116770 Project Obelix Pt1.qxp - Carlsberg Group

The Group’s operating results may be affected by economic and regulatory changes that have an adverse impact onthe real estate market in general, and there can be no assurances that the Group will realise a return on its real estateproperty projectsThe Group’s operating results are subject to risks generally incident to the ownership, development and sale ofreal estate, including: changes in general economic or local conditions; changes in supply of or demand forsimilar or competing properties in an area; changes in interest rates and availability of debt financing that mayrender the sale of a property difficult or unattractive; changes in tax, real estate, environmental and zoning laws(primarily in relation to converting former brewery sites into residential and commercial developments); andperiods of high interest rates and limited money supply. These and other reasons may prevent the Group fromrealising a return on its real estate property projects, which could have a material adverse effect on the Group’sbusiness, results of operations, cash flows or financial condition.Reliance on key third-parties could have a material adverse effect on the Group’s business, results of operations,cash flows or financial conditionThe Group relies on a limited number of key third-party suppliers, including third-party suppliers for a rangeof raw materials for beer and soft drinks, and for packaging material, including aluminium cans, glass and PETbottles and kegs. The Group seeks to limit its exposure to market fluctuations in these supplies through enteringinto medium- and long-term fixed-price arrangements. Consolidation of suppliers, the termination ofarrangements with certain key suppliers or the failure of a key supplier to meet its contractual obligationswould require the Group to make purchases from alternative suppliers, in each case at potentially higher pricesthan those agreed with this supplier, and this could have a material impact on the Group’s business, results ofoperations, cash flows or financial condition.The Group also relies on bottling agreements with third parties. The loss of such licenses could have a materialadverse effect on the Group’s business, results of operations, cash flows or financial condition.The Group’s substantial dependence on third-party retailers and wholesalers for the distribution of its products couldlower the Group’s net revenue and reduce its competitivenessThe Group sells its products directly to retailers, including supermarkets, specialized beer or alcoholicbeverage stores, pubs and restaurants, as well as to wholesalers for resale to retail outlets. Although in certainjurisdictions the Group owns some of these wholesalers, sales to third-party retailers and wholesalers (some ofwhom have significant market share and negotiating power) represent a significant portion of the Group’sconsolidated revenues. For instance, the Group relies primarily on third-parties to effect distribution in France.If third-party wholesalers and retailers give higher priority to other brands, purchase less of the Group’sproducts or at lower prices, or devote inadequate promotional support to the Group’s products, it could have amaterial adverse effect on the Group’s business, results of operations, cash flows or financial condition. TheGroup is subject to credit risk in relation to certain customers and wholesalers. The Group provides credit tocertain of its customers and wholesalers. These credit arrangements may include financing of all or a portionof the purchase price for the Group’s products. The credit period is dependent on local practice and thecreditworthiness of the customer or wholesaler. Any failure by these customers or wholesalers to dischargeadequately their obligations on a timely basis or any event adversely affecting these third parties could have amaterial adverse effect on the Group’s business, results of operations, cash flows or financial condition.Consolidation among the Group’s customers and wholesalers also exposes the Group to increasedconcentration of third-party credit risk. Although the Group is not dependent on any single customer orwholesaler, the loss of, or a significant reduction in, business from one or more of the Group’s major customersor wholesalers could have a material adverse effect on the Group’s business, results of operations, cash flowsor financial condition.7