Carlsberg to close some factories

Two saleswomen at a Carlsberg promotional event in Zhengzhou, Henan province. [Photo/IC]

A weaker-than-expected performance in China and Russia is forcing Carlsberg A/S, the world fourth-largest brewer, to axe 2,000 staff worldwide by 2018, around 15 percent of its workforce.

According to Chief Executive Officer Cees't Hart, cost-saving measures will affect its Chinese operations, including the closure of some factories.

As part of its "business right-sizing" efforts, he said it will be restructuring what he called its brewery footprint in the country, and that it was evaluating all possible measures.

More detailed information would be made available once local employment regulations had been confirmed, he said.

A spokesman for Carlsberg China told China Daily that there are already plans afoot to close factories in the east of the country, particularly some of the assets it acquired from Chongqing Beer (Group) Co Ltd, in Anhui and Zhejiang provinces.

A former employee at the company claimed, however, that Carlsberg China had expanded its marketing workforce too quickly in recent years.

According to the company's third-quarter financial results, it recorded a net loss of 4.49 billion Danish Krona ($650 million) mainly related, it said, to impairment of its Russian brands and eastern assets in China.

Hart said the company has already launched a program he called "Funding the Journey", which will merge some existing initiatives and see it taking significant steps to "right-size" parts of the business.

"To successfully execute the strategy, short-term measures are being taken to ensure we have an appropriate cost base."

Hart said it would make its sales operation and supply chain more efficient and profitable. But that will also mean a reduction in warehousing facilities and other restructuring of the business, which will include job cuts, he said.

"In total, we will reduce our white-collar headcount by approximately 2,000 employees, of which approximately 1,300 have been notified," he said, without detailing any numbers for China.

Earlier this month, the world's largest brewery Anheuser-Busch InBev NV submitted a formal offer to buy SABMiller Plc for around $107 billion.

The deal is expected to create a colossus which will produce one-third of the world's beer, and become the market leader in China.

Takeovers are considered "a low priority" for Carlsberg in China, said Hart.

"Our focus is on improving our current business. However, if something of significant interest comes up, we will of course have to evaluate that," said the CEO.

Jason Yu of Kantar Worldpanel China said the global beer industry is heading for a period of consolidation and market domination.

The new enlarged group that is being created, he said, will have greater power over others and potentially this could also lead to the efficient deployment of manufacturing and distribution resources and improved shareholder value.