Carlsberg is a global force in the brewing industry. Building on a long and storied tradition—the company was founded in Copenhagen in 1847—it has recently been expanding steadily in emerging markets such as China and Russia.

Success closer to home requires winning in increasingly competitive, uncertain, and even hostile environments. Beer consumption has been shrinking in some markets, thanks to aging populations, antismoking laws, and a growing health consciousness. At the same time, fizzy drinks and wine have become fashionable alternatives to beer among younger drinkers. Successfully addressing these market shifts is vital for Carlsberg because Western Europe accounts for 50 percent of its operating profits, Eastern Europe and Asia for most of the rest.

Part of Carlsberg’s response has been to restructure operations in Western Europe, an approach that has led to greater operational efficiency and the closure or imminent closure of several breweries (including the famous Valby site, where Carlsberg first started brewing). But a sustained commitment to new marketing efforts will be just as critical to the company’s long-term health.

Few insiders understand that challenge better than 43-year-old Alex Myers, Carlsberg’s senior vice president, Western Europe, and formerly senior VP for group sales and marketing. The appointment of Myers to his new position, just over a year ago, reflects the company’s determination to focus new attention on customers and consumers in the five mature European markets— Germany, Italy, Portugal, Switzerland, and the United Kingdom—for which Myers is responsible.

In a conversation with McKinsey director Trond Riiber Knudsen, Myers shares his excitement about beer’s future; explains what the company is doing to cope with the proliferation of distribution channels, media outlets, and customer segments; and describes some of the benefits of Carlsberg’s functional-excellence programs.

The Quarterly: How do you view the outlook for beer as a consumer category?

Alex Myers: I am very upbeat, but in many markets beer has become somewhat commoditized, so we need to generate more excitement and drive greater variation. We have to take new risks, innovate, get back to the roots of the beer business and the ingredients and flavors that it’s all about, and maybe concentrate on more convenient packaging and a more premium experience. We have to explore better the “indulgence potential” of beer. Consumers in some territories are attracted by products with less alcohol. Indeed, we may even have to free ourselves a bit from always thinking about beer as beer. Perhaps one day we will have to produce other types of products, malt based but nonalcoholic, with the technologies that we have. I see a lot of potential to mix beer with other flavors—almost a morphing of categories. And rather than just seeing low-alcohol beer as a “service” product for people who have to drive home, we should provide them with a better-quality offering.

ALEX MYERS

Vital statistics

Born May 9, 1963, in Vienna, Austria

Married with 2 children

Education

Graduated in 1984 with bachelor’s degree from Yale University

Career highlights

Carlsberg Breweries (2000–present)

• Senior vice president, Western Europe (2006–present)
• Senior vice president, group sales and marketing (2004–05)
• Vice president, marketing and innovation (2001–03)

Pripps-Ringnes Brewery, acquired in 2000 by Carlsberg (1997–2000)

• Vice president of marketing, innovation, and business development

Unilever (1985–96)

• Marketing manager, Langnese Iglo, Germany (1994–96)
• Marketing and sales positions in ice cream, foods in Scandinavia (1985–93)

Fast facts

Serves on boards of Carlsberg, Italy; Carlsberg, Germany; Carlsberg, United Kingdom; Feldschlösschen Beverages, Switzerland; Unicer, Portugal

Has served on boards of Carlsberg, Denmark; Media Support, Sweden; Ringnes, Norway; Vena Brewery, Russia

Grew up in Greece, studied in United States, lives in Sweden, and works in Denmark

Enjoys horseback riding, scuba diving

The Quarterly: Can you talk about any of the innovations that Carlsberg is working on?

Alex Myers: One of our most recent innovations—which we’re testing in some markets at the moment—is a product we call the DraughtMaster, which allows consumers to draw their own pint from a keg at home. It’s quite an emotionally driven proposition; many men dream about having their own machine and beer tap. There are great opportunities, but also challenges. It’s the first time, for example, that we will be supplying drinkers with both beer and a piece of equipment. The whole route to market becomes more complex. We need to work more closely with the manufacturers and distributors of this equipment and ensure they offer our consumers the necessary service and support. In some markets, we are testing a consumer hotline with help desk services in order to ensure that customers are satisfied.

The Quarterly: Consumer drinking patterns presumably vary from region to region?

Alex Myers: That’s right. And being a global player, we can see the different tendencies quite clearly. In Western Europe there’s a general move toward more consumption of nonalcoholic drinks: nonbeer, nonwine, and nonspirits. In Northern Europe beer consumption is stagnating at best, with many people drinking less beer and spirits but more wine; in Southern Europe it is going in the other direction, with beer and spirits in a growth phase and wine falling back; in Eastern Europe consumers are switching from spirits to beer. Alcohol consumption in Asia has been comparatively low—people there drink a lot of tea and nonalcoholic beverages—but we are starting to see Asians drink more beer and spirits.

The Quarterly: Has what you describe contributed to the proliferation of channels, media, customer segments, and brands in the industry?

Alex Myers: The category wars, with beer fighting for attention against nonalcoholic beverages and against wines and spirits, have been one of the key drivers of proliferation. But we see proliferation on all fronts, with the proliferation of consumer and customer segments in the first instance and the proliferation of media channels as a secondary effect.

Historically, brewers have been very big in the middle of the market, and if you go all the way back it was about having one brand in one town: a single-geography strategy, if you like. Now there’s a polarization between the top and the bottom, and the risk is in getting stuck in the middle. As I said, I see a big potential at the top, where variation and delivering experiences for consumers will bring higher margins. It’s almost as if beer is in the entertainment or chocolate business, providing new tastes and flavors at high prices.

At the bottom end it is a completely different story. Here it’s about focusing on fewer, bigger products and brands and making sure you can deliver them in a very cost-effective way. To serve the market you have to do both.

The Quarterly: At the bottom end, presumably, the big challenge comes from discounters and big-box retailers trying to squeeze your margins. What’s the proposition here?

Alex Myers: We have started to think more strategically, not just tactically, about the discount channels. If you can’t beat them, in other words, join them. The whole “value” segment, after all, is here to stay. We have found that its consumers are not interested in much variety: they’re looking for big brands at interesting prices. And they certainly want the market leaders to be available. Our approach is a dual one. Where we are market leaders we will try to use our “power” brands—big, mainstream, and well known—to serve this market, but we will deliver them in the most effective and efficient way, with full truckloads, full palettes, or maybe multipacks specifically designed for this channel. We’re working to make sure we take out the added-value costs that aren’t appreciated by this sort of consumer. In territories where we are not the market leader, on the other hand, we tend to use what we call “fighter” brands. These are no-frills products and less well known than the power brands. An example would be Skol in the UK or 5.0 in Germany.

The Quarterly: In many consumer product categories, of course, private labels are a big issue in the value segment. How does Carlsberg deal with private labels?

Alex Myers: We have a pragmatic approach. First, we look at the potential in that channel for the brands we own—our power brands and our fighter brands. We are not active seekers of private labels, but in some markets there may be no other option if we want to pursue a growth strategy. In Germany, for example, we simultaneously distribute private-label and fighter brands and have one brewery dedicated to their production. We have a separate business unit, a fighter brand unit, that measures the performance of both these sorts of products against our other premium and standard brands.

The Quarterly: Looking at European markets as a whole, how has segment and media proliferation affected your overall brand strategy?

Alex Myers: Fundamentally, what has happened is that we’re shifting from being a single-brand-driven business to becoming portfolio managers. And that’s a big transition. I would go so far as to say that the strength of a portfolio in the beer business is now much more important than the strength of individual brands. Five to ten years ago that wasn’t the case: the brand was everything.

So typically in each region we have a local power brand which could be, say, Carlsberg in the United Kingdom, Tuborg in Denmark, or Baltika Breweries in Russia. It might be an international name, but in that region it is performing the role of a local power brand. It’s like the middle of the sandwich—the meat. Above that segment in each market we will drive our international brands, or in places where an international brand is the power brand we also will emphasize the other international brands. Then you probably have some regional and local brands that could be for the value segment.

The Quarterly: So brand stretching has become part of the portfolio approach?

Alex Myers: Stretching is something we will do, usually by varying the alcohol level or the beer type. So you could have a light or alcohol-free variety and an extra-strong one or a darker, lighter, or maybe citrus-flavored one.

In Portugal, for example, we have a brand called Super Bock, which is a typical lager. But it exists in stout form, as a citrus-flavored variant, and as an Abbey Ale called Abadia. In most markets we try to focus on the different archetypes—something darker, something lighter, and something a bit more premium priced.

The Quarterly: In sheer numbers, how many brands do you have in Western Europe compared with, say, ten years ago?

Alex Myers: We have a lot more brands than we used to—somewhere between 90 and 100—because of a vigorous acquisition strategy. Of these I would say there is an active strategy for about 25, meaning that we put resources behind them. Beyond this we have identified the ten local power brands in Europe, one for each of our core European markets. So we’re focusing more and more resources on fewer and fewer brands: the power brands are 10 percent of the brands we own, but they represent probably 80 percent of our turnover.

The Quarterly: So in a way you are fighting proliferation by concentrating on a smaller number of brands?

Alex Myers: Exactly. The logic is to focus on fewer big brands. But that’s to create space at the top of the pyramid to bring variation and innovation in the specialty segment. The net effect will be that we will probably end up with the same number.

The Quarterly: Turning to media proliferation, what overall impact has that had on Carlsberg?

Alex Myers: What’s happening in the brewing industry is a bit different from what’s gone on elsewhere. Our media investments were already highly proliferated because we’re into sponsorships, product placement, TV advertising, outdoor promotions, and so on. We’re after visibility—local festivals and the like. Compared with other fast-moving consumer goods categories, our industry has tended to use a wide portfolio of media. At the moment we’re evaluating everything we’re doing and looking for more focus. We need to concentrate on doing fewer but bigger things. But that’s because our starting point was quite different from that of most companies. Rather than worrying about proliferation, our challenge is to concentrate on what works and learn from our long experience in areas like sponsorship.

The Quarterly: Can you say how you choose among different media types?

Alex Myers: We talk about the consumer “funnel,” which means building a relationship that starts with awareness and ends in customer loyalty. When we want to build awareness—in Asia and Eastern Europe at the moment, for example—we use sponsorships, festivals, and that type of activity. When we’re consolidating and seeking greater loyalty, we shift our resources to media like television, where the message can be communicated more effectively. After that, it’s about activating the brands in stores and winning greater visibility in restaurants and pubs. This evolution has been very difficult to measure, which is the main reason we launched a commercial-excellence program to evaluate the different elements of the marketing and sales mix and are trying to develop a best-practice approach for the group. The challenge in a business like ours is how and when to switch resources. It’s easy to fall in love with a sponsorship, for example, when the consumer has already moved down the funnel. In these situations you need more fact-based measurement so you can readjust your resources in an unemotional way.

The Quarterly: What have been the tangible outcomes of the commercial-excellence program?

Alex Myers: In terms of marketing effectiveness it has been about building a fact-based culture, developing consumer segmentation techniques around needs mapping, and measuring brand performance in the different media and customer channels. The fact-based approach, for instance, supported our decisions to abandon sponsorships in some markets and focus on fewer, bigger initiatives. We already felt that our investments were too fragmented. What these types of projects generally do is underpin your philosophy, which was probably right but just needed more evidence to support and accelerate it.

On the sales side, the program has deepened our understanding of our customers and of our brands, enabling us to understand our own and our customers’ profit drivers, as well as to improve our margins and use pricing more strategically.

The Quarterly: What new customer insights have you gleaned?

Alex Myers: How you execute your in-store strategy is going to be very important in the future. We’re getting study after study indicating that more than 90 percent of purchase decisions are made in the store or when consumers are standing in front of the point of purchase—that is, late in the process and spontaneously. We’re seeing the same thing in bars and restaurants, which means that what we can do at the table or at the bar to attract attention may be more important than what people see outside on the street.

The Quarterly: Can you talk more about the journey you have taken in the commercial-excellence program?

Alex Myers: I’d say it’s been a bit of a cultural change. At Carlsberg we’ve always been passionate about our brands and had some great ideas and slogans. But we’ve been a bit sloppy in execution. The great ideas didn’t get out into the market the way we had envisioned. The new fact-based approach has made us much more focused on improvement and more willing to embrace negative as well as positive feedback. Usually, the instinct is to celebrate the positive stuff and ignore the negative. A fact-based culture makes you accept that facts are facts and, if necessary, react to them.

I think our delivery has also improved. Our salespeople are now much closer to the brands and our customers. The marketing philosophers have connected with the sales practitioners out in the markets—with a resulting increase of in-store sales effectiveness.

The Quarterly: Proliferation in marketing can easily lead to greater organizational complexity. How has Carlsberg’s organization changed?

Alex Myers: In Carlsberg, decision making has always has been fairly decentralized, especially the closer you get to the customer and consumer. So a particular challenge has been how to do group projects, set group standards, and develop best practices. The commercial-excellence program has therefore been a useful vehicle for getting cross-functional thinking and behavior on the agenda.

We started by going around to the heads of nine European markets and putting together a menu of marketing and sales best practices. We asked our nine markets to assess themselves on the way they segmented their markets, their approach to pricing, everything to do with the marketing and sales function. In consumer segmentation, for example, everyone had a different model—some were looking at needs, others at age—but within three months the nine had agreed on a common approach to consumer segmentation. We also developed a price sensitivity model for the group. And as for contract development with customers, our markets are all adopting a tool called the Dealmaker, which was pioneered in the UK.

The team involved in the commercial-excellence program is about 20 to 25 strong—Bulgarians, Italians, Malaysians, British, and a lot of Nordic people, plus a staff at headquarters. But it hasn’t created a permanent organizational overlay; since individuals keep moving back into the functions, it’s constantly changing size, and new themes keep coming up. It’s a bit of an organizational amoeba. One important feature is that it’s performance based. The businesses in our markets are paying for it out of their local budgets, even though it’s a central resource, because they believe it’s a valuable initiative.

The Quarterly: All this presumably requires marketing people to have a new set of capabilities. Can you comment on that?

Alex Myers: I think the marketing function is developing along two extremes: the advertising guru, on the one hand, and what one might term the fact-based businessman, on the other. The trick is to find the right balance. The journey, which so far has been from advertising guru to communications guru, is entering a new phase that requires us to be businessmen and explain things clearly to management. It’s no longer enough to say, “Trust my campaign” or “It looks great.” You have to explain things internally in a much more relevant way. The marketing function is becoming much more accountable, with CEOs and CFOs saying, “OK, since you’re spending all this money, we want to know if it’s effective or not. Is our business growing or is it just the budget?” The challenge is not to lose the passion and religion of brands or consumers but to do it in a fact-based way.

The Quarterly: What would be your advice to a new chief marketing officer?

Alex Myers: Measurement and accountability, not creativity, should be at the core. And before you talk, listen to other functions, to other people internally, to consumers, to customers. Before you start driving in a new direction, make sure the fact base is solid. But don’t forget to be passionate about brands and about what the consumer wants—even if it is a little emotional or even irrational at times—because without this knowledge the risk is that the company will disappear. That’s the big challenge in the new marketing world: how to keep the candle glowing.