Emerging Markets And Premiumization Will Unlock Secular Trends

Key Takeaways

• Bold investments in brand, premium offerings, and emerging markets are driving superior growth, market share gains, and expanding margins beyond consensus expectations.
  
• Sustainability leadership and supply chain digitization are supporting higher profitability, investor appeal, and long-term earnings power through operational and funding efficiencies.
  
• Mature market stagnation, emerging market volatility, rising costs, regulatory pressures, and underperforming innovation could threaten Carlsberg's margins and long-term growth prospects.

Catalysts

Produces and markets beer and other beverage products in Denmark, China, the United Kingdom, and internationally.

• While analyst consensus expects Britvic to drive group revenue in the mid-single digits and deliver margin and EPS accretion, ongoing investments in brand development, premiumization, and sales force expansion in the U.K. position Carlsberg to dramatically outperform expectations by unlocking strong top-line growth, share gains, and superior margin development in the largest European soft drinks market, accelerating revenue growth and delivering double-digit margin expansion on a multi-year view.
  
• Analysts broadly agree that premiumization, growing the no
• and low-alcohol, and alcohol-free categories will drive future revenue, but this outlook may understate Carlsberg's competitive edge: its international brands and innovations (with 16% volume growth for Carlsberg Premium, 12% growth in alcohol-free brews in Western Europe, and outstanding double-digit growth for brands in China and India) are setting the company up for market share outperformance, outsized pricing power, and gross margin expansion, especially as consumer trade-up intensifies in emerging markets.
  
• Carlsberg's rapid geographic footprint expansion-especially in high-growth Asian markets with rising per-capita beer and soft drink consumption-combined with sizeable capacity investments (e.g., expanded breweries in India, new bottling facility in Kazakhstan, and growing distribution in Vietnam and China) supports a step-change in long-term volume and revenue growth above expectations, as demographic and urbanization trends accelerate addressable market expansion across Asia and Africa.
  
• The company's aggressive supply chain digitization and operational efficiency programs, already driving a 230 basis point operating margin gain in Asia and positive effects across all regions, are laying the groundwork for structurally higher net margins and EBITDA-carrying the potential to return gross margins to pre-pandemic highs and capture multi-billion DKK in recurring annual profit improvement.
  
• Carlsberg's industry-leading focus on sustainability and ESG, including advanced carbon reduction initiatives and proactive adaptation to upcoming EU packaging regulations, positions the group for lower long-term funding costs, premium investor appeal, and differentiated customer preference-unlocking both cost-of-capital advantages and pricing opportunities that will compound earnings growth and valuation re-rating over the next decade.

Carlsberg Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Carlsberg compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Carlsberg's revenue will grow by 9.3% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 8.1% today to 10.4% in 3 years time.
• The bullish analysts expect earnings to reach DKK 11.2 billion (and earnings per share of DKK nan) by about August 2028, up from DKK 6.7 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 17.1x on those 2028 earnings, up from 14.9x today. This future PE is greater than the current PE for the GB Beverage industry at 14.9x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 4.92%, as per the Simply Wall St company report.

Carlsberg Future Earnings Per Share Growth

Risks

• Carlsberg remains heavily exposed to mature Western European beer markets where organic volumes are flat or only slightly positive, and secular declines in alcohol consumption due to health trends and regulatory pressures could create ongoing headwinds for top-line revenue growth in these regions.
  
• The company's reliance on emerging markets such as China, India, and Eastern Europe exposes Carlsberg to significant geopolitical, regulatory, and currency risks, as seen in recent adverse impacts from currency depreciation in China, Laos, and Ukraine, leading to volatility in operating profit and downward pressure on net earnings.
  
• Rising input costs from commodities, energy, and logistics, compounded by climate change risks such as water shortages and extreme weather (including flooding at manufacturing sites), threaten to compress gross and operating margins and increase cost unpredictability.
  
• Carlsberg's innovation pipeline, while growing in soft drinks and alcohol-free categories, may still be lagging specialist brands and peers in premium and non-alcoholic segments; this creates a risk to long-term market share, particularly as younger consumers increasingly shift consumption patterns away from mainstream beer categories, which could limit future net margin expansion.
  
• Increased and evolving regulatory burdens-such as packaging waste directives, extended producer responsibility schemes, higher taxes, and advertising restrictions-are forcing Carlsberg to invest in compliance and cost mitigation, which may further erode future profitability and constrain earnings growth.

Valuation

• The assumed bullish price target for Carlsberg is DKK1254.88, which represents two standard deviations above the consensus price target of DKK982.5. This valuation is based on what can be assumed as the expectations of Carlsberg's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of DKK1350.0, and the most bearish reporting a price target of just DKK692.0.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be DKK107.3 billion, earnings will come to DKK11.2 billion, and it would be trading on a PE ratio of 17.1x, assuming you use a discount rate of 4.9%.
  
• Given the current share price of DKK754.2, the bullish analyst price target of DKK1254.88 is 39.9% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.