By Jacob Gronholt-Pedersen
COPENHAGEN (Reuters) -Danish brewer Carlsberg warned on Tuesday that a possible slowdown of beer consumption in Europe because of increased prices could dent profit growth this year.
The world’s third-biggest brewer also said it is buying out its partner in India and is seeking an option with the buyer of its Russian business to re-enter that market at some point in future.
Carlsberg expects organic operating profit this year to change by between minus 5% and plus 5%, compared with 12% growth last year.
“2023 will be another challenging year,” Chief Executive Cees ‘t Hart said in a statement.
“While beer historically has been a resilient consumer category, the higher prices in combination with generally high inflation may have a negative impact on beer consumption in some of our markets, particularly in Europe,” he said.
Brewers have raised beer prices in response to rising energy and raw material costs. Carlsberg said its revenue per litre of beer sold grew 9% last year, and that it would have to raise prices by a “high single-digit” percentage this year to cover rising costs.
This echoes comments by Nestle’s CEO last week about plans to raise prices of its food products further this year to offset higher production costs that it has yet to fully pass on to consumers.
Carlsberg, the Western brewer most exposed to Russia, said last year it expected a writedown of about 9.9 billion Danish crowns ($1.43 billion) after announcing a sale of its business in the country as a consequence of Moscow’s invasion of Ukraine.
The company expects to have found a buyer and signed an agreement by June, although finalising the deal depends on the Russian authorities, Hart said. Carlsberg is seeking an option with the buyer to buy back the Russian business in future.
“We are exiting Russia for now, but we don’t exclude the option … of coming back,” Hart said. “I can’t see us coming back in the first 10 years, and many things will need to change before we would consider going back to Russia.”
“Obviously, it would be good for my successor to have such an option in the future once the political situation has changed dramatically,” Hart said.
Carlsberg also said it expects to exercise an option this year to buy out its partner in India and Nepal for $744 million.
The buyout would follow a win against its Nepal-based partner Khetan Group in June in an arbitration case in which Khetan had been seeking financial relief related to a long-standing dispute.
The tribunal had awarded Carlsberg the right to call Khetan’s shares in the joint venture, which controls around 17% of the Indian beer market. On Monday, Khetan issued a formal put notice to sell its share in the joint venture.
Shares in Carlsberg plummeted when Russia launched its invasion of Ukraine in February last year but have since risen about 27%. They were trading 1.4% lower at 0833 GMT on Tuesday.
($1 = 6.9344 Danish crowns)
(Reporting by Jacob Gronholt-Pedersen; editing by Terje Solsvik, Robert Birsel and Sharon Singleton)