Carlsberg's 1H 2025 Results: A Resilient Play in a Turbulent Global Beer Market

The global beer industry is navigating a complex landscape of macroeconomic volatility, shifting consumer preferences, and regulatory pressures. Against this backdrop, Carlsberg A/S (CABGY) has delivered a 1H 2025 performance that underscores its operational resilience and strategic agility. While the company faced headwinds—such as the loss of the San Miguel brand and currency translation challenges—it has demonstrated a clear ability to adapt, innovate, and position itself for long-term value creation. For investors seeking a resilient play in the premium beer sector, Carlsberg's results and strategic momentum warrant closer scrutiny.

Navigating Headwinds: A Mixed but Manageable First Half

Carlsberg's 1H 2025 results reflect a blend of challenges and opportunities. Organic volume growth came in at -1.7%, driven by the loss of San Miguel and weaker demand in Asia and France. However, the company's operating profit rose 2.3% to DKK 7.23 billion, slightly below expectations but supported by disciplined cost management and a focus on premiumization. The acquisition of Britvic, completed in January 2025, injected significant momentum, contributing DKK 7.3 billion in revenue and DKK 844 million in operating profit during the first half. This acquisition not only diversified Carlsberg's portfolio but also unlocked GBP 100 million in cost synergies by 2029 through shared distribution with PepsiCo.

Regionally, the CEE&I (Central, Eastern Europe, and India) region outperformed, with 4% volume growth, 7.8% revenue growth, and 9.6% operating profit growth. This was fueled by strong demand for premium and non-alcoholic products in markets like India and Eastern Europe, where urbanization and rising disposable incomes are reshaping consumption patterns. In contrast, Western Europe and Asia faced softer demand, with Malaysia's volume declining due to a strategic price increase aimed at preserving margins.

Strategic Momentum: Premiumization, Sustainability, and Digital Resilience

Carlsberg's long-term strategy, Accelerate SAIL, is a cornerstone of its resilience. The company is doubling down on premium and non-alcoholic categories, which are growing at a faster pace than traditional beer. Premium beer (excluding San Miguel) saw 4% organic growth, while alcohol-free brews surged 15%. These segments align with global trends toward health-conscious and premiumized consumption, offering higher margins and differentiation.

Sustainability is another pillar of Carlsberg's strategy. The Fredericia brewery in Denmark, for instance, achieved a 31% improvement in water reuse since 2015, reducing environmental impact and costs. The company's regenerative agriculture goals—aiming to source all raw materials from regenerative farming by 2040—further future-proof its supply chain against climate-related disruptions. Early initiatives, such as a specialty beer brewed with regeneratively grown ingredients, highlight Carlsberg's commitment to sustainability-driven innovation.

Digitally, Carlsberg is investing in AI and cloud security through an AI Center of Excellence, enhancing operational efficiency and marketing precision. These efforts are critical in an era where data-driven decision-making and cybersecurity are paramount.

Financial Prudence and Shareholder Returns

Carlsberg's financial discipline is evident in its leverage reduction plan, targeting a debt-to-EBITDA ratio below 2.5x by 2027. The company has already returned DKK 5.6 billion to shareholders in 2024 and declared a 2025 interim dividend of 20 sen per share. Despite a 6% stock price drop post-earnings, the valuation currently trades at a discount to its 5-year average P/E ratio, suggesting potential undervaluation.

Investment Case: A Resilient Play in Premium Beer

Carlsberg's 1H 2025 results highlight its ability to navigate a challenging environment while maintaining long-term growth trajectories. Key factors supporting its investment case include:
1. Premiumization and Diversification: Strong performance in premium and non-alcoholic categories, bolstered by the Britvic acquisition, positions Carlsberg to capture higher-margin demand.
2. Operational Efficiency: Innovations in water reuse, regenerative agriculture, and digital transformation enhance cost resilience and sustainability.
3. Strategic Geographical Balance: CEE&I's outperformance offsets weaker Western Europe and Asia markets, ensuring a diversified risk profile.
4. Valuation Attractiveness: A discounted P/E ratio relative to historical averages offers potential upside for long-term investors.

Risks and Considerations

Investors should remain cautious about macroeconomic headwinds, including U.S. tariffs and inflationary pressures. Additionally, the integration of Britvic and the execution of cost synergies will be critical to realizing long-term value.

Conclusion

Carlsberg's 1H 2025 results demonstrate a company that is not only weathering the storm but actively reshaping its future. By leveraging premiumization, sustainability, and strategic acquisitions, Carlsberg is building a resilient business model capable of thriving in a volatile market. For investors seeking exposure to a premium beer sector with a focus on innovation and long-term value, Carlsberg presents a compelling case. The current valuation discount, combined with its strategic momentum, makes it a resilient play worth considering.