Innovation - The Legacy and the Future

Research, Development, and Innovation are core to the Carlsberg legacy and are still considered vital in driving beer category growth and business results. By offering consumers new experiences, we ensure that our brands remain relevant and that we maintain consumer loyalty and attract new consumers. Julia Isdale, head of Carlsberg Group's Innovation team Most people probably wouldn’t connect beer with research, development and innovation. But at Carlsberg, these are core to our legacy, which goes all the way back to the brewery’s founder, J.C. Jacobsen. He built Carlsberg with a strong focus on research and development, and it was this focus as well as his extraordi¬nary business acumen that lead to him becoming one of the leading brewers in Europe of his time. Today, the Carlsberg Group continues to see research, development and innovation as vital in driving the growth of the beer category in general and to improving business performance. Consequently, innovation is a key priority of the Group’s strategy. We want to give consumers new experiences, either by improving the brands they already know and cherish or by offering them something entirely new. This is how we can ensure that our brands remain relevant and how we can capture future growth opportunities. To support this and to drive an ambitious and profitable innovation agenda, our organisational structure integrates the research, development and innovation functions with sales and marketing, with the combined function being headed up by Senior Vice President Khalil Younes. This pooling of capabilities brings the different functions and teams together allowing better opportunities for combining commercial and technological knowledge, insights and developments. Widening the scope of innovation Julia Isdale, head of the Carlsberg Group’s Innovation team, explains why it is so important for Carlsberg to continue its focus on innovation: “We are currently in a situation where the beer category is challenged – beer consumption is declining in most of Europe. What we need to do is to make sure that we have a wide range of new products that can increase the value of the volume sold by the Group.” She continues, “Innovation is the lifeblood of many fast moving consumer goods (FMCG) companies. Even though the beer industry generally tends to be more traditional, it’s increasingly important for us to be innovative and bring ideas to the market to maintain consumer loyalty and attract new consumers.” Carlsberg’s innovation efforts are not only limited to developing the flavours inside the bottles – in fact, it’s not even limited to beer: “We have a holistic approach to innovation in the Carlsberg Group. Innovation means all kinds of new ideas and inventions, be it liquids, packaging, categories or technologies,” says Julia Isdale. Three recent examples show the benefits of successful innovation. The new Tuborg bottle, which you can read more about on the following page, is an example of innovation in packaging that revitalised the Tuborg brand and helped boost sales in many markets. Somersby, the cider brand first launched in 2008, became the world’s fastest growing international cider brand in 2012 and is an example of category innovation. And an example of innovation in technology is Draught Master Modular 20, a break-through draught system that keeps draught beer fresh for a longer time. Leveraging innovation across brands and markets In recent years, there has been more focus on leveraging the strength of the Group’s popular local brands to increase the value of our innovation efforts. The radler concept is a good example of this approach, which involves applying new concepts and ideas to local brands. Julia Isdale explains: “The basic concept of radler is mixing low-alcoholic beer with fruit juice to get a beer that is very light, refreshing and easy to drink. We have rolled the radler concept out internationally by launching radler variants of our local brands. In effect, this means that radler is sold across many of our markets, but under a different name and with different packaging and positioning. For example in Croatia, we have utilised the local brand Pan to launch “Pan Radler”. In Denmark, where Tuborg is a very popular brand, we have launched radler under the name “Tuborg Sommer”. By using this approach, we can leverage the brands that are strong in each market to get the most value out of our radler innovation.” What’s next? Innovation is a key component of the Carlsberg Group strategy. Focused efforts within defined innovation platforms supported by research and development are driving a continuous innovation pipeline. But Julia Isdale doesn’t want to be too specific: “We are very busy and have a lot of ideas and concepts in the pipeline. But since many of our plans are commercially sensitive, it’s better not to reveal too much just now.” A Taste of Carlsberg Group Innovations     Somersby cider – success in cider Like beer, Somersby cider is based on natural ingredients. Somersby innovations are not confined to the liquid itself with an on-going introduction of new flavours as well as an organic version of the popular drink, but expand to packaging and unique and distinctive marketing campaigns and activations. Somersby is available in 35 markets world-wide and was the fastest growing global cider brand in 2012.   Carlsberg Citrus – line extensions of our flagship brand When Carlsberg Citrus was recently launched in the UK market, it was the first UK line extension of our flagship brand in many years. Carlsberg Citrus is a refreshing, easy-to-drink beer with a low ABV of 2.8%. It has been brewed specifically to be smoother and less bitter than traditional lagers. Made with Persian limes, Carlsberg Citrus has already become a major player in the lower strength beer category – a category showing annual growth rates of 50%.      Garage Hard Lemonade – a drink for grown ups Garage Hard Lemonade was first launched in 2012 to address the need for a product that could fill the role of an alternative to beer and meet the demands of an older consumer group. The product falls within the category “ready-to-drink” (RTD) with a taste that combines the bitter-sweet taste of lemon juice with a touch of real sugar. It has an ABV of 4.6%. The inspiration for developing Garage comes from the USA and Australia where ”Hard Lemonade” is a wellestablished drinks category.      SKØLL Tuborg – the Viking beer SKØLL Tuborg is a product that mixes beer with vodka and citrus fruit notes with an ABV of 6%. Launched in March 2013 as a ”Viking” beer by French Brasseries Kronenbourg, SKØLL Tuborg leverages the Nordic heritage of Tuborg in a modern and contemporary context. SKØLL Tuborg bears the distinctive Thorkill (Viking helmet) and carries the slogan, ”Freshly arrived from the North”.       Baltika Razlivnoe – taking beer back to basics Baltika Razlivnoe was developed in response to a growing demand in Russia for “back to basics”, which means beers that are nonfiltered and non-pasteurized, also defined as RAW beers. The Baltika Razlivnoe brand was launched in 2010 and included three beer types: Baltika Razlivnoe, Baltika Razlivnoe Non-filtered and Baltika Razlivnoe Fresh. All three beers are bottled right after brewing, which means that pasteurisation and filtration are unnecessary.      Zatecky Gus – exploring Czech brewing traditions Although developed and brewed in Russia, Zatecky Gus is a light lager based on traditional Czech brewing traditions. Zatecky Gus gives consumers the opportunity to enjoy a traditional Czech beer brewed with the famous Zatec hops. Since its launch in Russia in 2010, line extensions building on the Czech heritage have been introduced, and most recently, packaging renovation was undertaken to enhance the perception of authenticity. Outside Russia, the Zatecky Gus brand portfolio is available in three markets.      World of Beer – Saku Dublin A growing interest among consumers in beers from other countries has recently led to Carlsberg launching the ‘World of Beer’ initiative. It is currently available in two markets. One of the brands launched as part of this initiative is Saku Dublin, a low-alcoholic, mild beer with a creamy foam head and sweet taste of dark lager brewed by Carlsberg’s Estonian brewery. Saku Dublin gets its Irish accent from light caramel, roasted malt and aromatic hops, and the carbon dioxide level of Saku Dublin is lower than average, just as with all classic Irish beers.             Jacobsen – beer and food Jacobsen is the Carlsberg Group’s Copenhagen-based super-premium craft beer. Named after founder J.C. Jacobsen, the unique brand is available in seven variants. In December 2011, the Jacobsen brew master teamed up with Danish chocolatier Peter Beier to break tradition and offer chocolate truffles filled with 20% Jacobsen beer. In the world of beer, there are long-standing traditions for using chocolate as an ingredient in brewing, but doing it the other way around was an innovation opportunity the Jacobsen Brew masters could not pass up.      Tuborg – rejuvenation and geographical expansion In the spring of 2012, the Tuborg brand underwent a comprehensive rejuvenation, which included a new visual identity featuring an original tilted logo, a new tagline "Open for More" and a new bottle design. The brand also entered new territories with its first-ever launch in China. The launch of the new identity was supported by a global marketing campaign, which comprised a television commercial, a social media campaign and a music campaign.         Grimbergen – Crafting beer with passion Grimbergen is Carlsberg’s super-premium Belgian abbey ale with roots dating back to 1128. The modern day Grimbergen beers are strongly inspired by the widespread craft beer craze and appeal to consumers looking for high-quality ales with unique flavour variants. To further support the super-premium positioning of the brand, a new proprietary bottle, livery and a new marketing campaign were launched in 2012. (This article was first published in our quarterly investor magazine "NEWS" on 21 August 2013)

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