Weekend in Sweden

Just finished up a great weekend in Stockholm with a dinner at the Opera House--finally got some authentic Swedish meatballs. Also finally tried some herring; they love this stuff out here, but its a little to much for me. Today we recovered from a night out at The Village, the "hippest" club in Stockholm according to my Swedish friend. Surprisingly, drinks were not that much more expensive than at every other bar we've gone to (but still in the $15 range). I was also one of the youngest people there (and recognizably so given that everyone I talked to asked me what my age was). I think we showed the Swedish 30 year olds how we like to party though!

So after a couple hours of sleep we left for a river cruise of Stockholm and then went to an awesome museum that holds an authentic 17th century battle ship. It is impressive how large the ship was... I had never really thought about that until seeing one up close. The ship has a great story behind it as well--it sank 20 minutes into its maiden voyage! The king of Sweden ordered that the ship have 2 levels of cannons, which placed too much weight on the top half of the ship and basically it just fell over into the Baltic Sea. We were told that Sweden spent 2% of its GNP to build it too. Talk about an embarrassing moment for Sweden!

Tomorrow is the last day of the study trip, and then i fly back to the U.S. on Tuesday. Then off to class on Wednesday to begin my last quarter at the GSB--I cannot believe how quickly it has gone by!

Denmark Business Trips Day 1

The first day of business trips started for us on Tuesday morning. We visited four companies today: Vestas, Carlsberg, Maersk and Saxo Bank. We also spoke with the US Ambassador. Here are the notes I took on the meetings.

Vestas
Peter Brun, SVP of Government Relations

Vestas is the world's largest supplier of wind turbines (23% of market).

They believe that the effective price of wind energy (taking into account the environmental costs of CO2) is actually on par with coal. However, I don't think they they have taken into account the costs of variability for wind; he mentioned that on days when there is no wind, plants can run gas generators, but the cost of these generators is significantly higher than coal and oil power plants, and should be included in the total costs of operating a wind turbine.

Carlsberg
Alex Myers, SVP of Western Europe Operations

Founding of the company
-JC Jacobsen discovered stable yeast, a process that is still used today by every brewer
-Did not patent the technique but instead freely gave out the IP

Why Not US?
-Chose to focus resources on Russia (BBD)

Culture
-focus on being the best, not the biggest (currently the 5^th largest brewery in the world)
-okay to make mistakes, as long as the same mistake is not made twice
-lots of internal debate, but once a decision is made it is supported country wide (this is a characteristic we have seen in many Danish companies)
-KISS: try to keep things as simple as possible

Organizational Chart
-the company is broken into four functional areas (Group Sales & Marketing, Communications, HR, Supply Chain) and four regions (Nordic, Western Europe, Eastern Europe, Asia)

Private, Public Company
-the company is 49% public and 51% owned by a private foundation, another characteristic common among Danish companies

Product Mix
-80% of the beer sold at Carlsberg is not under the flagship brand name
-The #1 sold beer at Carlsberg is actually a Russian brew

Strategic Mission
-Identified 4 key value drivers for future growth:

1. Improve earnings in Western Europe
2. Grow sales in BBH and Eastern Europe
3. Build a platform for long term growth in Asia
4. Develop valuable real estate (move production to less expensive real estate and create offices, restaurants, etc)

-Decided to not push one big global brand, but instead have multiple brands (some specific to certain regions)

-Local
-Power
-Premium
-Super Premium

-Have consolidated acquired local brands and built national brands out of a select few
-Belief that 70-80% of beer consumption is local consumption.

Specific challenges within Western Europe
-Powerbrands are being attacked from above and below
-Need to innovate and Premiumize due to no market growth (-1% growth of beer overall in Western Europe in 2007)
-Margins are being squeezed due to increased competition
-Material prices have increased dramatically

Scottish & Newcastle (S&N) Merger
-Currently have a 50/50 Joint Venture with S&N
-The acquisition will be a major consolidation in the BBH region

Maersk
Knud Pontoppidan, EVP Group External Relations

Company Overview
-100,000 employees in over 130 countries
-Moller family foundation has voting control
-By far the market leader (2x market share as closest competitor)

International Labor Force
-Maersk negotiates with unions from each individual country
-For example, Danes are paid more than Filipinos for same job

US Recession
-Had to lay off 3,000 employees in LA port
-However, shipping doesn’t necessarily decrease with a recession because people substitute purchases for cheaper goods (but the overall number of goods that needs to be shipped doesn’t change dramatically)
-Additionally, China has been doing well (and 1/3 of all containers touch China)

James Cain
US Ambassador to Denmark

One of 30 non-professional ambassadors appointed by the President. Eisenhower initiated this method after WWII, believing that he needed to have people he had worked with previously and could trust in key strategic areas of the world.

Three differences that he has witnessed between Denmark and U.S.

1. Life-work balance (Danes work on average 350 less hours per year)
2. Healthy, outdoor loving
3. Less sensitive to race and religion (Mohammed cartoon for example)

Typical day:
8:30 AM Starts with Security Briefing (only 4 major Danish threats since 2005)
9:00 AM Meetings with Ambassador Heads
1:00 PM Bilateral and Multilateral meetings with businesses and other orgs
7:00 PM Various dinners

He has initiated a bike ride throughout Denmark to meet “the normal people”
When a Dane rides with him, James always asks this person three questions:

1. What are the first words that you associate with the U.S.?
2. What would you show a U.S. visitor?
3. Rate from 1-10: How close is Denmark to the U.S.? Does it matter?

James has discovered that the answers to questions 1 and 3 vary from adults to youth. Danes older than 35 tend to associate patriotic words with the U.S. and believe that Denmark is close to the U.S. and that it matters. Those younger than 35, however, associate cultural images with the U.S., and do not believe that Denmark is close to the U.S., nor that it matters.

James has identified two negative attitudes that many youth feel about the U.S.:

1. Political issues that are tied to President Bush
1. Iraq
2. War on Terror
3. Global Warming
2. Cultural Images
1. Movies, TV, Food, Fashion
2. Images of America as a violent and materialistic country
3. Religion

How to change this opinion?

He believes that the first attitude will eventually fade away, but the second issue is critical to address. Various methods he has tried include visiting schools within Denmark, bringing guest lecturers from the U.S., and increasing the college exchange program.

Role of Ambassador

His role is to be a by-partisan representative of the U.S., and definitely not defend President Bush. However, sometimes he does need to clarify U.S. actions, such as America’s recent reductions of CO2 emmissions.

He also does not impart his personal opinions on domestic policy in Denmark, though he does have strong opinions about health care. His belief is that universal health care has reduced terminal and end of life care in Denmark, because the government does not want to pay for expensive medical procedures. For this reason, Denmark has the lowest life expectancy of all European countries.

Saxo Bank

Saxo Bank produces a foreign exchange (FX) trading platform, that is provided both as a commercial product and as a white label alternative for large commercial banks such as Citibank.

We met with the COO and the Head Trader. The Head Trader was an interesting guy—he showed us Saxo Bank’s predictions, but couldn’t really explain their reasoning. One poignant example is when he predicted that the growth over the next 10 years will be flat at best because the economy has been operating in 17 year cycles since 1953. However, he number 17 is easily influenced by when you begin the index, and clearly there are multiple crests and troughs within these cycles. Additionally, when we pushed back by asking how technology and a global economy has affected these cycles, he really had no response.

They believe in the values of Ayn Rand and Jack Welch, and actually gave us Atlas Shrugged as a gift. They are a truly meritocratic company, as they fired 15% of their work force last year (150 people), and yet are hiring over 50 people per month.

Here we also discovered that certain ex pats can receive a significant tax reduction (from 65% to 30%) for a three year period in Denmark.

Expensive City!

Just got back from dinner and drinks in Copenhagen. We went to the Madklubben, which means Food Club in Danish. We had spectacular food--salmon with watercress salad for appetizer, steak and beets for the main course, 4 different types of cheeses (including danish brie) and a pudding topped with pear sauce for dessert. Luckily the dinner was included in the trip price, so we didn't have to pay for that (well, better put we already paid for that...). However, I definitely know that drinks are expensive. Two bottles of the cheaper wine for the table... $90. One beer... $10. And for the cab ride home, the meter starts at $12 (you can imagine how quickly that bill grows). Definitely feeling the weak American dollar :(

Denmark Day 1

Today was our first official day of the Scandinavian study trip, in Copenhagen. Because it is Easter Monday, we had no meetings and instead spent the day sight seeing. First on our tour was the Kronborg Castle, one of the most famous castle's in Europe.



The castle is also known as Elsinore, the setting for William Shakespeare's Hamlet. In the picture below is a portrait of Amleth, whose story was told by Saxo Grammaticus in the 13th century and later retold by Shakespeare.



The castle also has a statue of Olgier the Dane, the great Danish King that sleeps here until needed for protection of the country's people. However, we have discovered that the Danish are quite fatalistic given their history of losing many wars to the Swedish (there appears to be a fun rivalry between them, as has been demonstrated from our Danish and Swedish classmates).



For the afternoon we took a canal tour of downtown Copenhagen, where we saw the house of Hans Christian Anderson (who wrote The Ugly Duckling and The Little Mermaid), the new opera house (which was donated by Maersk), and a battle ship that was recently retired because it accidently shot a missle at a summer house--luckily no one was home at the time!

Now we are off to dinner to meet a Danish Sloan alum, and then a little relaxation before our first business meetings tomorrow morning.

Iceland

Finally made it into Iceland after a one day delay. Spent the afternoon at the Blue Lagoon, one of the famous geothermal spas just outside of Reykjavik. The water is a really cool blue, and about 104 degrees F (see picture below).

Afterwards we grabbed some dinner by our hotel and started planning our evening festivities. We discovered that Icelanders don't actually start partying until after midnight, so we did some pre-partying at our hotel and went to a bar called the Apothecary around 1am. Icelanders definitely like to party late, as we didn't get home until around 6am! Overall it was a fun night of drinking and dancing with the locals. Now we're off to Copenhagen tomorrow morning for the start of our study trip.

Beginning to Iceland trip...

Not so good. Flight to JFK was delayed, so I missed my flight to Reykjavik. Had to buy a new ticket for tomorrow... not cheap. Here's hoping tomorrow works out!

For more info on my trip, check out this blog frequently--I'll try to keep everyone updated as much as possible.

Carlsberg

I gave a presentation on Carlsberg today in preparation for the Scandinavia study trip. They are quite an innovative brewery and I am very excited to meet with one of their Senior VPs, Alex Meyers. See below a quick overview of the presentation.

Carlsberg History

• Founded in 1847 by J.C. Jacobsen (after the name of his son Carl)
• Public company with over 30,000 employees and $10 billion (US$) market cap
  
• Merged with Orkla ASA in 2001, becoming the 5th largest brewery in the world

Carlsberg Brands

• Carlsberg Pilsner (4.6% ABV)
• Carlsberg Light (2.7% ABV)
• Carls Porter (7.8% ABV)
• Carls Hvede (5.8% ABV; interesting because until recently wheat beer was illegal in Denmark!)
• Tuborg (4.6% ABV)
• Tuborg Easter Brew (5.7% ABV; seasonal beer that will be released while we are in Scandinavia)

Financial Outlook

• Steady growth in volume over last 5 years
• Strong growth in EBIT (30%) because of "innovation and strong presence of international brands Carlsberg and Tuborg" -- CEO Jorgen Rasmussen

EBIT and Stock Price Growth over last 5 years

International Growth

• Clear market leader in Russia (38% market share)
• 25% increase in volume in Asia

Merger with Scottish & Newcastle

• Carlsberg and Heineken launched a joint bid to break up UK's Scottish & Newcastle in 2007
• $15.3 billion US (50% premium over share price)
• Carlsberg would gain sole possession of Baltic Beverages and S&N's French, Greek and Chinese Operations
• However, the European Commission announced this Monday (3/1/08) that it is postponing its review of the merger until April of this year

World's Most Expensive Beer

• Introduced Jacobsen Vintage #1 on Jan 25, 2008
  
• Costs 2,008 DKK (~$400 US)
• 600 bottles of the 10.5% ABV beer will be released in 2008
• Plans to release 2,009 and 2,010 version as well
  

"Probably the best beer in the world"

• Carlsberg Advertising slogan
• See the embedded online video about Carlsberg below:

Ignoring my blog

So I have been seriously ignoring my blog for the past few months, so I figure I better start with a recap of my life today :)

1. I have a job after b-school (always a good thing) at McKinsey in LA. I am also not starting till late October, so if you have any great ideas for what I should do over the summer let me know!
2. Just finished a very successful Entrepreneurship Week at Stanford, including the E-Conference which i helped out with as the Student Program Director. I met some great people there and hope to keep in touch as I consider pursuing a startup in the future.
3. I am going to Scandinavia for a study trip in 2 weeks. I am sure I will be doing a lot more posting while I am out there to keep everyone updated.
4. My pro bono consulting project with the San Francisco Playhouse is almost complete--we have our final presentation with the Board of Directors a week from Monday

Those are the big things so far... I also had a great time today at the Special Olympics basketball clinic here at Stanford. Everyone had a great time and I hope to see them again this spring in other Special Olympics events.

Till next time...