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Carlsberg has a Russian hangover that won’t go away

A brewery worker checks a bottle in the Baltika brewery in St. Petersburg, Russia.
Reuters/Alexander Demianchuk
Losing its fizz.
By Jason Karaian
Published Last updated This article is more than 2 years old.

The numbers: Sour. The Danish brewer recorded a first-quarter loss of 90 million Danish krone ($13.6 million), from a loss of 67 million krone last year.

The takeaway: The first quarter is typically the least important for brewers in the Northern Hemisphere, as the thirst for beer wanes in the colder months. But Carlsberg’s weak result, dragged down by its business in Eastern Europe, was enough to spook investors—the company’s shares sank by 5% in early trading.

What’s interesting: Carlsberg is the biggest beer seller in Russia, with its Baltika brand accounting for 38% of the market, and the second-biggest in Ukraine, with a 28% share. Recession, unrest, and currency depreciation in the region have weighed on the brewer for several quarters, with the latest no exception. Carlsberg’s Eastern Europe division recorded a 16% drop in sales volume in the first quarter, which translated into a 30% revenue decline thanks to negative currency movements.

The brewer’s woes in Eastern Europe obscure a recovery in its business in Western Europe and continued acceleration in sales in Asia. Carlsberg closed two of its plants in Russia at the beginning of the year, cutting 15% of its brewing capacity there. Eastern Europe recently accounted for a third of the brewer’s sales, but now make up just over a tenth of revenue. But with no end in sight to the region’s economic woes, a bitter taste will linger for Carlsberg’s investors for some time to come.

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