Carlsberg tackles on-trade
When Isaac Sheps stepped into the top job at Carlsberg UK almost a year ago, his boss Carlsberg chief executive Jorgen Rasmussen said he had a track record of challenging the "status quo".
Last Wednesday, there was evidence of what this meant in practice. Sheps was attending the official launch of draught Carlsberg and Tuborg into JD Wetherspoon's (JDW) 750 pubs at a launch for 1,300 staff at the new O2 Academy venue in Birmingham. Carlsberg is displacing Coors Carling and Coors Light products on draught across the JDW estate. It's a five-year supply contract that is likely to be worth a heck of a lot of extra barrels. The JDW deal follows hot on the heals of fresh business with Greene King and Mitchells & Butlers.
"One of the pieces of status quo that I was keen to challenge was that we couldn't be successful in the on-trade," he says. "It's a question of offering the right products and service."
Sheps insists it would be wrong to assume the JDW contract was won on price alone. He suggests that having "strong international brands", its own distribution network, the company's alacrity in responding to JDW's inquiries, and its World Cup positioning also played a part.
JDW chief executive John Hutson tells me: "Our five-year contract with Coors was at an end and we started casting around the market for a bit of excitement and fresh interest for our customers — it was time for a change and Carlsberg fitted the bill."
There were those who wondered whether Carlsberg would reconsider its commitment to the UK market in the wake of buying Scottish & Newcastle in partnership with Heineken a couple of years ago. The speculation was about whether Carlsberg would be content with its position as fourth largest brewer in the UK with a market share of 14.5% — behind Molson Coors, InBev and Scottish & Newcastle. But Sheps points out that the UK is Carlsberg's biggest single market as a brand in volume terms, worth three million barrels a year. He says he has third position — "just a couple of percentage points ahead" — in his sights. "Third largest is not so far away and second position is next year's target," he laughs.
Brewing margins are wafer thin for the large brewers in the UK. Carlsberg chief Jorgen Rasmussen made it clear last October that the "ambition" — read priority number one — was for Carlsberg UK to move its earnings closer to Carlsberg targets for elsewhere in western Europe.
Sheps has already overseen the taking out of another lump of cost from the UK business — he won't say how much, but intimates it's at least £10m. "Profit is not as it should be, but we're on the right track — certainly better than last year," he says.
"A sustainable level of profitability is the biggest target. In the past, we've all had supply contracts that lost money. We have tens of thousands of customers — the plan is to ensure we supply in a way that assures us of some profitability with each one."
Quality management
Sheps is an international expert on "quality management" and has published a series of academic papers on the subject. He says his approach at Carlsberg UK has been an "holistic" one, improving the clarity of communication about what the company is trying to achieve and encouraging people to make a personal difference. "We need to be customer-driven — it's the essence of quality management,' he says.
The company has launched "We Deliver More", which aims to provide licensees with a range of profit-boosting services and bits of expertise, ranging from menu printing to help with staff issues. More than 1,000 pubs are already taking advantage of the range of services. There is no obvious return on investment (ROI) criteria that can be applied to this — it's more about creating a different kind of relationship with licensees. Says Sheps: "ROI is clear in the total overall performance of the company. Delivering more isn't about direct return — it's about adding value to our customers."
Sheps says the UK pub trade is going "through quite tough times", but believes pubs that continue to provide great value to their customers will out-perform. Sheps, who lives in London, says he invariably pops into a pub as he travels the country.
A fortnight ago, he was at Wembley to watch England beat Croatia 5-1 and qualify for the World Cup — and is aware of how big an opportunity lies ahead for the sector next June. "There will be lots of people who want to watch the games in the pub — and if England play like they did against Croatia, they might even win the World Cup."
Curriculum vitae
Dr Isaac Sheps has a degree in industrial engineering and management and holds an MBA and PhD in Economics.
He has served for 10 years on the international committee ISO/TC176, responsible for preparing the ISO 9000 family of standards. He worked for five years as president of United Romanian Breweries (Tuborg Romania) and before taking the helm at Carlsberg UK he was chief executive of Carlsberg South-East Europe covering seven countries: Bulgaria, Croatia, Hungary, Slovenia, Serbia, Bosnia & Herzegovina and Montenegro.
