Carlsberg denies Heineken APB takeover drove Singha deal

By Ben Bouckley

- Last updated on GMT

Related tags Carlsberg Europe Thailand

Carlsberg denies Heineken APB takeover drove Singha deal
Carlsberg has agreed a strategic partnership with Singha Corporation, and tells it is confident the new venture will succeed where a previous Thai partnership with Chang Beverages failed amidst legal acrimony in 2005.

Under the terms of a JV, the two firms will oversee the marketing, sale and distribution of Carlsberg’s international beer brands in Thailand, in a deal that a company spokesman told was not linked to Heineken’s capture of Asia Pacific Breweries (APB).

Heineken won support from Fraser & Neave shareholders at an EGM last Friday to takeover APB in a S$5.6bn (US $4.55bn) move, while Carlsberg announced its tie-up with Singha (which has a 65% volume share of the Thai beer market) on the same day.

But a Carlsberg spokesman told “The timing is purely coincidental, and obviously we wouldn’t want to comment too much on competitor activity.”

DIscussing existing sales and distribution of Carlsberg in Thailand, the spokesman said: “We introduced Carlsberg back into the market, tentatively, just over a year ago.

“But obviously getting involved with Singha gives us much better distribution for that brand.”

Other premium brands in Carlsberg’s portfolio that will also be launched in Thailand – the firm has a limited presence vis-à-vis rivals – include Kronenbourg and Tubourg.

Mutual acrimony after Chang bust up

Carlsberg’s previous 50/50 JV with local Thai brewer Chang was established in 2000 with the vision to create a “significant brewing company in Asia”​, with the Danish firm injecting all of its Asian activities into the company.

But the venture broke down amidst mutual acrimony in 2005 as Carlsberg pulled out, and the Thai brewer subsequently sued the Danish firm for $2.5bn in damages: the JV’s assets were eventually divided up following a settlement that year.

Asked how confident Carlsberg was of a better working relationship with Singha, the spokesman said: “Very confident – we wouldn’t be doing it otherwise. I guess what happened in the early 2000s is very different to what we’re doing now.

“There are many complementary factors. Singha don’t have that ‘international premium’ lager in their portfolio, and we’ll be able to distribute some of their products in our world markets – they’re particularly interested in Europe.”

Singha Corporation’s top brands include Leo Beer and Singha Beer, and Carlsberg said that the new partnership would involve the launch of Singha in selected markets beyond Thailand via its international network.

Sudhabodi Sattabusya, senior vice president of Singha Corporation, said that despite exports to nearly 50 countries, the new JV would significantly boost the brand.

“Our strategic partnership with Carlsberg has potential to open doors for Singha to new markets, particularly in Europe where we see plenty of untapped potential for our brands. I have reasons to believe that there is significant growth potential for both parties in the future under the umbrella of this partnership”.

Confidence in Asia, Russia

Explaining that Asia represents a smaller part of Carlsberg’s current profit pool (around 12% on 18% of group beer volumes) as against Europe and Asia, the spokesman stressed double-digit volume growth for the firm across all Asian markets in the last quarter.

However, Carlsberg’s exposure in Asia has remained not grown markedly since August 2005, when a company document reporting the Chang settlement noted 10% of group earnings (net income) in the region.

“It’s a huge area that we’re really committed too. And as we said during the last set of results, most of our acquisitive growth would be focused on Asia,”​ the spokesman said.

The Financial Times​ reported on Friday that Carlsberg was ‘emphasizing’ Asia and Eastern Europe over Latin America and Africa, and the spokesman said this originated from a recent investor presentation on Russia.

“Lots of our competitors talk about the growth prospects in Latin America and Africa, which are obviously doing well, but as [Carlsberg CEO and president] Jørgen Buhl Rasmussen said at the time, there are still risks attached to those markets at the moment,”​ the spokesman said.

“We are confident that Russia will return to higher growth levels than it’s seen over the past couple of years, so we feel quite confident focusing on Western and Eastern Europe, as well as Asia – the latter is a really strong engine for growth.”

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