Carlsberg: A Toast to Long-Term Gains

Carlsberg Group is one of the world’s leading brewing companies, with a broad portfolio that includes well-known beer brands, alcohol-free products, soft drinks, and other beverages. Best known for brands like Carlsberg, Tuborg, and 1664 Blanc, the company combines stable positions in mature European markets with long-term growth opportunities in Asia. As drinking habits change and consumers increasingly focus on premium products, moderation, and choice, Carlsberg is adapting its business through premiumization, alcohol-free beer, and a growing soft drinks presence. The key question is whether this strategy, together with Carlsberg’s cash generation and market position, makes the company a compelling long-term investment.

This is not a financial advice. I am not a financial advisor and I only do these post in order to do my own analysis and elaborate about my decisions, especially for my copiers and followers. If you consider investing in any of the ideas I present, you should do your own research or contact a professional financial advisor, as all investing comes with a risk of losing money. You are also more than welcome to copy me. 

For full disclosure, I should mention that I do not own any shares in Carlsberg at the time of writing this analysis. If you would like to copy or view my portfolio, you can find instructions on how to do so here. If you want to purchase shares or fractional shares of Carlsberg, you can do so through eToro. eToro is a highly user-friendly platform that allows you to get started on investing with as little as $50.

The Business

Carlsberg Group is a global brewing company founded in 1847 and headquartered in Copenhagen, Denmark. Brewing remains at the core of its identity, but the group has steadily evolved into a broader beverage company with a diversified portfolio spanning beer, cider, alcohol-free products, and selected soft drinks. The company operates a portfolio of more than 140 brands, combining global flagships such as Carlsberg, Tuborg, and Kronenbourg 1664 with strong local and regional brands like Grimbergen and numerous market-specific mainstream beers. In addition, Carlsberg owns Somersby in cider and is expanding across alcohol-free beer and Beyond Beer categories, which are structurally growing faster than traditional beer in many markets. Carlsberg’s operations are organized across three main regions: Western Europe; Asia; and Central & Eastern Europe and India. While Western Europe provides stable cash flows and brand strength, Asia and parts of Eastern Europe represent the group’s most attractive long-term growth opportunities. The company focuses deliberately on markets where it can achieve a number one or two position. Beer and soft drinks are volume businesses with meaningful scale advantages, and Carlsberg’s strategy prioritizes depth over breadth. This concentration allows the group to optimize sourcing, production, logistics, and sales, while maintaining strong relationships with customers across both on-trade and off-trade channels. Carlsberg’s route-to-market model is tailored to local conditions. Depending on the market, the company distributes directly or through multi-layered distributor networks designed to serve everything from small bars and restaurants to large retail chains. This flexibility ensures broad market access and allows Carlsberg to adapt to differences in regulation, customer structure, and consumer behavior. Beyond beer, Carlsberg increasingly leverages its infrastructure through partnerships and licensing agreements. In several markets, the company bottles and distributes soft drinks or other beverages under license, using its existing production facilities, logistics network, and salesforce to improve asset utilization and broaden its local offering. These partnerships enhance customer relevance and strengthen Carlsberg’s position as a full-service beverage supplier without requiring heavy upfront investment in new brands. Carlsberg’s competitive moat is built on a combination of brand strength, scale advantages, and deeply embedded local market positions. First, its brand portfolio provides durable pricing power. Carlsberg owns some of the most recognized beer brands in its core markets, spanning premium, mainstream, and alcohol-free segments. This breadth allows the company to serve multiple consumer occasions while maintaining strong shelf presence and on-trade visibility. Over time, these brands foster customer and consumer loyalty, supporting price increases and mix improvements, particularly through premiumization. Second, scale is a central pillar of the moat. By focusing on markets where it holds a leading position, Carlsberg benefits from economies of scale across sourcing, brewing, distribution, and marketing. These cost advantages are difficult for smaller competitors to replicate and become increasingly important in a capital-intensive, logistics-heavy industry like brewing. Third, Carlsberg’s route-to-market capabilities represent a structural advantage. Long-standing relationships with retailers, bars, restaurants, and distributors create high switching costs and make shelf space and tap access harder for challengers to secure. The company’s ability to tailor distribution models to local conditions further entrenches its position across diverse geographies. Fourth, partnerships and licensing agreements enhance the moat by deepening customer relationships and improving asset utilization. Acting as a bottler or distributor for other beverage producers strengthens Carlsberg’s role in local ecosystems and allows it to expand into adjacent categories without diluting focus or returns. Finally, the group’s continuous focus on operational excellence reinforces the moat over time. Investments in digital systems, supply chain optimization, and standardized processes improve margins, resilience, and responsiveness, allowing Carlsberg to compete effectively even in mature or highly competitive markets.

Management

Jacob Aarup-Andersen serves as the CEO of Carlsberg, a role he assumed in September 2023. Although new to the brewing industry, he brings a strong leadership and transformation track record from large, complex, and operationally intensive global organizations. Prior to joining Carlsberg, Jacob Aarup-Andersen was the CEO of ISS, a global leader in facility management with more than 360.000 employees across over 60 countries. During his tenure, he led a multi-year turnaround focused on operational discipline, contract quality, and margin improvement, materially strengthening profitability and cash generation while simplifying the business and sharpening strategic focus. His leadership at ISS earned broad recognition for disciplined execution in a low-margin, people-intensive industry. Before ISS, Jacob Aarup-Andersen held senior executive roles at Danske Bank and Danica Pension, where he gained deep experience in capital allocation, risk management, and large-scale organisational leadership within highly regulated environments. Earlier in his career, he worked in investment banking and asset management at Goldman Sachs and TPG-Axon Capital, giving him a strong foundation in financial analysis, valuation, and strategic decision-making. He holds a master’s degree in economics from the University of Copenhagen, where he earned the nickname “Guld-Jacob” or “Gold-Jacob” for his exceptional academic performance. In addition to his executive role, he serves on the Board of Directors of SEB Group, one of the leading Nordic financial services institutions. Since joining Carlsberg, Jacob Aarup-Andersen has quickly set a tone of ambition, clarity, and disciplined growth. In his first earnings call as CEO, he highlighted the importance of compounding earnings over time and made clear his expectation that the company should deliver positive earnings growth every year. He also signaled a meaningful shift in strategic priorities by elevating long-term growth to carry equal weight alongside earnings and free cash flow in executive incentives. Reflecting this mindset, he raised Carlsberg’s long-term organic revenue growth ambition to a compound annual growth rate of 4 to 6%, up from the previous target of 3 to 5%. While still early in his tenure, Jacob Aarup-Andersen’s experience running large global businesses and his emphasis on steady, long-term growth give me confidence in his ability to lead Carlsberg through its next phase of development.

The Numbers

The first number we will look into is the return on invested capital, also known as ROIC. We want to see a 10-year history, with all numbers exceeding 10% in each year.  Carlsberg’s ROIC has been consistently above 10% for roughly the past seven years, which is a strong outcome for a capital-intensive and competitive industry like brewing. This level of returns is not driven by a single factor, but by the interaction of brand strength, scale, and disciplined execution across the business. A key reason is Carlsberg’s focus on markets where it holds a number one or two position. Beer and soft drinks are volume-driven businesses with meaningful scale benefits. High market shares allow Carlsberg to spread fixed costs such as breweries, logistics, and marketing over a large revenue base, supporting solid operating margins without requiring excessive additional capital. This naturally lifts ROIC. Brand strength also plays an important role. Carlsberg’s portfolio of international and strong local brands gives the company pricing power and supports premiumization. When prices and product mix improve faster than capital employed, profitability increases without a proportional rise in investment, pushing ROIC higher. This effect has become more visible in recent years as premium brands, alcohol-free beer, and Beyond Beer categories have grown in importance. Capital allocation has also played a role in supporting returns. Historically, Carlsberg focused on organic improvements, partnerships, and smaller bolt-on acquisitions, which helped protect capital efficiency. The acquisition of Britvic marks a larger strategic move, increasing exposure to soft drinks and expanding the capital base. Whether this proves value-accretive will depend on execution and the company’s ability to realize synergies without compromising ROIC. Geographic mix matters as well. While Western Europe is mature, Asia and parts of Central and Eastern Europe and India offer better long-term growth and attractive incremental returns once scale is established. As these regions have become a larger part of group earnings, they have contributed positively to overall returns on capital. Looking ahead, there are good reasons to expect Carlsberg’s ROIC to remain at or slightly above current levels, with room for modest improvement over time. Continued premiumization, growth in alcohol-free products and Beyond Beer, and selective expansion in soft drinks can lift profitability without requiring large new investments. At the same time, better digital systems, improved demand planning, and more efficient distribution can help the company get more out of its existing breweries, logistics network, and sales infrastructure. That said, expectations should remain realistic. Brewing is still a capital-heavy business that requires ongoing investment in brands, production capacity, and regulatory compliance. These needs naturally limit how high returns can go compared with more asset-light industries.

The next numbers are the book value + dividend. In my old format this was known as the equity growth rate. It was the most important of the four growth rates I used to use in my analyses, which is why I will continue to use it moving forward. As you are used to see the numbers in percentage, I have decided to share both the numbers and the percentage growth year over year. To put it simply, equity is the part of the company that belongs to its shareholders – like the portion of a house you truly own after paying off part of the mortgage. Growing equity over time means the company is becoming more valuable for its owners. So, when we track book value plus dividends, we’re essentially looking at how much value is being built for shareholders year after year.

These numbers don’t impress, as Carlsberg’s equity has declined in several years. However, the sharp drop in 2022 and 2023 was primarily due to a presidential decree in Russia that temporarily transferred the management of Baltika Breweries to a Russian federal agency for State Property Management. As a result, the investment in Baltika was fully written down across those two years. Equity increased in 2024, as Carlsberg received cash from the Russian disposal—although the amount was significantly below the expected valuation. While equity remains below previous levels, with the Russian operations now exited, there is a reasonable chance we’ll see more consistent year-over-year growth going forward. Carlsberg’s equity development over the past decade can look disappointing at first glance. Equity in 2025 is lower than it was ten years ago, and several years show negative growth. This outcome is not the result of weak underlying operations, but mainly reflects a series of exceptional events and balance sheet adjustments that reduced reported equity over time. The most significant factor was the loss of the company’s Russian business. When Carlsberg lost control of Baltika Breweries, the investment was fully written down, which had a direct and material negative impact on equity in 2022 and 2023. This write-down did not reflect a deterioration in Carlsberg’s core businesses, but it permanently reduced the equity base and explains much of the sharp decline during those years. Equity has also been affected by restructuring charges, impairments, and currency movements across Carlsberg’s global footprint. Operating in many markets means that changes in exchange rates can move reported equity up or down even when local performance is solid. From time to time, portfolio changes and acquisitions have also led to conservative asset valuations, which weigh on equity in the short term. Importantly, periods of negative equity growth do not mean that Carlsberg destroyed value in those years. The company remained profitable and cash generative, but these profits were offset on the balance sheet by write-downs and one-off items rather than being retained as equity. Looking ahead, equity should develop in a more stable way. The Russia-related write-down is largely behind the company, removing a major source of volatility. Assuming no similar geopolitical shocks, future equity growth should primarily reflect the company’s ongoing profitability and the performance of recent investments such as Britvic. While equity is unlikely to grow smoothly every single year, it should gradually rebuild over time as the business continues to generate consistent earnings.

Finally, we will analyze the free cash flow. Free cash flow, in short, refers to the cash that a company generates after covering its operating expenses and capital expenditures. I use levered free cash flow margin because I believe that margins provide a better understanding of the numbers. Free cash flow yield refers to the amount of free cash flow per share that a company is expected to generate in relation to its market value per share. Carlsberg Group has generated relatively stable free cash flow over the past decade, which is a good reflection of the company’s underlying business quality. Beer and soft drinks are mature categories with predictable demand, and Carlsberg’s strong market positions allow it to convert a large share of earnings into cash year after year. While free cash flow moves around from one year to the next, the overall pattern has been steady rather than volatile. The decline in free cash flow in 2025, despite higher margins, is mainly explained by investment timing rather than weaker profitability. Operating performance actually improved, helped by higher EBITDA from both organic growth and the addition of Britvic. However, cash outflows increased due to higher capital spending, particularly for capacity expansion in India and Vietnam, investments related to soft drinks, and commercial preparations for new licenses such as Pepsi in Kazakhstan. These investments weigh on free cash flow in the short term, even as they support long-term growth. This also explains why free cash flow margins improved in 2025 even though absolute free cash flow declined. Higher operating margins lifted cash generation at the operating level, but that improvement was more than offset by increased investment spending during the year. In other words, the business became more profitable, but more cash was reinvested back into the company. Looking ahead, free cash flow should remain solid and broadly stable, with some year-to-year variation depending on investment needs. Capital spending is expected to stay around 6 to 7% of revenue, which is consistent with maintaining breweries, expanding capacity in growth markets, and supporting the soft drinks business. As the current wave of expansion investments matures, free cash flow margins should normalize and better reflect the underlying profitability of the business. Carlsberg uses its free cash flow in a fairly straightforward and shareholder-friendly way. A significant portion is returned to shareholders through dividends, with a stated policy of paying out around half of adjusted net profit. Management has been clear that dividend growth should broadly follow earnings growth over time. At the same time, free cash flow is used to reduce leverage following the Britvic acquisition. Once leverage is back below the company’s target level, Carlsberg plans to resume share buybacks and return excess cash to shareholders. Free cash flow yield is lower than it has been in the past, but it still suggests that Carlsberg is trading at a relatively fair valuation. We will revisit valuation later in the analysis.

Debt

Another important aspect to consider is debt. I assess debt by looking at whether a company could reasonably repay its long-term debt within three years using earnings. Based on this measure, Carlsberg had 9,97 years of earnings in debt at the end of 2025, which is well above my preferred threshold. This means debt is clearly something that needs to be monitored. The elevated debt level is largely explained by the acquisition of Britvic, which significantly increased debt to DKK 61,6 billion. As a result, net debt to EBITDA rose to around 3,3x, above management’s stated target of a maximum of 2,5x. Importantly, this increase was driven by a strategic acquisition rather than operational weakness or deteriorating cash generation. Management has been very clear about its priorities following the acquisition. Reducing leverage is now a central focus, and the company expects to bring net debt to EBITDA back below 2,5x no later than the end of 2027. The main lever for deleveraging is organic EBITDA growth, supported by continued margin improvement and contributions from Britvic. In addition, Carlsberg is focused on generating strong operational cash flow and improving efficiency across the business, including further improvements within Britvic itself. While debt is currently higher than what I would normally be comfortable with, it does not concern me at this stage. The increase has a clear and temporary explanation, cash generation remains solid, and management has been transparent and credible in outlining how debt will be reduced over the next few years.

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Risks

Macroeconomic factors is a risk for Carlsberg. Carlsberg operates across a wide range of geographies, which makes the company particularly exposed to shifts in the global macroeconomic environment. In recent years, this environment has been characterized by geopolitical tensions, elevated inflation, higher interest rates, and generally weak economic growth. Management has been clear that these conditions are not expected to improve meaningfully in the near term, and that consumer sentiment across most regions is likely to remain subdued through at least 2026. The most direct impact of a weak macroeconomic backdrop is pressure on consumer spending. Carlsberg has already seen softer beer volumes in Western Europe and Central and Eastern Europe, which management has linked to declining consumer confidence. High living costs and limited real wage growth are forcing households to prioritize essential spending, leading to reduced consumption of discretionary products. While beer is often considered relatively defensive, premium products and on-trade consumption are more sensitive to economic stress, and these segments tend to feel the impact first. Asia presents a similar challenge. Carlsberg has highlighted ongoing weakness in consumer sentiment in China and parts of Southeast Asia. These markets are important for long-term growth, but slowing economic momentum can limit volume growth and make pricing actions harder to implement. In such an environment, Carlsberg may need to rely more on promotions or mix adjustments, which can weigh on profitability. Macroeconomic volatility also affects Carlsberg on the cost side. Input costs for raw materials, packaging, energy, and logistics are closely tied to global commodity markets and geopolitical developments. While Carlsberg has some pricing power, passing higher costs on to consumers becomes more difficult when demand is already under pressure. This creates a risk of margin compression if cost inflation outpaces the company’s ability to adjust prices. In addition, governments facing fiscal pressure may seek to increase excise duties or taxes on alcohol. Such measures can directly affect pricing, volumes, and profitability, particularly in markets where beer consumption is already under strain. Regulatory and tax uncertainty therefore adds another macro-related risk that is largely outside management’s control.

Shifting consumer trends is a risk for Carlsberg. Carlsberg  operates in a category that is increasingly shaped by long-term changes in consumer behavior rather than short-term cycles. Unlike risks such as input costs or macroeconomic volatility, shifts in consumer preferences tend to be structural, harder to predict, and slower to reverse. For a traditional beer producer, failing to adapt to these changes can gradually erode volumes, relevance, and long-term growth prospects. One of the most important shifts is the growing focus on health, wellness, and balance, particularly among younger consumers. Gen Z is drinking less alcohol than previous generations and is more selective about when and why they drink. This cohort shows a clear preference for low-alcohol, alcohol-free, and functional beverages that align with healthier lifestyles. As this generation becomes a larger share of overall consumption, demand for traditional beer risks stagnating or declining unless producers successfully reposition their portfolios. At the same time, consumption occasions are changing. Socializing is increasingly moving away from traditional on-trade settings such as bars and pubs, especially among younger consumers, and toward more informal or at-home occasions. This shift can pressure volumes and margins, particularly for brands that are strongly associated with classic beer-drinking settings. While this trend has both cyclical and structural elements, it reinforces the need for beer companies to adapt packaging, formats, and brand messaging to new occasions. Another emerging risk is the growing use of GLP-1 drugs such as Ozempic and Wegovy. These medications, originally developed for diabetes and weight loss, have been shown to reduce alcohol cravings for many users. Early research and anecdotal evidence suggest that widespread adoption of these drugs could lead to a lasting reduction in alcohol consumption. While the long-term impact is still uncertain, the potential scale of GLP-1 use represents a meaningful headwind for the entire alcohol industry, including beer. In parallel, cannabis is becoming a more accepted and legal alternative in many markets, particularly among younger consumers. For relaxation and socializing, cannabis increasingly competes directly with alcohol. Gen Z is not only drinking less but is also more open to substituting alcohol with cannabis, further challenging demand for traditional beer products over time. These trends are especially relevant in mature markets where beer consumption is already flat or declining. In such environments, losing relevance with younger consumers can translate into long-term volume erosion rather than temporary weakness. Even strong brands can suffer if they fail to evolve alongside changing values, preferences, and consumption habits.

Competition is a risk for Carlsberg. Carlsberg operates in a highly competitive and increasingly complex beverage landscape. While the global beer industry has historically been dominated by a small number of large players, competition has intensified as consumer preferences fragment and the definition of “beer” broadens to include alcohol-free, flavored, and functional beverages. This shift has made the market more dynamic and reduced some of the traditional advantages enjoyed by incumbent brewers. In Carlsberg’s core beer markets, competition from global peers such as AB InBev and Heineken remains intense. These competitors often have similar scale advantages, strong brand portfolios, and significant marketing budgets. In markets where multiple global brewers compete for leadership, maintaining market share can require higher promotional spending or more aggressive pricing, particularly during periods of weak consumer demand. This can limit Carlsberg’s ability to fully pass rising input costs on to consumers and put pressure on margins. At the same time, regional brewers and local craft producers continue to take share in certain segments. These players are often perceived as more authentic or innovative and can respond more quickly to local trends and niche consumer preferences. While their scale is smaller, their presence increases fragmentation and competition for shelf space, tap access, and consumer attention. Over time, this can dilute the strength of mainstream brands and make growth more dependent on marketing and innovation spending. Competition is also intensifying outside traditional beer. The rapid growth of alcohol-free beverages, ready-to-drink products, and functional drinks has attracted new entrants that do not carry the same legacy cost structures or brand positioning as traditional brewers. Many of these competitors are focused entirely on fast-growing segments and can be more agile in product development, branding, and distribution. As a result, Carlsberg faces competition not only from other brewers, but from a widening set of beverage companies with different business models and consumer propositions.

Reasons to invest

Expanding soft drink exposure is a reason to invest in Carlsberg. Carlsberg  has been deliberately expanding its soft drinks exposure as part of a broader strategy to build a more diversified, consumer-centric beverage portfolio. This matters because soft drinks benefit from stronger structural growth trends than beer and help reduce reliance on alcohol consumption, which faces long-term pressure from changing consumer habits. Soft drinks is a growing category in both volume and value, supported by urbanization, rising disposable income in emerging markets, and changing consumption patterns. Unlike beer, soft drinks are consumed across a wider range of occasions, including everyday hydration, meals, convenience, and quick-serve channels. Growth in e-commerce, convenience stores, and food-to-go formats further supports demand. These structural tailwinds make soft drinks an attractive complement to Carlsberg’s beer portfolio. Carlsberg is particularly well positioned to benefit from this growth because soft drinks and beer are highly synergistic across the value chain. Production, procurement, logistics, warehousing, sales infrastructure, and back-office functions can largely be shared. This improves asset utilization, lowers unit costs, and supports attractive margins and returns on capital. Importantly, expanding soft drinks does not require building a parallel organization from scratch. Instead, Carlsberg can leverage its existing scale and route-to-market, which makes growth in soft drinks more capital-efficient than it would be for a new entrant. The acquisition of Britvic in January 2025 significantly accelerated this strategy. The deal roughly doubled Carlsberg’s soft drinks business and lifted soft drinks to around 30% of total group volumes. It also made Carlsberg the largest Pepsi bottler in Europe and one of the largest globally. The PepsiCo partnership itself is another important pillar of the investment case. Carlsberg has long-standing bottling relationships with PepsiCo across multiple markets, and this partnership has deepened further following the Britvic acquisition. New bottling agreements in Kazakhstan and Kyrgyzstan will meaningfully expand Carlsberg’s presence in Central Asia, with Kazakhstan set to become one of the group’s top ten markets. Over time, these agreements add incremental growth opportunities that look more like organic expansion than traditional acquisitions, while still benefiting from scale and shared infrastructure. Soft drinks also strengthen Carlsberg’s long-term resilience. As consumer preferences shift toward low-sugar, zero-calorie, and functional options, soft drinks allow Carlsberg to participate in growth areas that beer alone cannot fully capture. This reduces exposure to declining alcohol consumption in some demographics and supports more stable long-term revenue growth.

Alcohol free beer, premiumization, and beyond beer is a reason to invest in Carlsberg. Carlsberg has made premiumization, alcohol free beer, and beyond beer central pillars of its Accelerate SAIL strategy, positioning these categories as long-term drivers of both growth and profitability. This matters because traditional mainstream beer is largely mature in many of Carlsberg’s core markets, while these segments are growing faster, carry higher margins, and better align with shifting consumer preferences. Premiumization is one of the most powerful value drivers in Carlsberg’s portfolio. Premium beers sell at higher price points and typically generate stronger margins than mainstream products, allowing revenue and profit to grow even when total volumes are flat. Management has deliberately increased investment behind premium brands, redirecting marketing, sales, and innovation resources to support this shift. The results are already visible. In 2025, Carlsberg’s premium portfolio grew by 5% despite soft consumer sentiment, with growth across all three regions. The Carlsberg brand itself grew volumes by 4%, while its premium variants increased by 13%, highlighting the strength of trading up within the brand. Local premium brands such as Wind Flower Snow Moon in China, Pirinsko in Bulgaria, and Zatecky in Poland also delivered strong growth, demonstrating that premiumization is working across both international and local brands. Premiumization also creates a virtuous cycle. Higher revenue per hectoliter lifts margins, which in turn allows Carlsberg to reinvest more in brand building, innovation, and route-to-market execution. Over time, this reinforces brand strength and pricing power, supporting more sustainable and profitable growth. Management views premiumization as a structural, long-term opportunity rather than a short-term mix benefit. Alcohol free beer is another important growth pillar. This category is expanding rapidly across Europe and is increasingly viewed as a structural trend driven by health awareness, moderation, and changing social norms, particularly among younger consumers. These products are not only growing faster than traditional beer, but are also accretive to both revenue per hectoliter and margins. Alcohol free beer expands the overall beer category by enabling flexible moderation rather than replacing traditional consumption. Carlsberg has been extending both its international and local brands into the alcohol free space, supported by a high pace of innovation. In 2025 alone, the company launched 50 alcohol free products across its markets, ensuring continued relevance and consumer interest. Management views this as a generational shift rather than a cyclical trend, making alcohol free beer a durable contributor to long-term growth. Beyond beer represents the third leg of this strategy and includes categories such as cider, flavored brews, ready to drink beverages, tonic water, kombucha, and herbal drinks. Brands like Somersby and Garage play a central role, and Carlsberg is focused on scaling these brands through increased investment, innovation, and footprint expansion.

Growth in Asia is a reason to invest in Carlsberg. Carlsberg  has made Asia a core pillar of its long-term growth strategy, and the region offers a combination of scale, favorable demographics, and structural growth that is difficult to replicate elsewhere. While Europe provides stable cash flows, Asia is where Carlsberg can still grow volumes, premiumize its portfolio, and compound value over time. China is central to this opportunity. It remains the largest beer market in the world by volume and the second largest by value, even after several years of decline. Despite weak consumer sentiment, Carlsberg has consistently outperformed the market. This outperformance is not accidental. Carlsberg’s strategy in China is focused on winning in the right places rather than chasing the overall market. The company has strong positions in western China, where it holds around 80% market share in its core regions, and has built a clear “big city” strategy since 2017. This approach combines expanding into new urban areas with deepening penetration in existing cities through targeted investments, strong route-to-market execution, and a tailored portfolio for different city types. Carlsberg is also well positioned for structural channel shifts in China. Consumption continues to move toward off-trade, particularly e-commerce, O2O, and convenience channels, and Carlsberg is performing well in these winning channels. Innovation in pack formats has been an important driver, most notably the 1-liter can, which combines a premium look with a social sharing occasion and stands out on the shelf. This format has supported both volume growth and brand strength, especially for premium offerings. Beyond China, other Asian markets add depth and diversification to the growth profile. India stands out as a particularly compelling opportunity. The country benefits from strong economic growth, rapid urbanization, rising incomes, and a very young population, with around 65%under the age of 35. Beer penetration remains low, but consumption is growing as social norms evolve and eating out becomes more common. Carlsberg has steadily built its position in India, growing market share from about 5% in 2011 to roughly 23% in 2025, and securing a number one or two position in several key states. Southeast Asia also offers long-term potential, despite short-term volatility. In markets like Vietnam and Laos, Carlsberg benefits from positive demographics, increasing affluence, and a growing premium consumer base.

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Valuation

Now it is time to calculate the share price. I perform three different calculations that I learned at a Phil Town seminar. If you want to make the calculations yourself for this or other stocks, you can do so through the tools page on my website, where you have access to all three calculators for free.

The first is called the Margin of Safety price, which is calculated based on earnings per share (EPS), estimated future EPS growth, and estimated future price-to-earnings ratio (P/E). The minimum acceptable rate of return is 15%. I chose to use an EPS of 44,90, which is from 2025. I have selected a projected future EPS growth rate of 7%. Finbox expects EPS to grow by 11,8% annually over the next five years, but I'm not as optimistic.. Additionally, I have selected a projected future P/E ratio of 14, which is twice the growth rate. This decision is based on Carlsberg's historically higher price-to-earnings (P/E) ratio. Finally, our minimum acceptable rate of return has already been established at 15%. After performing the calculations, we determined the sticker price (also known as fair value or intrinsic value) to be DKK 305,66. We want to have a margin of safety of 50%, so we will divide it by 2. This means that we want to buy Carlsberg at a price of DKK 152,83 (or lower, obviously) if we use the Margin of Safety price.

The second calculation is known as the Ten Cap price. The rate of return that a company owner (or stockholder) receives on the purchase price of the company essentially represents its return on investment. The minimum annual return should be at least 10%, which I calculate as follows: The operating cash flow last year was 12.431, and capital expenditures were 4.924. I attempted to analyze their annual report to calculate the percentage of capital expenditures allocated to maintenance. I couldn't find it, but as a rule of thumb, you can expect that 70% of the capital expenditures will be allocated to maintenance purposes. This means that we will use 3.446 in our calculations. The tax provision was 2.072. We have 132,1 outstanding shares. Hence, the calculation will be as follows: (12.431 – 3.446 + 2.072) / 132,1 x 10 = DKK 837,02 in Ten Cap price.

The final calculation is called the Payback Time price. It is a calculation based on the free cash flow per share. With Carlsberg's Free Cash Flow Per Share at DKK 56,84 and a growth rate of 7%, if you want to recoup your investment in 8 years, the Payback Time price is DKK 623,99.

Conclusion

I believe Carlsberg Group is an intriguing company with strong management that has built a durable moat through brand strength, scale advantages, and deeply embedded local market positions. The company has consistently generated a ROIC above 10% for the past seven years, a level that appears sustainable given its market positions and operating discipline. Free cash flow has also been relatively stable over time and is expected to grow modestly in the years ahead, supporting continued dividend growth. At the same time, Carlsberg is not without risks. Macroeconomic factors remain a headwind, as weak consumer sentiment, high inflation, and geopolitical uncertainty across key markets can pressure volumes, limit pricing power, and make it harder to pass on cost increases, while also raising the risk of higher alcohol taxes. Shifting consumer trends present another structural risk, as younger generations drink less alcohol and increasingly favor health, moderation, and alternatives such as alcohol-free beverages, GLP-1-driven lifestyle changes, and cannabis, which could gradually weigh on demand for traditional beer if Carlsberg fails to adapt. Competition also remains intense, with pressure from global brewers, local players, and non-beer competitors in a more fragmented beverage landscape, often requiring higher marketing spend or sharper pricing that can weigh on margins. Against these risks, Carlsberg’s strategic initiatives provide compelling long-term upside. Expanding soft drink exposure allows the company to tap into faster-growing categories and diversify away from declining alcohol consumption, while leveraging its existing scale, distribution network, and partnerships such as PepsiCo in a capital-efficient way. In parallel, premiumization, alcohol-free beer, and beyond-beer categories are aligned with long-term consumer trends and carry higher margins, enabling Carlsberg to grow profits even in mature beer markets through better mix and stronger pricing power. Growth in Asia further strengthens the investment case, as the region offers favorable demographics, rising incomes, and opportunities for both volume growth and premiumization that are largely unavailable in Europe, with strong positions in China, rapid share gains in India, and attractive long-term trends across Southeast Asia. Taken together, I believe Carlsberg is a high-quality business, and buying shares around the Ten Cap price of DKK 837 would represent a solid long-term investment, particularly for dividend-oriented investors.

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