately 170 brands of beer and cider including Heineken beer, Tiger, Foster’s, Strongbow and Newcastle brown ale (Heineken International- About Heineken). Their main markets are Western Europe, Central and Eastern Europe, Americas, Africa, Middle East and Asian Pacific (Heineken’s Annual Report 2008:20). This shows that they are one of the most globally exposed breweries in the world. Their yearly volume of sales for 2008 was 125. 8 million hectolitres and their net profits amounted to €209 million in 2008 (Heinken’s Annual Report 2008:2-3). 6. 1. Anheuser-Busch InBev American brewery, Anheuser Busch and Belgian brewery InBev officially joined forces in July 2008, becoming the largest brewer in the world, and took the name Anheuser-Busch InBev. The company manages a portfolio of more than 300 brands that includes Budweiser, Stella Artois and Becks. Their main markets of operation are North America, Latin America, Western Europe, Central & Eastern Europe, and Asia Pacific (Ab InBev- profile). The combined sales volume for 2008 is 285 million hectoliters and their operating profit before non-recurring items was €4. 22 billion (Annual report Anheuser-Busch Inbev 2008:4, 56). 6. 1. 3 SABMiller South African company SABMiller plc is one of the world’s largest brewers with a portfolio that includes more than 200 brands, including Grolsch, Miller Genuine Draft and Peroni Nastro Azzurro. SABMiller is also one of the world’s largest bottlers of Coca Cola products (SABMiller- Overview). The company operates in Europe, North America, Latin America, Asia and Africa (SABMiller- Where we operate). Total volume of beer sold was 239 million hectoliters and an operating profit before exceptional items of $3. 60 billion (SABMiller Annual Report 2008:1, 62). 6. 2 PESTEL analysis The purpose of making a PESTEL analysis is to look at the external environment of an organisation. PESTEL is an analysis of the Political, Socio-cultural, Economic, Technological, Environmental and Legal aspects of the environment. A PESTEL analysis can act as a checklist to show if you have considered the key aspects. In a PESTEL you should not state all the different aspects affecting the company but the main ones. This makes you think of different aspects and prioritise them according to relevance (Lynch 2006:84).
In this analysis we take a look at these important factors and how they are affecting the future for the Carlsberg Group. 6. 2. 1 Political The political aspect of the PESTEL analysis is concerned with political factors affecting the company and the industry they are in. In relation to Carlsberg the political factors are important when looking at areas such as the legal drinking age in different countries, hours of the day where shops are allowed to sell alcohol and the smoking ban in restaurants, pubs and bars.
In Denmark the legal age for buying alcohol is 16 years and in Norway the legal age for buying and drinking alcohol with a level of alcohol less than 22% is 18 years, while buying alcohol with an alcohol level of more than 22% is 20 years of age (Kristeligt Dagblad 2008), (Lovdata 1989). These rules and regulations are very different between countries. Some countries such as Denmark are much more liberal when it comes to rules regarding alcohol consumption and purchase of alcohol than other less liberal countries. This is one of the things that can affect Carlsberg immensely.
The rules can be changed by the different countries at any time. If Denmark were to change the legal drinking age from 16 years to 18 years, it would have an enormous effect on the sales of Carlsberg (Kristeligt Dagblad 2008). In France they have recently passed a law to increase the legal drinking age from 16 years to 18 years to try and stop wild parties with high alcohol consumption in schools (Ullerup 2009). Not only the legal age for buying alcohol has an effect on Carlsberg’s sales, the same can be said about availability and the price of the products.
Were the products to be sold in selected stores only selling alcohol and at high prices like in Norway and Sweden, this could be a catastrophe for Carlsberg’s volume sales. One of the reasons why Carlsberg is considered a mainstream beer in Denmark is that it is available everywhere and it is cheaper than many other types of beer, but it still has a good taste. This makes it perfect for young people. In Denmark the competition is more on price then on quality. Carlsberg is therefore forced to keep prices relatively low.
In recent years prices of Carlsberg beer have been raised in an attempt to change the image of Carlsberg in Denmark from a mainstream beer to a premium beer. This has made consumption of Carlsberg decrease and with the financial crisis the Danish market has been one of the markets suffering from a decrease in sales (Carlsberg’s annual report 2008:6). Many people go to bars and pubs to enjoy alcohol, often with a cigarette or two. In recent years several governments in Europe have passed laws on bans of smoking in public bars, restaurants etc.
This has an impact on Carlsberg’s sales as smokers will choose not to go to public places to have beer. They will have their beer at home in private or they will go to a bar, but stay only shortly because they do not want to go outside every time they want to have a cigarette. During the last year France, Germany and the United Kingdom have passed laws on smoking bans in bars (Carlsberg’s annual report 2008:33) 6. 2. 2 Economic The economic factors are important aspects for Carlsberg, especially in the current environment with the financial crisis and economic downturn in the world.
Carlsberg’s operations in most of Western Europe are not affected by the exchange rate fluctuation as the Danish krone, DKK is more or less fixed against the Euro (Finansministeriet). This means that either way Carlsberg will incur less risk when dealing with the European countries which have Euro as their currency. However, the fluctuations are significant on other markets around the world. The British and the Russian markets are among the most important in this connection. The GBP and the RUB have experienced a decrease in value compared to the DKK. The Russian RUB has been devaluated several times during the last 8 months.
These fluctuations have meant that the money earned on these markets have lost some value when being changed into DKK (Carlsberg’s annual report 2008:12). The acquisition of 50 % of S;N has burdened Carlsberg’s economy with a significant debt. Carlsberg has decided to pay back the debt faster than was originally intended due to the financial crisis. This is done to ensure the investors that it is worth holding shares in Carlsberg and this might also raise the share price, which has suffered considerably in the wake of the financial crisis (Pedersen 2009), (Nymark 2009). Carlsberg has an advantage of economies of scale due to their size.
This is also relevant in relation to future merger possibilities. Due to the size of their production, Carlsberg will be able to buy large quantities of resources and raw material at a relatively low cost pr. unit. They will be able to produce large quantities of products, and reduce the production cost pr. unit. This gives Carlsberg a large operating profit, which enables them to compete with the other international players in the market and ensures their future prospects. Due to the financial crisis there can be some changes in disposable income and therefore in consumption for the private consumer.
The development can go both ways. When having less disposable income, one can assume that people will usually use less money on goods that they do not necessarily need, this includes beer, wine etc. On the other hand, the economic crisis may change the consumption pattern from more expensive beverages such as champagne and wine to cheaper beverages such as beer. This can work to the advantage of Carlsberg. In general, we assume Carlsberg to be considered as a premium beer in most Western European countries. The company is thus likely to experience difficulties and declining sales in these countries due to the financial crisis.
In the Nordic countries especially, the sales of beer is seasonal and most beers are being consumed during the summer months. In recent years, the Nordic countries have had some summers with bad weather. This has affected beer sales as consumers have chosen not to attend as many outdoor activities and festivals where it is popular to consume beer. Carlsberg have a risk in the area of prices on raw material. The market prices of the materials that they need to make beer, like water, barley etc. can rise and fall and this is something Carlsberg cannot control.
This is not a great risk at the moment due to the financial crisis but it is a factor they have to be aware of. They also have some dependency on their suppliers of cans, bottles and packaging, as there are only a few different suppliers which can make the products Carlsberg need, and have the sufficient capacity (Carlsberg’s annual report 2008:55). 6. 2. 3 Social On the social aspects of the environment, Carlsberg is involved in events of social character all over the world. They sponsor concerts, football teams and championships (Carlsberg’s annual report 2008:21).
This is done to market themselves as a company that is involved in the local as well as international events and to connect with consumers on a more local level. This is one of the ways Carlsberg creates consumer awareness in the different countries (Carlsberg’s annual report 2008:43). Because they have such a strong brand they are easily recognised all over Europe. Carlsberg has a way of getting sponsorships agreements that works in their best interest due to their well known brand and their position on the European market. (Carlsberg’s annual report 2008:19) Carlsberg is known for its onsistency in quality and taste, as was originally the intention of J. C. Jacobsen when he wrote on the building of Old Carlsberg; “Ved Driften af Bryggeriet Gamle Carlsberg skal det v? re det stadige Formaal uden Hensyn til en Oieblikkelig Fordel at udvikle Fabrikationen til den storst mulige Fuldkommenhed. Saaledes at dette Bryggeri og dets Produkt altid kan staae som et Monster og ved sit Exempel virke til, at Olbryggeriet her i Landet holdes paa et hoit og h? derligt Standpunkt” (Norregard-Nielsen 2002). This statement is a clear indication of Carlsberg’s goals and objectives. J. C.
Jacobsen was very conscious about the need to provide consistently good quality to the consumers. They therefore enjoy high consumer confidence and a good reputation and consumers will expect a high quality beer. Demographic changes are happening all over the world, but especially in Western Europe the population is getting older on average (Beder 2008). This shift from a large generation of young people to a large proportion of older people has changes the consumption behaviour. Older people are more likely to drink wine or super-premium beer, such as 1664, Jacobsen, and Grimbergen than mainstream beer.
This might have affected and will still be a possible effect for future sales. On the other hand, the younger generation choose to become parents later than the previous generations. The average age of couples having their first child has increased considerably over the years (Nyt fra Danmarks Statistik, 2003). One can assume that young people today are interested in education and creating a life and career for themselves before having children. This also includes going more out to cafes, restaurants and clubs where alcohol is enjoyed.
A lot of young people also enjoy the freedom of youth and do not want to be tied up. This prolongs the years of acting as young person and this is likely to work to Carlsberg’s advantage. In a social context there are a lot of health related issues, such as abuse of alcohol and under aged drinking. Carlsberg is a member of Bryggeriforeningen, an industry organization that works to promote a responsible drinking culture (Carlsberg Danmark- Sundhed). This organisation has decided that alcohol should have a label stating the units in the product (Dilling 2009).
The government has made a recommendation on how many units it is responsible to drink during a week. Nowadays people are concerned with healthy eating and exercising. Staying healthy is an important issue of our time. Carlsberg is aware of this trend and it cannot be ignored. Several kinds of light beer have been introduced to the consumers by Carlsberg, both in types of a lower alcohol level and beer with fewer calories, but with the same level of alcohol as regular beer (Bjerrum 2008). These products have been marketed to men first and foremost, as it is not only women who are concerned with staying healthy.
This can relate to the fact that men drink more beer than women, especially when socialising with their friends, and they want to keep drinking, but not gain weight. That is why light beer can be considered a healthier alternative. When Carlsberg consider a merger with other firms, the social aspect of the situation should be taken into consideration. In accordance with Qiu and Zhou, mergers should be encouraged when demand uncertainty is large and competition is intense. A merger in this environment will increase information sharing regarding new and unknown markets.
This scenario is socially desirable and can increase global welfare via increased consumer surplus. On the other hand, output coordination will decrease competition and thus reduce global welfare (Qiu, Zhou 2006). 6. 2. 4 Technological Carlsberg strives to be innovative and launch new or improved products regularly. They have a relatively large research centre which employees 150 people. Here they do microbiological and biotechnological research to develop new beer types and new ways of producing beer (Carlsberg Group- Carlsberg Research Center).
This is a key area of Carlsberg in their survival in the Western European market, and they spend a lot of time and resources in this area. Carlsberg is a public company now and obviously they have a well established and informative company website, where the public can get all the necessary information about the company including financial statements, annual reports and general information about the products and the company goals. 6. 2. 5 Environmental Over the past years there has been an increasing trend among consumers to buy organic products and organic beer is no exception.
Carlsberg sells organic beer and the sales of organic beer have increased the last year according to Carlsberg’s annual report from 2008. Due to the financial crisis and the fact that organic beer is more expensive, the growth might not be as large the next year, but it is definitely a product they should keep in their portfolio. On the environmental front, Carlsberg is very active. They have a recycling system for all their bottles and cans in the Nordic countries, and in Denmark they are the majority shareholder in the company that has created the recycling system for the Danish supermarkets (Kronborg 2003).
Additionally, Carlsberg has an ambitious environmental policy and every other year they publish an environmental report (Carlsberg Group- Environmental Affairs). 6. 2. 6 Legal EU and national law on mergers and acquisitions, and on competition as a whole, can also affect Carlsberg and their possibilities in the market. The Danish government and the EU have to accept a merger for it to come true. They make sure that the company will not be too large and rule out all other competition in the market.
If the merger results in too high a market share for the merging companies in a particular market, the merger will not be accepted and the parties cannot merge. Depending on the market share and the annual turnover of the firms considering a merger, the ruling will be done in their respective countries or by the European Court of Justice (Kent 2008:301, 308). According to article 82 of the European Competition law, it is not prohibited to dominate a market, only to abuse the dominant position. A company can be dominant in a market as long as there is still effective competition (Kent 2008:301).
This is also the case in Danish law according to §11, stk. 2 of dansk konkurrence lovgivning (Konkurrencestyrelsen 2005). Dominance in the market was the reason why a merger between Carlsberg and Albani did not take place. Carlsberg wanted to buy the majority of shares in Albani, but was refused to do it, as their market position in the Danish market would become too strong. Konkurrence styrelsen in Denmark came to the conclusion that if Carlsberg acquired Albani this new company would exclude all effective competition in the market (Konkurrencestyrelsen 2000), (Skaaning 2000).
When merging the antitrust regulators consider the markets of concern for the merging companies as well. This can be seen from the merger between Anheuser-Busch and Inbev in the summer of 2008. These companies had significant positions in the world market prior to the merger, but as the positions were primarily in different markets, they were allowed to merge. As the firms were operating in different markets, no particular market would become more dominated because of the merger. In relation to mergers, anti-trust regulation can have an effect on stock price.
Eckbo rejects the market power hypothesis mentioned earlier. He believes that the increase in the rival’s stock price upon an announcement of mergers is due to the fact that firms within an industry can become more efficient through consolidation. If anti-trust complaints are announced, the stock price of the rival company will not be affected. The decrease in potential efficiency is offset by the merging plans not taking place (Pautler 2003). Due to government rules passed in 1995 in the Nordic countries, supermarkets and kiosks were not allowed to sell alcohol after a certain hour of the day.
This rule could possibly affect Carlsberg sales, but most likely it did not because the public was aware of it. People knew at what time of the day they should buy alcohol so this did not seem to affect any kind of sales. In Denmark the rule was changed back in 2005 so it is now possible to buy alcohol 24 hours a day (Elmeland, Villumsen 2007). One factor that can affect Carlsberg’s sales is the tax on alcohol. This is a factor that exists in all countries to some extent. If the tax on alcohol is increased significantly it is likely to affect the sales of alcohol in that country.
This can be by lowering the consumption or by changing the patterns of consumption. 6. 3 Porter’s 5 forces This model was made by Michal Porter, a professor at Harvard Business School. He identifies 5 basic forces in connection with the organization. We have chosen to use this model because we want to examine the forces influencing the organization and these results can be used to develop the competitive advantages of the organization which can provide them with a margin to their rival companies (Lynch 2006:93).
The model has been subject to some criticism with regards to the model being too static, whereas the competitive environment is changing constantly, but it still provides an overview of the external environment (Lynch 2006:98). 6. 3. 1 Bargaining power of suppliers Beer consists of a few key ingredients which are hops, water, barley and yeast (Professor’s house). These ingredients are acquired from outside suppliers and are therefore a subject of concern in connection with the bargaining power of suppliers. We consider these ingredients to be basic oods that Carlsberg can acquire from several suppliers. Since there are so many available suppliers, the price of the beer ingredients follows the prices set by the market. This makes the bargaining power of the suppliers small and indifferent. Carlsberg do not have to worry about lack of available raw material for the beer production, nor do they risk paying unfairly high prices. Changing suppliers does not seem to be a problem if they are offering the same goods at a better price. Besides this Carlsberg purchases their packaging, bottles and cans from outside the company.
The companies supplying these materials have more bargaining power than suppliers of raw materials. This is due to the fact that there are fewer suppliers of the products therefore Carlsberg is more dependent on the suppliers. However, Carlsberg is trying not to be dependent on one single supplier of any essential product (Carlsberg’s annual report 2008:53). Being dependent on one supplier can have a negative effect as they might have to pay higher prices for their supplies than they would if they had offers from different suppliers.
It would be in Carlsberg’s interest if there were several firms who wanted to supply to them. Obviously one of Carlsberg’s obstacles in getting more suppliers is the fact that the suppliers need to be able to supply in large quantities. This means that new potential suppliers need to possess a large capacity in their production system and be reliable in their deliverance. 6. 3. 2 Bargaining power of buyers When looking at the buyer’s bargaining power we assume the buyers to be supermarkets, bars, restaurants etc. uying directly from Carlsberg, as we find it very unlikely for consumers to buy directly from Carlsberg. We consider the supermarkets in Denmark to have very little bargaini