Ladies and gentlemen, welcome to Carlsberg Q3 2021 trading statement. For the first part of this call, all participants are in a listen-only mode. Afterwards, there will be a question and answer session. To ask a question, please press five star on your telephone keypad. This conference call is being recorded. I will now hand it over to the speakers. Please begin.
Good morning, everybody, and welcome to Carlsberg's Q3 2020 conference call. I hope you are all safe and well. My name is Cees 't Hart, and I have with me CFO Heine Dalsgaard, and Vice President Investor Relations, Peter Kondrup. Let me begin by summarizing the key headlines for the quarter. Driven by both volume and value growth, the group delivered solid top-line performance for the quarter. The market development remains mixed with recovery in many European markets, while many Asian markets were impacted by the pandemic. As you probably have noticed, we issued our Q3 announcement, including an upgrade of our full-year earnings expectation already yesterday. The upgrade was done in light of a better than expected result across all three regions in Q3 and the start to Q4. Finally, we have launched the last quarterly buyback for the year.
I will provide the headlines for the quarter and our performance against some of our SAIL '22 priorities, and Heine will take you through the regions and upgraded full-year outlook. Please turn to slide three. It has indeed been a volatile and disruptive year for us, as well as for the communities in which we operate. As a consequence, our performance has varied significantly between brands, categories, markets, and regions. Given this backdrop, we are very pleased with our performance, both for the quarter and year to date. Organic revenue was up by 7% due to both volume growth and improved revenue per hectolitre. The 3.4% organic volume growth was supported by double-digit growth in markets such as China, the Nordics, and India, and also good growth in the markets across Central and Eastern Europe.
In reported terms, volumes grew by 5.8% due to the Marston's and Wernesgrüner acquisitions. Comparing the volume growth to the pre-pandemic level in Q3 2019, volumes were up organically by around 6%. Revenue per hectolitre was up by 3%. This was driven by several positive factors, such as the reopening of the on-trade in Western Europe, growth of premium products, and growth of alcohol-free beverages, which more than offsets country mix and much higher soft drinks sales. Please turn to slide four and a brief update on some of our strategic priorities. Our SAIL '22 growth categories performed well. Craft and specialty grew by 5%. We saw strong growth in Asia, Central and Eastern Europe and certain markets in Western Europe such as Denmark, Norway and the UK.
While volume growth in the quarter was curtailed, primarily due to declining volumes for Grimbergen in France and Somersby in Poland. Key global craft and specialty brands were 1664 Blanc, for which volumes were up by 19%, and Somersby, for which volumes grew by 4%. We have now launched Somersby in China. It is still very early days, but we see good initial results. On the back of strong growth of 29% in Q3 2020, alcohol-free brews were up by 10% for the quarter and 19% year to date. We saw particularly strong growth in Central and Eastern Europe in markets such as Russia, Ukraine, and Belarus. Western Europe markets such as Finland, Sweden, Norway, and Poland also posted strong growth rates. Growth in the quarter was impacted by volume decline in France.
The alcohol-free category has delivered consistent growth also during COVID. Compared with pre-COVID level in 2019, volumes in Q3 were up by 41%, and year to date, they were up by 30%. Innovations are important for the continued relevance of our brands and for supporting the value growth of our portfolio. Examples of innovations launched this year include the alcohol-free Feldschlösschen Citron in Switzerland, Somersby Piña Colada in Poland, and 1664 Rosé in China. In 2020, innovations accounted for around 10% of total group volumes. Speaking of Asia, this region is the third growth pillar in SAIL '22. Despite the COVID-related obstacles in many of our Asian markets, we benefited from our very strong business in China, being a key driver of the regional results, which Heine will elaborate on in a minute. With that, over to you, Heine.
Thank you, Cees, and good morning, everybody. Please turn to slide five and Western Europe, where the volume and numbers were quite mixed across markets, mainly due to bad weather and continued restrictions in certain markets. Revenue was up organically by 2.2%, driven by an increase in revenue per hectolitre of 2%. Revenue per hectolitre was supported by channel mix due to fewer on-trade restrictions, partly offset by product mix due to strong non-beer volume growth in the Nordics and also country mix due to volume decline in the high-priced markets of France and Switzerland. In reported terms, revenue was up by 17.1% and volumes were +8.6% due to the acquisition impact from Marston's and Wernesgrüner. We achieved strong volume growth in the Nordics with double-digit growth rates in Denmark, in Norway, and in Sweden.
Volumes were supported by strong growth in the on-trade and very good progress for craft and specialty and alcohol-free brews. In addition, non-beer volumes grew strongly in Denmark and in Norway. Revenue per hectolitre benefited from channel and product mix, partly offset then by the strong growth of soft drinks. Our business in Switzerland and our business in France were impacted by bad weather. In France, on-trade was open but negatively impacted by the sanitary pass requirement and lack of staff. In the off-trade, our business was impacted by less promotional activity vis-a-vis competition. Brands such as 1664 Blanc, Brooklyn, and Carlsberg grew. In Switzerland, the reopening of the on-trade was off to a slow start, also due to sanitary pass requirements and unable to offset the decline in the off-trade. Craft and specialty saw positive growth rates.
On the back of tough comps, alcohol-free brews were flat in Switzerland. Poland had a difficult quarter due to severe market decline following heavy rainfall and low temperatures. In addition, and specifically towards the end of the quarter, the beer market was impacted by growing inflationary pressure, reducing consumers' spending power. Our business gained market share, but not sufficiently to offset the market decline. In the U.K., the integration of Marston's and Carlsberg remains well on track. Our volumes benefited from good weather, the lifting of restrictions, and the reopening of the on-trade. The latter also supporting a good development in revenue per hectolitre. Albeit from a low base, craft and specialty grew strongly with particularly strong growth for Somersby. Our market share in the U.K. for the combined business improved slightly.
Now to slide six and Asia, please, where the impact of COVID was severe in many markets. Revenue was up organically by 13.3%. The volume growth of 7.9% was driven by markets such as China, India, and Cambodia. These markets also supported the revenue per hectolitre growth of 5%. In reported terms, revenue increased by 16.9%, mainly due to a positive currency impact from China. In a slightly declining market, our Chinese business delivered 11% volume growth, albeit this number was helped by easy comps as parts of Western China were subject to severe lockdowns in Q3 last year. We have, in recent years, significantly strengthened our market share in China. Compared with 2019, our volumes in Q3 were up by 15% and year-to-date by 20%.
Key drivers of the volume and market share growth were again this year strong growth of 1664 Blanc and the local premium brands, good results for our Big City strategy, and an increasing share in the modern off-trade channel. In a very volatile India, 30% volume growth was achieved on the back of relaxation of various COVID-related restrictions. We are encouraged to note that our Q3 numbers in India were almost back at the 2019 levels, albeit we see significant differences state by state. Our business in Cambodia benefited from very strong volume growth for the Sting energy drink, while beer volumes were impacted by severe beer market restrictions. In Vietnam, our stronghold in the central part of the country was less impacted by COVID compared with other parts of the country, and our volumes therefore declined significantly less than the overall market.
The situation in Laos was very challenging due to steep increase in infection rates during the quarter. This led to severe bans on the on-trade and on alcohol sales in the off-trade, in addition to movement restrictions and even curfews. In Malaysia, results in the Q3 remained negatively impacted by the mandatory closure of the brewery from mid-June until mid-August, preventing us from replenishing supplies for almost two and a half months. The situation is now gradually normalizing. Slide seven and Central and Eastern Europe, please. The region delivered another solid quarter. Revenue grew organically by 8.6%, driven by both volume and value growth. With the exception of Azerbaijan, all markets in Central and Eastern Europe delivered organic volume growth for the quarter, and total volumes were up by 2.6%.
The revenue per hectoliter growth of 6% was the result of a positive development in most markets, supported by pricing and product and channel mix. We had tough comps due to the very good weather last year, but nevertheless, volumes were up by mid-single digit. Revenue per hectoliter was supported by strong growth of cider and specialty, and we also saw very good growth for alcohol-free brews. Our market share increased sequentially in Russia. The overall pricing environment in Russia remains challenging, but to compensate for some of the higher inputs and logistics costs seen already in second half, and also the 1 ruble duty increase as of 1 January 2022, we increased prices towards our customers in late Q3. Volumes in Ukraine grew, and we strengthened our market share. Our portfolio of alcohol-free brews delivered strong growth.
In Southeast Europe, volume growth was supported by the return of tourists, and our international brands did well, led by Tuborg, 1664 Blanc, Somersby, and Carlsberg. Towards the end of the quarter, we saw signs of weakening beer markets in several countries in this region due to increasing restrictions and lockdowns as infection rates are going up and the vaccination rates in many countries remain low. In addition, there is an increasing inflationary pressure which may negatively impact consumer spending on beer. Slide eight, please. An update on the share buyback. We've carried out the share buyback as quarterly programs this year due to the continued business uncertainty related to the COVID-19 pandemic. Up until Friday last week, we had bought back shares at a total value of DKK 2.75 billion.
During the most recent quarterly program, which was initiated on August 18, 938,441 shares were purchased at a total value of DKK 1 billion, corresponding to an average price of DKK 1,065. The daily volume bought represented an average of around 10% of daily traded volumes on Nasdaq Copenhagen. Today, we initiate this year's last program, which will run until 28 January 2022. The good results this year enables us to increase the value of this last tranche to DKK 1.25 billion, taking the total amount of the share buybacks for 2021 to DKK 4 billion on average of DKK 1 billion per quarter. The Carlsberg Foundation will continue to participate in the share buybacks on a pro rata basis. Further details on the share buyback can be found in the Q3 trading statement.
Please turn to slide nine and the outlook for the full year, which we yesterday were able to increase to 10%-12% organic operating profit growth versus the previous expectation of 8%-11%. The reason for sending out the announcement yesterday is to comply with the interpretation of the EU Market Abuse Regulation by the Danish regulators. 2021 has again been a challenging year due to the pandemic. The visibility has been low, and the volatility has been high during the year as authorities frequently are adjusting lockdowns and restrictions in light of the local development of COVID-19 related infections. However, we are pleased that our employees and the company as a whole have been able to navigate well through these challenging times, enabling us to upgrade our full year earnings outlook twice this year.
It is not one specific market driving yesterday's upgrade, but better than expected results across all three regions in Q3. The upgrade also takes into account performance so far in October. It is important to emphasize that the uncertainty remains very high in many markets across our regions. In many Asian markets, there are frequent changes in restrictions and lockdowns. The same is true in several European markets. In addition, we also see a risk of consumer behavior being impacted by the increasing inflationary pressure. The FX translation impact is now assumed to be -DKK 100 million. This is DKK 50 million better than in August. We're also adjusting our assumptions on the effective tax rate, which we now expect to be around 24% compared to the previous expectation of around 25%. The lower tax rate is due to faster implementation of various tax initiatives.
The assumptions on net finance costs and CapEx remained unchanged. Net finance costs, including FX, are assumed to be around DKK 600 million, and CapEx is expected to be DKK 4 billion-DKK 4.5 billion. Now back to you, Cees.
Thanks, Heine. Before opening up for Q&A, let me summarize. Driven by both volume and value growth, the group delivered solid top-line performance for the quarter. The market development remained mixed with recovery in many European markets, while many Asian markets were impacted by the pandemic. Yesterday, we upgraded our full-year earnings expectations, and we have launched the last quarterly share buyback for this year. Please observe that we, again this time, will limit the number of questions to two per person to ensure that as many as possible get a chance to get through. With this, we are now ready to take questions.
Ladies and gentlemen, to ask a question, please press five star on your telephone keypad. To withdraw your question, please press five star on your telephone keypad again. We will have a brief pause while questions are being registered. The first question comes from the line of Edward Mundy from Jefferies. Please go ahead. Your line will now be unmuted.
Hi. Morning, Cees 't Hart. Morning, Heine Dalsgaard. Hi, everyone. Two for me, please. I think you flagged that there can be a limited impact from higher COGS for the remainder of the year, given you've got good hedging in place. Is there anything you can do to show on the outlook for COGS for 2022 at this early stage? Then the second question is, you know, as you think about getting stronger revenue per hectoliter, you know, given the inflation environment, you know, what are the biggest levers that you're gonna lean on across price, premiumization, channel recovery, and broader revenue growth management skills?
Thanks, Ed, and good morning. Yes, indeed, we are currently in a very volatile environment, which is impacting both the COGS and the logistics significantly. For many of our commodities, utilities, and logistics services, we have seen prices at very high levels during the autumn. To your point, the headwind for 2020 will be significantly higher than in 2021. For 2021, we were indeed hedged. I'm afraid we will not, at this moment in time, give you an estimate of the increase in COGS and logistics in 2022. It's still work in progress. We are still not fully hedged, and volatility remains very high, both on commodities that can be hedged and inputs that cannot be hedged.
Another reason is that, for competitive reasons, as we are in the middle of customer negotiations, we cannot make further comments at this time. As always, we will come back in connection with the full year guidance in February. With regards to your second question, and also maybe to give you some comfort, we started preparing for 2022 already before this summer. Also at a market level, so very much country by country, COGS increases will vary significantly market by market. Plans therefore need to be locally based, and our operators are working on determining the right balance of mitigating actions. The levers you are talking about are about value management, indeed channel mix, especially in Western Europe, vis-à-vis 2021 Q1.
Pricing of course, and also funding the journey, so the cost initiatives. I hope that suffice your question or answers your question.
Yeah. It does, but I mean, I suppose there's one element as well that you didn't mention. That's premiumization, and a favorable pack, favorable product mix. You know, your low alcohol and some of those other products as well. Is that gonna be a further tool?
No. Fair. So if you look at it in totality, it's indeed a value management. It's product and pack mix. It is the further growth of alcohol-free beers, especially in Western Europe. It's the further development of craft specialties and alcohol-free beer in Eastern Europe, especially in Russia. So it's basically the continuation of the premiumization journey we do. On top of that, extra attention on the ones that I said earlier: value management, channel mix, pricing, and funding the journey.
Great. Thank you.
Thank you.
Thank you. The next question comes from the line of Simon Hales from Citi. Please go ahead. Your line will now be unmuted.
Thank you. Morning, Cees, Heine, Peter. Two for me as well, please. Guys, I know you don't want to be drawn on COGS inflation outlook for 2022 at this point, which I understand. Are you able to say anything about how you will hedge now into 2022 generally? Have you continued to hedge your core input costs where you can at the normal rate that you would do through the second half of this year? Or are some of the raw materials you may need a little bit more under-hedged than you would normally expect at this point? So anything you could say there is my first question.
Secondly, I wonder if you could just talk a little bit about the performance in Southeast Asia, some of those more challenging markets as we came through the end of Q3 and into the beginning of Q4. You know, where you're seeing the recovery starting to come through, some easing of restrictions. Any more color there would be much appreciated. Thank you.
Thanks, Simon, and good morning. Heine, with regards to the COGS, over to you.
Good morning, Simon. For the hedging at this point in time, we are approximately 80% covered for barley for 2022 with a higher proportion in Western Europe and in Asia than in Central and Eastern Europe since Central and Eastern Europe to a bigger extent is a spot market. For aluminum, we are also covered around 80% for 2022 with the highest level being in Western Europe and the lowest again being Central and Eastern Europe. For sugar, we are almost 100% hedged.
Commodities such as PET and paper that are very difficult to hedge.
With regards to your question with regards to the Southeast Asia countries. It is very different country per country. Malaysia had in Q3 a volume development of -33%. Parts of Malaysia were closed. There's now a national recovery plan for four phases, and most of Malaysia is now in phase three, so they are developing into the right direction. 90% is vaccinated. Interstate traveling is going to be open again. In that respect, we move into a better situation. Q3 was, as the volume indicate, very poor also because the brewery need to be closed between June and mid-August. We had by that lower stocks in the market, so we also lost some share.
We are really getting close to basically moving to a bit more normal times, although it is still very dependent on the recovery province by province in Malaysia. With regards to Cambodia, there the situation was very different. You probably have heard about what they call vaccination diplomacy, but there 90% is vaccinated. I said Malaysia is 90% vaccinated. That's where they really reopened the total market. The vaccination is 62% in total. In Cambodia it's 90%. And there is still a sales ban on alcohol, but the strong performance we had in Cambodia is very much on the back of Sting, which is a soft drink.
Some basically very good improvement or growth of our non-alcoholic portfolio there. Laos is at this moment of time, probably one of the countries where we have the most concerns with regards to COVID. Q3 was -10%, beer even -20%. That also suggests that the CSD was positive. In fact, it was +4% in CSD, but very slow in beer. There is a high consumer price inflation. There's a weakening of the local currency. There are lockdowns, and the vaccinations are very, very low. To Vietnam, -8% in Q3.
Basically, I think it's fair to say that in Vietnam we had the feel that COVID was not so much impacting the country a year ago. Now it's at its worst since the outbreak. There are lockdowns also there. The market was down with almost 40% in August. We did relatively well. We are more in central Vietnam, as you know, where the issue is a bit less concerning as in the big cities. Luckily, the Vietnamese government is really focusing on vaccination. They now move from a kind of the stop COVID campaign. They now have a new campaign, Live with COVID.
By that we hope also that there will be more reopenings in the foreseeable future. It's a bit patchy. It's a very different country by country. Maybe separate from Laos, we think that most of the countries are now moving towards recovery. We are hopeful that by the end of Q1, most of these countries are back more or less on track.
That, that's really helpful.
okay
No, that's really helpful. Can I just check, you know, within some of those Southeast Asian markets, did you see some restocking, you know, in September, as some of the restrictions were easing? Or is that something that you perhaps might see if restrictions continue to ease into Q4?
Yeah. Well, not that I have particular information about that. In Malaysia, as I said earlier, we were out of stock, so there we are trying to restock. That's more about stock building after reopening of our brewery. I don't have very specific remarks from our people on that. Probably that means also that it's not a big issue at this moment of time.
Understood. Thank you very much.
Thank you. The next question comes from the line of Laurence Whyatt from Barclays. Please go ahead. Your line will now be unmuted.
Morning, Cees. Morning, Heine. Thanks very much for the questions. A couple from me. In Russia, you mentioned that your positive revenue per hectolitre was driven by product mix, and there was some hope that we might be able to get some price through the Russian market after the problems over the past couple of years. I was wondering if you'd give us an update on whether you're able to or have been able to recently and your current expectations for taking price, in particular in the Russian market. Secondly, over the past few years, we've seen a number of guidance increases during the year. The guidance given at the beginning of the year has then been raised I think a couple of times now for the past three years.
How does that change your ability to give guidance at the beginning of the year? How do you think about the guidance at the beginning of the year, and how do you think that will change, going forward?
Thank you very much.
Thanks for your questions, Laurence, and let me try to answer your Russia question and then with regards to the guidance, Heine will take over. With regards to Russia, we had mid-single-digit volume growth. It's continuing to be a very difficult competitive environment with high level of promotions. We had low single-digit price mix, as you alluded to, and that was driven by craft and specialty. What we see is there that we have broadened our portfolio, put more focus on premiumization, and that helped driving the mix. We also have the brand Flash Up, a very popular energy drink, which is also helping to grow our volume and improving our mix.
On average, we have been able to land a close to 4%, in fact 3.7%, price increase. We announced it in September. We have closed most of the negotiations with the customers. In that respect, that is a good step, although it does not yet at all cover for the high cost inflation in Russia. With regards to the market share, which is of course very important with regards to the strategic health of our business, that was in August at a level of even 29%. Year to date, it's 27.6%, which means under 20 basis points up versus last year.
With regards to, let's say, the strategic health, I think we made a good progress in Russia. Heine, guidance.
Yeah. Good morning, Laurence. There is, as you know, a lot of uncertainty and a lot of volatility due to COVID-19, which really makes it difficult for us in the beginning of the year, for good reasons, to see how all the different moving parts sort of pans out throughout the year. If you look at our performance throughout the year, there are really a lot of moving parts, a lot of processes, and a lot of minuses, which makes it really, really difficult, in particular for good reasons, in the beginning of the year, to give full year guidance.
What you see is also that some of our peers are not giving full-year guidance, which probably has to do with exactly that effect. We do give full-year guidance also, because as you know, due to the Danish regulators' view on EU regulation, but also because we fundamentally believe that we should give the market you guys as analysts and our investors sort of our best guess, which just comes with a lot of uncertainty, in particular, in the beginning of the year.
Is that answering your question?
Honestly, thank-
Thank you very much.
Thank you, and good morning.
Thank you. The next question comes from the line of Richard Withagen from Kepler Cheuvreux. Please go ahead. Your line will now be unmuted.
Yes. Good morning, all. Thanks for the questions. I have two, please. First of all, you know, with the cost inflation in the back of our mind, can you share some thoughts on price increases and how that might affect volumes in the different regions that you operate in? And then secondly, can you talk a bit about the dynamic of alcohol free? Does that change much as the on-trade opens or do you still see sort of a similar dynamics as before?
Thank you, Richard. Good morning. Well, what we said with regards to price increases, we don't give a direction of that one. In total, I guess it will depend on the altitude of the price increase. With regards to the impacts on volumes, very difficult to say. As we said earlier in the call, it will not only, when we talk about mitigating actions for the cost increases, depend on price increases. There will be a channel mix, volume management, and pricing.
Also we continue with our premiumization, as we said earlier. That brings us to the mix and especially your question on alcohol-free. We think that by the reopening of the on-trade, we only have more opportunities to grow alcohol-free. We have seen a very good takeoff of alcohol-free in especially off-trade over the last couple of years. On-trade followed a bit later. Our DraughtMaster, for example, in the Scandinavian markets also now is able to have alcohol-free beer on-premise, which will help to further develop this category.
Going forward, we are very confident that the trend on alcohol-free beer will continue, and that the percentage of alcohol-free beer as a part of our total portfolio, especially in Central, Eastern, and Western Europe, will be significant. We also started in Asia. Chongqing brand has now a 0.0. It's not yet big, but it's encouraging. The next step for expanding alcohol-free beer will be in Asia. All in all, confidence in that category, and that also will help us in the steps that we need to take to mitigate the increasing costs for 2022.
That's clear. Thanks, guys.
Thanks, Richard.
Thank you. The next question comes from the line of Trevor Stirling from Bernstein. Please go ahead. Your line will now be unmuted.
Good morning, Cees and Heine. My two questions are the following. First one, concerning Western Europe, I think my calculations are right, Q3 still about 1% below 2019 in terms of volumes. Just wondering if you can give us a little bit of color on which countries in Western Europe are trading ahead of 2019 and where is there still some catch up to be had? The second one concerning the pricing environment. I appreciate Cees it's very, very early days, but you've mentioned in the past that the Russian price increases went through slightly easier than normal. Any indications yet about the general pricing environment in Europe, in Western Europe?
Given the inflationary environment, given the price increases have already gone through in soft drinks, are the grocers just a little bit more amenable than they were maybe in previous years?
Yeah. Thanks, Trevor. With regards to Western Europe, you're almost spot on. It is, if you take year to date, September 2021 versus 2019 year to date, we are 0.9% plus for Western Europe, which is, in that respect, I think very encouraging. Total group, we are at 5.2% reported. So in that respect, if you look at whether we have been able, if you like, to survive COVID, so to say, and to improve further, and to increase our volume, then we can only say that vis-à-vis 2019, which was the last normal year, we have grown by 5.2%.
For the record, 6.1% in Asia, 0.9% in Western Europe, and 7.7% in Central and Eastern Europe group. In that respect, I think positive news. With regards to your question about Western Europe, it is a bit different country by country. When we look at France, Switzerland, we are down versus 2019. They came, as you know, a bit slower out of COVID and also had some very bad weather impact during the season. Denmark is still below, but it has a lot to do with the border trade. We are very happy and positive about our development in Denmark.
We are improving significantly our share there. Norway is a very positive outlier, the same as the U.K., but also that has to do, of course, with our joint venture. However, if you look September sales in 2021 versus September 2019, the new group, if you like, the joint venture grew by 8%. That gives you an impression that we are on the right track there. Also, Poland is positive and Germany is very positive. That gives you a bit of a feel that in general, we are close to 1%, but there are some underperformance and some severe overperformance there.
With regards to pricing, yes, I don't know whether it's a bit easier, but you could argue indeed that it took less time in Russia than normal in order to land these prices. Normally, we get delisted for quite a while, and the negotiations are tough. I wouldn't say that it was less tough, but at least it was shorter in terms of the period that we could land the new prices.
For the rest, I must say what I hear from the colleagues in the countries, that it is a conversation that of course the trade colleagues are really waiting for in terms of they're expecting us to come up with our proposals. It is very different country by country. Also some of the chains react in a normal way. The French trade is reacting fiercely against any proposal. In other countries, there is a bit more understanding that we need to move. Also there, it's very local.
I think it's very much too early to take any conclusion there other than that in Russia, at least we landed the price increase.
Great. Thank you very much, Cees.
Trevor, good morning.
Thank you. The next question comes from the line of Søren Samsøe from SEB. Please go ahead. Your line will now be unmuted.
Good morning, guys. I have two questions. First of all, regarding if you take the guidance now versus what it was in the beginning of the year, you know, a decent increase. This increase, would you say this is more due to higher top-line growth than you expected back then? Or is it more due to higher efficiencies and better execution on costs or it's something?
Completely different. The other question is just regarding your tax rate, the 24% level. Is that a sustainable level going forward, or are there any extraordinaries in there that we should account for? Thank you.
Thanks, Søren. These seem to be two questions for Heine. Heine, up to you.
Yeah. Good morning, Søren. The guidance sort of improvement in the 10%-12% versus where we started in the beginning of the year really comes from both top line, but also further efficiencies. It is in particular, of course, the top line that is difficult to predict in the beginning of the year. As we also said, we knew this was going to be a difficult year. Also on the cost side, we initiated sort of further scrutiny and further attention already from the beginning of the year. We were right in saying that the start of the year and the recovery, in particular in Q2 in Western Europe, came a bit later than we expected.
That's the reason why we initiated these different cost initiatives in the beginning of the year. It really comes from both top line coming in better, and that comes in better across many of our markets. It comes from further focus and further attention to some of our structural costs. As you know, the one cost area that we are not sort of scrutinizing with a target of reducing our cost, that is indeed investments into marketing and investments into product and to innovation. Structural costs have been sort of at a further review also from the beginning of the year. It's both top and efficiencies. When it comes to tax, as we have discussed before, tax is a priority for A/S.
Carlsberg, both in terms of continuing to strengthen the tax compliance, but also in terms of optimizing the effective tax rate. The results or the reason why we are able to improve our outlook from around 25% to around 24% has to do with a lot of different sort of tax initiatives that we've launched over the last five years. That is really the reason why we are able to sort of reduce our full year outlook. Our outlook then for the coming years remains at approximately the same levels of around 24%.
Thank you. That's very clear.
Thanks, Søren.
Thank you.
Thank you. The next question comes from the line of Olivier Nicolai from Goldman Sachs. Please go ahead. Your line will now be unmuted.
Good morning, everyone. Just, two questions, please. First, on Western Europe, could you give us an update on your on-trade performance during Q3? How does the on-trade channel today at the end of Q3 compare to 2019? Are you back to 80% of it, 90% of it? That would be great to have a bit of an idea there to see how much that's going to be for next year. Then just on the U.K., could you perhaps give us a bit of an update on the progress you've made on the Marston's integration in terms of cost savings, if you believe there's more to come, but also, what's your plan when it comes to unlocking revenue synergies? Thank you.
Thank you and good morning, Olivier. With regards to the on-trade, where we were in Q3 2021 versus 2020, it's 8% up in the on-trade and -2% in the off-trade. The index over 2019 for the on-trade is 90. Index 90. Basically, we're still below 2019. What we see is the further developing of the on-trade during also indeed during Q3. Switzerland and France, for example, were a bit later in the game of reopening, and there were more restrictions there than in some other countries.
We see the consequences of that back in our volume, but also of course in our margins, because as you know, traditionally, on-trade has better margins. With regards to the U.K., there's positive news in my view. First of all, we see a normalization post-COVID-19 in the U.K. I know there are some new, maybe, some clouds there with regards to COVID-19, but Q3 was very good. We had a 4% volume increase and even 11% net revenue improvement, so a good mix. It was a strong September due to the weather. What we see there, to your earlier question about on-trade, the on-trade in the U.K. in September was only, between brackets, 2% below the development in September 2019 in the on-trade.
That's good.
Mm-hmm.
Our joint venture grew by 8% in September versus September 2019. That also shows that we're on the right track. In general, year to date, the share is stable. With regards to the integration, to your point, that goes well. We get the synergies through. We, as now also Marston's is reopening, we start to see some revenue synergies. That of course needs to be driven further at the moment that the total market has been reopened. We're positive about our development in the U.K.
Thank you.
Thank you, Olivier.
Thank you. The next question comes from the line of André Thormann from Danske Bank. Please go ahead. Your line will now be unmuted.
Thanks a lot and good morning everyone. I just have one question, and that's just in terms of the guidance for 2021. Can you please elaborate on the assumptions for both the top end and the bottom end of your current updated financial guidance? Thanks.
Thanks, André. Good morning. Heine, to you.
Yes. Good morning, André. The outlook for the remainder of the year is sort of our best guess at this point in time. That includes a lot of risks and a lot of opportunities that may, both positive and negative, materialize in the remainder of the year. At this point in time, we will not comment sort of in further details on all the different moving parts, all the different positives and negatives. The outlook is, as I said, 10%-12%. Our assumption in terms of COVID outlook is that it continues at approximately the same level as it does today.
Okay. Cool. Thanks a lot. That's all from me.
Thank you, André. Could we have the last questions, please?
Yes, and thank you. The last question today is from the line of Fintan Ryan from JP Morgan. Please go ahead. Your line will now be unmuted.
Hey, good morning, Cees. Morning, Heine. Thanks for the questions. Two from me, please. Firstly, I appreciate you said that the on-trade opening within France has been a bit slower than other countries, but you also said that the promotional intensity seems to be getting worse. Just trying to get a sense of, like, how you see the French market evolving for you over the next few years. Like, are you tending to increase your level of promotional investment next year, or are you just purely focused on the profit and sort of value within that market rather than sort of absolute volume share? And secondly, I noticed in the presentation you made a number of references to your energy drinks portfolio in both Asia and Central and Eastern Europe.
With the upcoming strategic update in early next year, should we anticipate that energy drinks will become another one of your strategic pillars along with alcohol-free and craft and specialty? Thank you.
Thanks, Fintan. Thanks for your questions. Well, with regards to France, we had in Q3 a double-digit decline in a declining market. The market was heavily impacted by bad weather. The market share loss we had was, to your point, due to less promotions versus competitors. That resulted for us in good price mix. We also got a good premium development. The Kronenbourg brand is a high volume brand, as you know, and at the moment as we start to promote it a bit less, we immediately see that back in our market share.
We need to get a better balance, if you like, between volume, mix, and the total, if you like, our famous golden triangle needs to be rebalanced in France. It's one of our countries under scrutiny, as we speak, to see how, with what kind of mix, we need to go further. In terms of the weapons we have in that market with Grimbergen and 1664 Blanc and some other brands, we really feel we have enough ammunition, but again, we need to get the balance a bit better.
Talking about energy drinks, yes, we are excited by the development in w ell, we were talking earlier in the call about Cambodia, also about the impact of energy drinks in our portfolio in Russia. You will not be surprised that it will be one of the work streams that we have with regards to our SAIL '27 program. It's far too early to say whether we are going to put, let's say, more focus on that. We will come back to you at mid-next year with regards to SAIL '27. We will talk about the priorities in our portfolio in terms of geographies and in terms of subcategories going forward towards 2027. That is basically news to come. I think this is the end.
Very clear.
Thank you. Thanks for the questions, Fintan. This was then the final question for today. Thank you for listening in, and thank you for your questions. We are looking forward to meeting some of you during the coming days, and weeks. Have a nice day. Bye-bye for now.