If you set up a business there comes a time when you need to change your focus from the product, brewing beer or whatever, and start to concentrate on the business side of the enterprise. Inevitably you will have to pay bills and hopefully you will have to collect money from your customers, and it is the ability to manage these two tasks which will ultimately determine the success or failure of your enterprise. Personally, I cannot abide unpaid bills hanging around, and like to sort them out as soon as possible, but this is not the way to conduct yourself in business, especially if you are one of the big fish. European Union guidelines state that it should take no more than 60 days to settle a bill, so the financially savvy will delay payment to the last possible second so that they can earn interest or reduce borrowing costs over the two month period whilst the customer waits for the money, perhaps borrowing to pay his own suppliers. That seems a long time to me, but Carlsberg, the firm that claims to make ‘probably the best lager in the world’ has decided that this is not long enough. In July they introduced what they call the C93 system, where payment will be made 93 days after the end of the month in which the invoice was presented, a potential delay of 120 days. In other cost saving measures, the group has announced a two year worldwide pay freeze, prompting the members of the Unite union to support a work to rule at the Northampton brewery.
A quick search of the Carlsberg website will reveal their business ethics section, complete with pictures of smiling faces and noble phrases, but nowhere does it mention any commitment to paying fair wages, settling bills promptly or paying a fair rate of tax. Like so many of their products, the situation leaves an unpleasant taste in the mouth.
So why is the group which is controlled by the Carlsberg Foundation, a charitable body set up by the founder J.C. Jacobsen, taking such a hard hearted approach? Some see it as a result of problems with their Russian operations. They took over the Baltika brand in 2008, and since then have suffered from increased taxation, heavy regulation, declining rouble exchange rates and sanctions resulting from the Ukraine crisis. Others suggest that the competition from ‘craft beer’ is hitting profits as more customers taste alternatives and realise that it is highly unlikely that the cold, fizzy and relatively tasteless offering from Carlsberg is the best lager the world can offer. Carlsberg have responded by offering a range of 39 speciality beers to their customers. As their marketing literature says ‘year-on-year growth for craft beer in the UK is up 34% and the average pint of craft beer commands an additional 75-90p per pint’
Another solution is to diversify, and Carlsberg have come up with the ‘the Beer’d Beauty range’, an extension of its male grooming range (I did check the date of the press release to make sure that it was not April 1st).
Will these measures be enough? With UK sales down 6% and TESCO taking the decision to remove Carlsberg products from the shelves (maybe they didn’t like the payment terms), the company is being squeezed between the small craft breweries and the giant brewers, who will become even bigger if the merger between SAB Miller and In Bev goes ahead to create a company which produces over a third of the world’s beer, Carlsberg has a struggle on its hands.