New Carlsberg chief executive Jacob Aarup-Andersen commences his role today, 1 September, replacing Cees 't Hart, who has led the business since 2015.
Aarup-Andersen joins the Danish brewer from facilities management firm ISS A/S, while he also previously worked at Danske Bank, Realkredit Danmark, Goldman Sachs and various other roles.
ESM looks at five challenges facing the new CEO as he takes charge.
1. Big Shoes To Fill
Cees 't Hart's tenure as chief executive of Carlsberg has been marked by remarkable achievements, including substantial organic EBIT growth – a significant improvement compared to the middling growth the beer maker recorded prior to his tenure.
'Since ['t Hart] took over as CEO, there has been consistently low single digit and high single digit growth, apart from the Covid-19 years,' Bernstein analyst Maria Meita wrote in a recent briefing note.
Aarup-Andersen will seek to build on this impressive legacy while navigating a rapidly evolving industry landscape – while the group reported a 11.2% increase in revenue in the first half of its financial year, volumes were down in its Western Europe (-2.1%) and Central & Eastern Europe (-1.9%) markets.
As 't Hart recently commented, "The long-term opportunities for Carlsberg remain significant." Aarup-Andersen will be keen to grasp that nettle.
2. Exiting Russia
One of the immediate challenges for the new CEO is the company's ongoing struggle to exit the Russian market after the state's unexpected seizure of Carlsberg's business there. Aarup-Andersen must find a way to salvage the situation and secure a favourable outcome.
The brewer said that it was "shocked" by Russia's seizure of its business in the country, shortly after Carlsberg had agreed to sell the unit to an undisclosed buyer – and is no closer to knowing what might happen next, 't Hart' commented recently.
The Russian market accounted for a significant portion (around 12%) of Carlsberg's business, and its sudden loss presents a financial and strategic challenge that requires deft negotiation skills and a keen understanding of geopolitical complexities.
3. Sustainability and Environmental Responsibility
Under 't Hart's leadership, Carlsberg made significant strides in sustainability, surpassing targets in carbon and water reduction. The new CEO must build on this foundation and drive the company towards even greater environmental responsibility.
The success of initiatives like the Together Towards ZERO and Beyond program will hinge on Aarup-Andersen's ability to identify and seize opportunities for sustainable practices that not only benefit the planet but also contribute to the company's bottom line.
This programme may include more focus on regional ESG programmes – in Lithuania, it recently entered into a energy-as-a-service power purchase agreement (PPA), which will provide renewable energy to its brewery and cover 100% of its annual demand with carbon-free electricity.
4. Diversifying Growth Opportunities
While Carlsberg's success in the Chinese market has been noteworthy, it has led to a potential over-reliance on a single market for growth. Aarup-Andersen must work to diversify the company's revenue streams and expand its presence in other promising markets.
'China went from 12% to 20% of revenue and about 30% of EBIT, which is an incredible achievement, but leaves it with another single country risk,' Bernstein analyst Meita commented.
The completion of the buyout of Carlsberg's joint venture partner in India (on the Carlsberg South Asia Pte Ltd business) holds potential for growth, but this endeavour is undergoing arbitration, adding an additional layer of complexity to the CEO's plate.
5. Transition and Adaptation
Aarup-Andersen's background in business is impressive, but his lack of consumer brand experience poses a challenge as he navigates the intricacies of the brewing industry. Rapid adaptation to the nuances of the business, understanding consumer preferences, and fostering innovation will be essential to his success.
His time with Danske Bank should ensure he has a good handle on the financial side of the business, while as ISS, he led a financial turnaround and the development of a strategy – with a core focus on technology and digitisation, sustainability and diversity, equity and inclusion – which also should help him in his new role.
Commenting on his appointment back in March, he said, “I’m very impressed with the successful journey that Carlsberg has been on these past years. Cees and the leadership team have created a strong foundation, both financially and strategically, and I will continue the strong shareholder value focus.
"I’m looking forward to working with the team over the coming years to further accelerate the full growth and value creation of this unique company.”
With Carlsberg recently upgrading its earnings expectations for 2023, the market will be watching his first few weeks closely.
