TBY talks to Victor Semak, CEO of Carlsberg, on the peculiarities of working in Kazakhstan, regaining market share, and maintaining relations with distributors.

Victor Semak
Victor Semak has a background both in brewing from both Carlsberg Group as well as other FMCG companies in Russia. He started his career with Carlsberg Group in 2002 as Regional Sales Manager for Vena brewery. Within a year, he was promoted to Deputy Sales Director, and later Sales Director. Semak has also served as President of Olivaria Brewery, during which the company made significant breakthroughs in all directions. Semak has made a number of achievements throughout his career, including increasing company sales. In 2006, he was listed as the best manager in sales by the Association of Managers.

The Kazakh beer market started to fall at the end of 2015. How do you expect the market will fare in 2016?

The Kazakh beer market was restored to its 2012 level in 2014; however, it is difficult to speculate about the market because in 2015 it began to shrink again. We forecast a fall in 2016 as well at an even more serious pace. Over the last two to three years, we have seen toughening state regulations on the beer industry. In 2014, amendments were passed that banned advertisements even for non-alcoholic beer. Beer consumption per capita is 25 liters. In comparison to Russia, where the beer market is also falling, per capita consumption in 2014 was 55 liters. Due to the developed brewing industry in Kazakhstan, we are the only company in Central Asia to successfully produce malt, through the company Soufflet Kazakhstan.

Carlsberg is growing in Kazakhstan and at a rapid rate. How do you keep growing despite a declining market?

Our path to success was not smooth. In 2010, sales volumes of Carlsberg Kazakhstan
fell and reached a historic low by 2013. Our corporate culture is engrained with principles dedication to the company and teamwork. Thus, 2013-2014 was declared a time for sales. It was difficult, because during this period our reputation in the labor market was not the best and people did not want to join us. We focused on our personnel in the retail channel and brought in managers from Ukraine and Russia to organize our commercial and operational functions. Kazakhstan is a huge country, and it is not possible to use a one-size-fits-all approach for consumer needs. We worked out an assortment for every single region. In 2015, we entered with full confidence in success, and by the end of the year the market share of Carlsberg was 33.2%, which was up 3.2% compared to 2014. We have regained the market share we had four years ago. Overall, our competitive advantage is that we produce a quality product. We responsibly purchase our malt and hops and we extract water from our own wells.

Why do many companies facing crises have problems with distributors?

We have had problems with distributors even in favorable periods. In 2013, we audited our distributors, defining the quality of their services in retail. We made conclusions and replaced about a fourth of distributors who were not innovative. We also changed our pricing model, allowing large revenues on the brands that are in demand in remote regions of the country. Our partners met our needs and we opened more than 20 new logistics centers all over the country. The model we use now is the best for us. We want to expand our portfolio of distributors with more contracts. Our relations are built only on mutual benefits, trust, and motivation toward joint development.

What project of Carlsberg's was particularly successful in 2015?

It was indisputably our social-ecological Irbis project, which aimed at preserving the Kazakh population of the snow leopard, known locally as Irbis, and received a large and positive social response. It was a partnership with the Kazakh Association for Preserving Biodiversity. During the project, we financed three expeditions to the Dzhungarsky Alatau Mountains where scientists installed 50 photo-traps. It is expected, that the data received from these photo-traps will help local scientists to precisely count the number of snow leopards in the area and will foster effective measures of protection of the animal.

What are your expectations for 2016?

We originally planned to reach an optimal business index in four to five years, but now we see we can do that in a shorter period of time. I follow the position that any stressful condition within the market it is an opportunity. My teams and I, whom I have worked with during such periods, have always managed to be the leaders. I have no doubts that this time we will work even better.