"Carlsberg has always been international. We have been looking at breweries here and in the region for over ten years, but have not taken the jump. The previous management were very cautious, and despite being on the verge of signing a deal, they pulled back," says Poul Bech, managing director of Carlsberg Hungary.

But in 2003, after seven years of unbroken economic growth, and with accession to the European Union looming, new management in Copenhagen decided they could ignore Hungary no longer. The decision was made that "super premium" brands, the eponymous Carlsberg lager and Skol, had to be on Magyar menus.

Accession a catalyst

"EU accession was a catalyst. With trade barriers coming down on May 1, we said we would start a sales and marketing operation here at the beginning of the year. But, in a kind of new strategy, we were almost forced into it. There was no brewery available. So we are a kind of test case operation," Bech says. The plan was to assemble a team and launch a marketing and sales campaign prior to the May accession, when Hungary would lift all customs tariffs and quotas on EU goods.

EU ACCESSION was the catalyst that brought Carlsberg’s super premium beers to Magyar menus.

But while cross-border trade was going to be easier, getting hotels and pubs to accept the new beers - the vital, so-called entree market - had its special challenges. "The problem is that you cannot effectively enter a market with only two super premium brands. Entree outlets demand a portfolio of beers," says Bech.

As a solution, Carlsberg took a year to create a new beer: "Pannon Ászok," designed to match the "mainstream" Magyar palate, and put it in competition with popular and strong selling brands such as Borsodi Sör and Soproni Ászok.

Bech was also severely shackled when it came to the marketing budget. Hungarian beer consumption is in the order of 8 million hectoliters. So for Carlsberg, the fifth largest brewery in the world, with an annual production of 82 million hectoliters, 1 percent of the Hungarian market is less than onetenth percent of the brewer’s annual total. In such circumstances, and faced with intense and entrenched competition, Bech set his sights on winning between 5-10 percent of the premium market, the equivalent of 1-3 percent of the total market, within three years. Despite this apparently modest target, Bech warns that winning even 1 percent of beer sales can prove very difficult. At the same time he decided to shun television advertising - his competitors’ principle medium - based on a simple premise.

Advertising strategy

"All the others are spending huge sums on TV advertising, and the spending has been going on for eight years. To be visible, we would have had to allocate even bigger sums on advertising. We simply could not justify this, though that is not to say we will never go on air," Bech says.

Instead, Carlsberg has focused on a small billboard advert campaign, some print ads in lifestyle magazines and Internet pop-ups. "The educated youth [and future big spenders] are our future market," he argues. Another focus has been on what he terms "nitty-gritty" issues, concentrating resources on building up a quality, well-paid, sales and marketing team of 40 employees, mostly head-hunted from within the industry. But while EU membership has helped Carlsberg enter the market, it has also done the same for rivals. In an unexpected move, the German government precipitated something of a crisis in the region when it introduced new ecological fees on canned beer at the end of last year.

If the Greens in the Bundestag wanted to force consumers back to bottles, the move has certainly worked. Germans have returned to bottled beer big time; but that has left breweries in the federal republic desperate to find work for 12 million hectoliters of spare canning capacity which would otherwise stand idle.

The result - amidst mummers of dumping by the incumbents - has been a huge influx of canned beer exports to the Central European markets, including Hungary, in a desperate attempt to utilize the capacity.

Price war

The knock-on effect in Hungary, coupled with poor weather in the early summer, has been a price war in the mainstream range and a slump in the domestic beer market - consumption was down almost 14 percent in the second quarter.

Not the best of news for a man keen to make waves in a new market. But if he is worried, Bech fails to show it. Four months after EU accession he claims success in his key market - he says around 40 quality restaurants in Budapest have switched to Carlsberg brands - and he insists that sales are already on target to claim a 1 percent market share this year. When challenged, he admits that costs are also above target, but says many of these are one-off, associated with the foundation of the company and the like. "I can’t shout it from the house tops, but we have been successful so far," he says. If all goes well, Carlsberg Hungary hopes to generate total annual sales of between EUR 5-6 million, though Bech stressed this will take time to achieve.

Perhaps his confidence stems from his business philosophy. Asked as to how many of his 40-strong team is actually involved in sales on a day to day basis, he retorts; "Everybody in this team is here to help sell beer!”