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.