116770 Project Obelix Pt1.qxp - Carlsberg Group

events, and hosting beer festivals. The world of sports is an integral part of the Carlsberg brand and itsconnection to consumers. In terms of sponsorships, football is the Group’s flagship sport globally. The Groupis involved in the longest sponsorship ever in the English Premiership, sponsoring Liverpool Football Clubsince 1992 and was the lead sponsor of the 2008 UEFA European Football Championship (EURO 2008). Thisis in line with the international brand strategy of strong investments in sponsorships with prestigious sportingevents that reinforce the brand’s premium character and promote both on-trade and off-trade volume.Through its Tuborg brand, the Carlsberg Group also sponsors live music events. Since 1991, the CarlsbergGroup has sponsored the Roskilde Festival, the largest music festival in Northern Europe, through the Tuborgbrand. In South East Europe and Eastern Europe, Tuborg sponsors GreenFest, which is a series of large musicfestivals in various cities. In the United Kingdom, Tuborg is the Official Beer of Live Nation, the UK’s biggestorganiser of festivals and live music events. Through these sponsorships, Management believes that Tuborg hasgradually established its position as the beer most frequently associated with live music.Raw Materials and PackagingThe principal raw materials that the Group uses in the brewing process are barley/malt, hops, yeast and water.Barley and hops are generally available on the open market and barley and hops are usually grown in theregions where the Group brews beer. The Group usually uses its own proprietary yeast, which it grows in itsfacilities. In some regions, the Group imports hops to obtain appropriate quality and variety. The Grouppurchases these ingredients through the open market and through contracts with suppliers. The Group producesa part of its own malt requirements in Northern & Western Europe and Eastern Europe. Part of the Group’sbarley needs in Eastern Europe are sourced through direct collaboration with farmers.Raw materials prices are determined by, among other factors: the level of supplier competition andconsolidation; the level of crop production; weather conditions; overall beer market sales growth; demand fromoverseas markets; government regulations; and macro-economic conditions. In addition, prices of certain rawmaterials are impacted by the growing global demand for bio fuels.The Group is reducing the number of its suppliers in order to develop closer strategic relationships therebyensuring tighter quality control, more competitive prices and better service. Some of the Group’s raw materialsupply contracts are long-term fixed-price contracts to ensure stable supply, price stability and predictability.The Group relies to some extent on a few third-party suppliers. See “Risk Factors – Risks Related to theGroup’s Business – Reliance on key third-parties could have a material adverse effect on the Group’s business,results of operations, cash flows or financial condition.”The main part of packaging material expenditures is related to beverage cans and glass and PET bottles.However, the Group is also a large buyer of steel kegs, crown corks, plastic closures, wet glue labels andcardboard products. It has a number of long-term contracts for the supply of packaging materials with strategicsuppliers. The choice of packaging materials varies by price and availability in different regions, as well as byconsumer preferences and the individual brand position and image.The Group coordinates the procurement of all major raw materials and packaging in Northern & WesternEurope and Eastern Europe with the exception of concentrates for third-party brands. In Northern & WesternEurope, the Group mainly purchases its raw materials and packaging from large national and internationalsuppliers. In Eastern Europe and Asia, the Group also purchases a part of its raw materials and packaging fromsmall local or regional suppliers.57