Carlsberg Group Chief Executive Officer Cees ‘t Hart admits that while the company’s third quarter performance has been solid, he also believes that Carlsberg’s profit development is less desirable. In fact, he says it “has not been satisfactory.”
This is what compelled the company to take on a new strategy that involves “right-sizing” (as opposed to downsizing) the business. With it comes a significant round of job cuts.
During a discussion involving the third quarter performance of Carlsberg, it was announced that as part of improving the company’s operating expense efficiency, job reductions need to happen. Specifically, 2,000 or around 15% of the company’s white collar employees must go. Of the affected workforce, the company says that as much as 1,300 have already been notified.
Carlsberg believes it will need between 18 to 24 months to be able to “right-size” or restructure the business. And during this period, the company says it will put focus on four markets: Russia, China, UK and other markets that will be the target for smaller initiatives to address assets that have not been utilized effectively.
Total beer sales for Carlsberg during the third quarter has been flat. It stayed at DKK37.6 million (approximately $5.4 million), just like it did during the same quarter the previous year. In contrast, sales for other Carlsberg beverages increased slightly, going from DKK6.2 million ($892,463 million) in the third quarter of last year to DKK6.4 million ($921,252 million) this year.
To help improve the company’s profitability and cash flow, Carlsberg has launched a program called “Funding the Journey.” With this, it is hoped that both old and new profit improvement initiatives will be put into sharper focus.
For now, Carlsberg says it is expecting to take on impairment and restructuring costs amounting to DKK10 billion (approximately $1.4 billion) from 2015 to 2017. Of this, DKK8.5 billion (approximately $1.2 billion) will be charged this year.