Carlsberg: We Hope for Share Gains as New CEO Takes Reins

Jacob Aarup-Andersen has assumed his role as CEO of Carlsberg CARL B, slightly earlier than expected, replacing Cees ‘t Hart after eight successful years. This has no effect on our DKK 970 fair value estimate, our no-moat rating, or our view that the shares are fairly valued.

Aarup-Andersen comes from services provider ISS and has no consumer product experience, which limits visibility into what to expect from his leadership. There was something of a turnaround during the last eight years under Cees ‘t Hart. Carlsberg has made significant strides in improving financial execution, and after having lagged peers for so long, now generates EBITDA margins of around 20%, in line with comparable peer Heineken. We believe the top priority for Carlsberg’s next stage of transformation should be consolidating market share in some of its key markets outside of Scandinavia, especially other parts of Northern Europe, through product innovation and marketing. Our no-moat rating is to a large degree based on Carlsberg’s second-tier positioning in some of these key markets, meaning it lacks the primary vendor status with retailers, making it more vulnerable to shelf space loss and margin pressure. If Carlsberg could improve volume share in some of these markets, there could be an upside to our cash-flow forecasts and we would reconsider our moat rating.