When the UK marriage of Carlsberg and Tetley was completed in December 1992 there were three key players at the new company who gave the impression that the then Allied-Lyons held the upper hand.
Last week, Liz Morgan, marketing director and the only surviving member of the triumvirate, left the beer company. She has been temporarily replaced by Doug Scott but informed sources suggest he is only keeping the seat warm for a hand-picked Dane to be introduced before the end of the year.
Chief executive Ebbe Dinesen will play more of a marketing role in the coming months. Dinesen replaced Don Marshall 12 months ago. The third member of the triumvirate, Morgan’s deputy Steve Kay, left 12 months before that.
Although Scott has an Allied background, he is currently sales director at Carlsberg-Tetley Alloa, the general drift at the company is seen to be toward the Danish interests. The advertising support for the individual brands underlines this apparent shift in emphasis with more money being put behind Carlsberg Pilsner than Castlemaine XXXX.
“The balance has definitely changed,” says one ad agency source. “There is a belief that the merger of the two cultures was never quite completed. Even after three years there is a Carlsberg type of person and an Allied type of person, with the Danes taking the upper hand.”
Officially Carlsberg-Tetley says of Morgan’s departure: “This was a mutual agreement. We felt it was an appropriate time to make a change – the market has undergone changes such as Beer Orders, which opened up free trade, bigger brands and more power to retailers. A different approach to marketing is needed to build for the future.
“The company has to become better at selling beer and keeping an eye on costs. There have been discussions about the overall direction of the marketing, a board responsibility, for several months.” That may come as a surprise to Morgan. Sources close to her say she was stunned by the decision.
Why Morgan, best known for the launch of Castlemaine XXXX in the UK in 1984, and marketing director from day one of the joint venture, could not execute the change in direction has not been made clear.
There had been speculation last year that her hold on the job was slipping. The company’s 21 per cent drop in profits revealed in May brought increased pressure.
The company has also taken an axe to advertising and marketing support for its brands. From being the largest drinks advertising spender in 1993, Carlsberg-Tetley slipped to seventh spot, cutting its ad spend by more than 40 per cent to 10.5m (Register-MEAL) in 1994. Only market leader Bass made more severe cuts. Significantly at the same time Allied Domecq increased its spending on spirits and wines by 82 per cent to 9.1m.
“Her departure is not about past mistakes but about what Carlsberg-Tetley must do in the future,” says the company spokesman. “Any further changes will be the remit of the new marketing director.” Bizarrely, the company denies that financial performance has anything to do with the marketing director’s departure.
Morgan was told of her fate and left the same day with no job to go to. The victim of a boardroom decision fuelled by complaints that she had not done “what had been asked of her” according to one insider – that is to marry brand awareness statistics with improved sales figures. Morgan was also criticised for a lack of investment in the premium sector, which is the way the rest of the market is moving.
The regional testing of Tuborg Gold and a growing emphasis on Carlsberg Special Brew suggest that the gap in the premium sector will be plugged.
Analysts are now forecasting the company will post pre-tax profits of between 40m and 45m in the year to August. In contrast the pre-merger Carlsberg UK made profits of 48m in 1992.
“If you look at the portfolio of brands, it is difficult to see why they have so many problems,” says Hoare Govett drinks analyst Eric Frankis. “There is a lack of premium brands, but the rest of the list is good. But the profits are unacceptable, perhaps there were not enough costs taken out when the merger deal was originally done.”
The departure of Morgan comes at a crucial time for Carlsberg-Tetley. Allied Domecq is keen to sell its 50 per cent stake in the company. Whitbread and Bass have both been linked as possible suitors. It is also possible that Carlsberg would take the whole company, which has a valuable 12 per cent of the UK market.
But the outcome will depend on the Scottish & Newcastle takeover of Courage which will fundamentally change what is already a highly competitive market. It will also permanently change the rules for further expansion among the brewers.
“Allied wants to sell its stake in the company but needs to get it into shape before it can do that,” says one City analyst echoing the view of many others.
Morgan appears to have been sacrificed as part of that effort.