The Beer Volume-Price Trade-off: Carlsberg's Commodity Balance

Carlsberg's latest results show a clear split between its financial performance and its core beer business. The company posted a 5% rise in full-year operating profit to 13.99 billion Danish crowns, beating analyst forecasts. This beat was powered by the acquisition of Britvic, where synergies are delivering ahead of schedule. Operating profits jumped 22.7% to DKK 14bn, with about 30% of the expected £110m in cost savings delivered in 2025. In other words, the profit growth is being driven by corporate restructuring and portfolio expansion, not by selling more beer.

The underlying volume picture tells a different story. For all the reported growth, the core beer commodity balance is deteriorating. Organic volumes declined 2% during the year, with a sharper 3% drop in Q3. This decline is even more pronounced when you exclude the one-time loss of the San Miguel licence, which Carlsberg said was a major factor. The company's own data shows organic volume development in Western Europe excluding San Miguel was +1.3%, but this was offset by a -5.2% decline in Central & Eastern Europe and India. The bottom line is that the company is selling less of its core product, even as it integrates a new soft drink business.

This sets up the central analytical question for Carlsberg: Can premiumization and cost synergies sustain profit growth if the fundamental volume of beer being consumed continues to fall? The Britvic deal provides a powerful offset, but it also introduces a new commodity dynamic-soft drinks-that may not fully compensate for weakening beer demand. The company's forward guidance for 2026 organic growth of 2-6% on operating profit will be tested by whether it can reverse this volume trend or if the profit gains remain reliant on external factors.

Demand Shifts: The Bifurcating Consumer

The demand-side pressures on Carlsberg's core business are now clear and structural. The company's CEO has explicitly described a continued bifurcation in terms of preferences, where drinkers are choosing either premium or economy brands, leaving middle-tier core brands vulnerable. This is not a minor shift; it's a fundamental reordering of consumer choices that directly attacks the volume base of established names like Carlsberg, Tuborg, and Kronenbourg.

This bifurcation is mirrored in the trade channels. The company notes that the on-trade, so bars and restaurants, are suffering right now, while the off-trade-supermarkets and retail-is winning. This is a critical dynamic because it pressures pricing power. When consumers shift to retail, they are often more price-sensitive and have more leverage. Meanwhile, the ongoing cost of a pint in bars pushes people toward at-home consumption, further weakening the on-trade's ability to command premium pricing. This channel shift amplifies the volume pressure from the core brand squeeze.

The financial results mask this underlying weakness. While the company reports strong reported revenue growth of 17.8%, that is driven by the Britvic acquisition. Excluding the San Miguel licence, the organic revenue growth was a mere +0.2%. This tiny figure, which includes the loss of a major brand, points to a business where volume declines are being partially offset by price increases and portfolio shifts, but not by genuine organic expansion. The core beer commodity balance is under siege from both ends: consumers are moving away from core brands, and the channels where those brands traditionally commanded higher margins are weakening.

This creates a clear margin trade-off for Carlsberg. The company can attempt to protect margins through selective price increases and by pushing its premium and alcohol-free categories. However, this strategy risks accelerating the volume decline in core segments. The alternative-focusing on volume recovery-would likely require deeper price promotions, especially in the off-trade, which would compress margins. The bifurcating consumer and the on-trade decline mean Carlsberg is caught between two pressures: the need to defend margins against a price-sensitive, brand-fragmented market, and the risk of further volume erosion if it does not adapt.

Supply & Portfolio Adjustments: The Premiumization Buffer

Carlsberg is actively reshaping its portfolio to counter the organic volume decline, but these moves are a buffer, not a cure. The company's growth categories are providing a crucial offset. Premium beer categories grew 5% organically in 2025, while soft drinks and alcohol-free brews also posted gains of 3% and 4%, respectively. This shift toward higher-margin products is a direct attempt to insulate profits from the core volume pressure. However, this premiumization trend is a fragile support; it depends entirely on consumers choosing to pay more for specific brands, a choice that could reverse if economic conditions worsen.

The most significant volume adjustment comes from the Britvic acquisition. The deal drove a 17.7% increase in reported volumes for the group last year, a figure that completely masks the underlying organic weakness. Without Britvic, the company's core beer volumes fell 2%. This acquisition has fundamentally altered the commodity balance, adding a large, non-beer volume stream to the books. The integration is progressing well, with synergies ahead of schedule, but it also introduces a new, more competitive category where Carlsberg is a relative newcomer.

The company's forward guidance for 2026 reflects this reliance on the buffer. Management expects organic growth of 2-6% on operating profit, a range that hinges entirely on maintaining the momentum in premium and non-alcoholic categories. This is a narrow band, indicating limited confidence in a broad-based volume recovery. The guidance assumes the premiumization trend holds and that the Britvic integration continues to deliver. If core beer volumes continue to fall or if the growth categories slow, the profit growth target will be in jeopardy.

In essence, Carlsberg's portfolio adjustments are a tactical response to a structural demand problem. The growth in premium and soft drinks provides a temporary buffer, while the Britvic volume spike creates a misleading headline figure. The commodity balance remains under strain because the company is not selling more of its traditional beer; it is selling a different mix of products and leveraging a new business. This strategy may hold the line for now, but it does not address the fundamental bifurcation in consumer preferences that is eroding the core volume base.

Catalysts and Watchpoints

The path to a sustainable commodity balance for Carlsberg hinges on a few near-term events that will confirm whether its premiumization buffer and Britvic integration are enough to offset a structural volume decline. Investors should watch three key catalysts.

First, monitor the Q1 2026 organic volume and revenue growth. The company's guidance for 2026 organic growth of 2-6% on operating profit is a narrow band that assumes the momentum in premium and non-alcoholic categories holds. The first quarterly results will be a critical test. Any further deterioration in organic volumes, especially in the core Western Europe and Central & Eastern Europe & India regions where declines were sharpest last year, would signal that the bifurcation trend is accelerating. Conversely, stabilization or a return to positive organic volume growth, even if modest, would be a positive sign that the company's portfolio adjustments are beginning to take hold.

Second, track the execution of Britvic synergies and the integration of the combined portfolio. The acquisition has already delivered ahead of schedule, with about 30% of the £110m savings delivered in 2025. The key watchpoint is whether this pace continues. The CEO has stated the integration is progressing ahead of plan, but the real test is in the P&L. Any delay in realizing the full cost savings would pressure margins and make the organic profit growth target harder to hit. More broadly, investors should watch for any friction in combining the beer and soft drinks businesses, as a seamless integration is essential for unlocking the promised value creation.

Finally, watch for any shift in consumer spending power that could exacerbate the bifurcation trend. The CEO has pointed to a "continued bifurcation in terms of preferences" and a "spending pause" from the global consumer. If macroeconomic conditions worsen, pushing more drinkers toward the economy end of the spectrum, it could further squeeze the core brands Carlsberg is trying to protect. This would pressure both volume and pricing power, making the premiumization strategy more difficult to sustain. Any early signs of a broader economic slowdown or rising inflation would be a red flag for the entire beer category.

The bottom line is that Carlsberg's near-term story is about execution. The company has a clear plan, but its success depends on stabilizing volumes, delivering synergies, and navigating a fickle consumer. These three watchpoints will provide the evidence needed to judge whether the commodity balance is improving or simply being masked by a powerful acquisition.