## China: one country – many opportunities 

There is no simple for- mula for success in China. The country’s sheer size in terms of population and geography, together with the major differences in consumer behaviour from region to region and between rural and urban markets, presents signifi- cant challenges. 

Where there are challenges, how- ever, there are also opportunities. The Chinese beer market is big. More beer is consumed in China than in any other country. While independent research indicates that one in every four litres of beer consumed globally is consumed in China, per capita consumption is only about half that of Europe and America. 

Within China, beer consumption varies significantly. Per capita consumption in the economically less developed western part of the country is less than half that in the north-east. However, in recent years market volume growth in western China has outperformed national growth rates. From 2007 to 2011, beer market volumes in western China grew by approxi- mately 12% (CAGR) versus a na- tional growth rate during the same period of approximately 6%. While public forecasts are not available for individual regions, according to the independent research company Canadean the overall Chinese beer market is expected to grow annu- ally by 3-5% in the next five years. 

In addition to volume growth expectations, premiumisation is the long-term trend in China. Current estimations are that the very large mainstream segment makes up approximately 90% of the beer market, but due to demographic 

developments, such as increasing urbanisation, a growing middle class and generally higher living standards, consumers are increas- ingly willing to pay a higher price for premium brands. 

## EXPANDING OUR PRESENCE 

Carlsberg has a twofold strategy for growth in China. One part of the strategy focuses on developing and expanding our existing busi- ness. With 39 breweries, more than 11,000 employees (incl. Chongqing Brewery Group) and an overall market share in the western part of China of around 60%, Carlsberg has a strong footprint in the country. Local brands, which fall into the mainstream market, include Shancheng, Chongqing, Wusu, Dali, Huang He and Xixia. 

This strategy involves premiumising the local portfolio and bringing more of our international premium brands to the market to take advantage of increasing consumption and market 

value growth as well as continuous- ly improving commercial execution and capabilities by investing in and developing employee competences and capabilities. We are also apply- ing best practices learned from other areas within the Carlsberg Group such as supply chain, administration and sales and marketing, which has resulted in operational efficiency gains and cost reductions. 

## PREMIUM BRAND STRATEGY 

The second part of Carlsberg’s growth strategy in China involves growing and marketing Carlsberg’s premium international brands nationwide. In addition to the long-standing presence of the Carlsberg brand in China, this has seen the launch in specific market segments of Kronenbourg 1664 Blanc in 2011 and Tuborg in 2012 and, most recently, the relaunch of Carlsberg Chill in 2013. Our pre- miumisation strategy has resulted in increasing beer volumes in the high-margin segment. 

Our innovative approach to the market has expanded the Carlsberg portfolio to cover the full spectrum of local and international brands. This positions Carlsberg strongly with customers, who can offer con- sumers a wide choice of beer, from economy to super-premium. 

## M&A IN CHINA 

During the past 10 years, Carls- berg’s M&A efforts in China have focused on expanding our business from western China towards the east and increasing our sharehold- ing in partly-owned businesses. 

An important step was taken in late 2013, when Carlsberg completed the partial takeover offer for Chongqing Brewery Company, taking our own- ership share to 60%. Carlsberg now directly manages the company, which enables us to drive greater synergies and leverage the ex- panded production footprint across several new provinces in China. 

## HIGHLIGHTS 

12% Western China beer market growth (CAGR) 2007-2011. 

3-5% Expected annual beer market growth in the next five years. 

60% Market share in western China. 

We also increased our ownership in the Qinghai and Lanzhou joint ventures in 2013, taking our owner- ship share to 50%. 

A CARLSBERG WAY OF BUSINESS Carlsberg is committed to its busi- ness in China. This is apparent in our cooperation with local external stakeholders and also in the way staff are supported with attractive employment conditions, train- ing and career development. Our way of business has established a strong platform for Carlsberg to expand its footprint in the region even further. 

