Carlsberg seeks buyback clause as it nears exit from Russia

Carlsberg wants to insert a buyback clause when selling its large Russian business that would offer the world’s third-largest brewer a way of ultimately returning to the ostracised country.

Cees ‘t Hart, chief executive of the Danish brewer, told the Financial Times that Carlsberg was leaving Russia “full stop”, and that he hoped a sales agreement would be in place by the end of June.

But the Carlsberg boss said he wanted to give his successors the chance to return to Russia if the country takes a “different direction”, something he did not expect for at least 10-15 years.

At its peak, Russia accounted for more than half of Carlsberg’s profits and sales after the company made a big bet on the market in the 2000s. But a succession of problems stemming from restrictions on where beer could be sold and how it could be advertised meant Russia now accounted for just 10 per cent of sales and 5 per cent of group profits.

Shortly after Russia’s invasion of Ukraine in February, Carlsberg said it would leave the country, but it has not disclosed who it is in talks with over the sale.

Hart said the “reverse integration”, the process of disentangling the Russian operations from the rest of Carlsberg, had proved more complex than he had assumed, but that he was hopeful of reaching an agreement on a sale by the end of the second quarter.

“Business leaders need to not only look at the next year and the year after. What I’m paid for also is to look at the far future. Companies like Carlsberg, which is 175 years old, I would like to make decisions that in 10, 20, 30 years the successor of the successor of the successor also has different options,” Hart said in the interview.

He added: “If, if, if Russia is a different country in 10 or 20 years we hope to have the opportunity to come back. I can’t see we will be back in the foreseeable future. Maybe in 10-15 years it’s a different consideration but it depends on many different aspects.”

The comments from Hart come amid increasing scrutiny of how many western companies remain in Russia, despite vowing to leave.

As part of the sales process, the Danish brewer will look at licensing to the new owner many of its best-known international brands such as Tuborg, 1664, and Somersby cider — but not the Carlsberg brand. It would not receive any future revenues from this licensing, only as part of the sale, Hart stressed.

“It’s a bit of a catch-22. If we took out the international brands, it can’t be sold. Then it would be nationalised. But if we do the licensing, we might have some criticism from the outside world,” Hart added.

Earlier on Tuesday, Carlsberg warned that beer sales this year would be hurt by higher prices and of a potential squeeze on profits.

The Danish group said that while beer “historically has been a resilient consumer category” the large price increases required to offset rising costs and the still high levels of inflation would hit sales, especially in Europe.

Its operating profit this year could fall by up to 5 per cent or rise by up to 5 per cent, it added.

In its full-year results published on Tuesday, Carlsberg reported a 17 per cent increase in revenues to DKr70.3bn ($10.1bn), its highest growth in at least a decade as the company sustained its recovery from the pandemic. Operating profits rose 13 per cent to DKr10.7bn.

Hart said Carlsberg would have to raise prices by close to 10 per cent this year to offset a cost increase in the “low-teen” percentage.