Cees ’t Hart (Carlsberg): 'The Most Difficult Decision I Ever Had to Make'

Cees ’t Hart (Carlsberg): 'The Most Difficult Decision I Ever Had to Make'
As CEO of the Danish beer brewery Carlsberg, Cees ‘t Hart was left with a difficult choice at the start of 2022 when the war broke out in Ukraine: ‘When I spoke about “a conflict”, my colleagues in Ukraine were angry. And I couldn’t speak about “a war” because this would have been dangerous for our staff in Russia.’ ‘t Hart was heavily criticized by the Danish media. ‘Five weeks after the start of the invasion we decided to withdraw from Russia, the most difficult decision I ever had to make.’ Although there are still ongoing problems, ‘t Hart remains positive: ‘The verve is back in this company.’

‘Skål!’ His Danish has not improved much further than this — not even after seven years at the top of Danish brewery Carlsberg. He laughs. Skål means cheers. ‘To be honest, I already knew this word before I started working as a CEO here,’ he chuckles. Despite his poor Danish, ‘t Hart feels in his element at the Danish brewery, ranked number three in the international beer market. In 2015, this Dutchman became the first non-Danish person to be chair of the board. The Danish were not totally happy about that, but ‘t Hart won them over by working, even more so than his Danish predecessors, in the spirit of the Danish founding fathers: Jacob Christian Jacobsen and his son Carl. This earned him admiration and respect, but in all fairness there was also criticism. Particularly due to the recent invasion of Ukraine, ‘t Hart came under attack from the Danish media. ‘Hart without a heart, declared the newspapers.’ ‘At times like this it is good to be able to pop over to the Netherlands for the weekend.’

‘This is the highest point in Copenhagen,’ says Cees ‘t Hart to Geert van den Goor, managing partner of consulting firm Valcon and todays guest at Carlsberg in Copenhagen. ‘All of 27 meters above sea level.’ ‘t Hart is in good spirits today. He seems to enjoy having Dutch guests and appears relaxed. He is proud of where we are: The new Carlsberg Headquarters on the J.C. Jacobsens Gade in the Danish capital. One thing is clear: We are at a historical site. Every Saturday morning, young Carl would walk with his father from the center of Copenhagen to the higher situated brewery. He called it a “berg” (mountain), and so his father came up with the name of the beer: Carl’s berg... therefore Carlsberg. Everything here seems to exude history: Carl’s splendid historical house, the equally historical beer laboratory — the oldest in the world — and the iconic elephant gate, the entrance to the brewery. Between the historical monuments there are a few new architectural highlights such as trendy cafés and rooftop bars. The old brewery site is now a hotspot in a metropolis.

‘t Hart has seen the neighborhood change. ‘I came here seven years ago and ended up in an old, concrete office block, a former beer silo. On the 20th floor, where on a fine day you could see Sweden. That was wonderful, but the office premises were completely outdated. The management floor could only be accessed using a special pass. My secretary worked at the end of a long hallway, with my office alongside it. No one ever came there. No one would have noticed if I had died and laid there for ten days,’ he laughs. He spent only three weeks in that office, after which he looked for a place among the rest of the staff.

Everything has changed since then. Not only the neighborhood and his office — the head office is a completely new and tasteful, yet modest, building — but the Carlsberg firm as well. When ‘t Hart arrived, the Danish brewer was not doing that well. The results were disappointing, it missed that verve. A new impetus was necessary, and that came from the Netherlands in the form of former CEO of dairy company FrieslandCampina. ‘A Dutchman. That was a little bit of a shock for the Danish. But I think they were mainly relieved that I was not Swedish or Norwegian. Now, that would have been painful for them.’
For ‘t Hart, too, the switch took some getting used to. ‘I went from a cooperative where farmers were the boss to a company where professors were in charge.’ ‘t Hart refers to the Carlsberg ownership structure. The controlling shareholder has long been the Carlsbergfondet (the Carlsberg Foundation). Carlsberg is listed on the stock market, but the foundation has a 30 percent economic interest in the brewery and has over 70 percent of the voting rights. The foundation is mainly made up of learned professors. ‘I can tell you that farmers understand their business, whilst professors might come from a very different academic background. It’s a different situation, but we work very well together.’ And about the ownership structure: ‘It is a bit of a socialist concept, but it works perfectly. The entire country benefits from the profits made by Carlsberg. Even the famous Little Mermaid statue in Copenhagen was financed by Carl Jacobsen.’

Let us take a look at some current events. You have been through a recent rough patch. Can you tell me a little about it?
‘The last two-and-a-half years have been crazy. It felt like a game of chess, where — if I did not pay attention — someone would come along and move the pieces. And in such a way that you would have no idea how to play your next move. And then on top of this, the rules of the chess game would change. Well, that is how it felt. We had to endure three crises. First of all the pandemic, then the war in Ukraine and then came along hyperinflation. I can assure you: No one here has ever had to work through so many situations of helplessness, and that includes me. That took some getting used to.’

Let us take a closer look at Russia’s invasion of Ukraine. You are – or were — active with Carlsberg in both countries.
‘The war has an enormous impact on our concern. Russia and Ukraine are important countries for us. In Ukraine, we employ 1,300 people at three breweries, and in Russia 8,400 people at eight breweries. Ten percent of our turnover comes from Russia, with five percent of our profits coming from there. Early one Thursday morning in February there was suddenly a war, and you were faced with an uncertain future. The first thing we did was look at the safety of our people and the surrounding area.’

Were you not prepared at all?
‘We certainly were prepared. We had actually developed four different scenarios, with the help of all sorts of experts. In these scenarios, we had estimated a Russian attack on the entirety of Ukraine to be ten percent. We did not consider it the most likely scenario, but it was still a possibility. So fortunately, we had made some preparations. We immediately downscaled the breweries in Ukraine, and moved our people from the brewery in Eastern Ukraine to Kyiv and Lviv. In Lviv, we converted a warehouse into accommodation for refugees.’

In the meantime, there was increasing international pressure on companies to withdraw their businesses from Russia...
‘We had an internal list of 14 trigger points, which would lead to us immediately withdrawing from Russia. For example, in the event of an escalation by Russia using unacceptable weaponry, or if our management were taken prisoner in Russia or if our customers were to turn away from us en masse. But this was not a decision you make overnight.’

What was your most difficult dilemma?
‘You cannot just abandon 8,400 people in Russia. These are also Carlsberg staff and they have all worked hard for us through difficult times. They did not ask for Putin to invade Ukraine. What is more, I had a personal connection with many Russians; I have visited Russia on many occasions. At the same time, I will never forget the telephone call with my managing director in Ukraine: “I fully understand that you want to remain in Russia, but I am travelling as we speak from Kyiv to Lviv, because bombs are falling on Kyiv.” This really gives you pause for thought. You have to consider so many different interests, so many stakeholders: Employees, investors, the Carlsberg foundation, the international organizations, customers, the media, politics, banks. Investors and banks do not easily accept it if you relinquish an important part of your assets — and rightly so.’

Have you ever experienced anything like this?
‘No, I have not. I suddenly had to deal with a type of corporate diplomacy. That was completely new for me. I have, of course, experienced many different things in my 15 years as a CEO. I have consulted with numerous government leaders, but this was on a completely different level. Every two weeks I hold an internal talk, Cees Direct, and I was not allowed to refer to “a conflict”, so as not to upset those in Ukraine. But I also could not speak about ‘a war’, because this would result in a potential danger for our staff in Russia”. It was a complicated game of chess. Eventually, five weeks after the start of the Russian invasion we decided to withdraw from Russia. This was the most difficult decision I have ever made.” But at the end of the day, I think that it was the right decision, also in terms of timing, although Danish journalists would probably disagree.’

I imagine that this caused you some sleepless nights...
‘Luckily I am a good sleeper. But I made sure that I took good care of myself during this time. I planned in time for extra sport, to keep myself physically and mentally fit. That way it is not too bad to occasionally be working 24 hours a day.’

You came under fire personally. That must have an impact on you.
‘What was different here in Denmark from other countries is that the media responded very strongly. Within just a few days they had taken the standpoint that Danish companies should withdraw from Russia immediately. Every day we were front page news. And the tone of the coverage became increasingly strident. Satirical cartoons of Putin drinking a Carlsberg beer.... I, too, came under fire. “Dutch CEO sitting on his hands.” Or: “Hart without a heart”. “I must admit that in these cases it was an advantage to be a foreigner. It makes it easier to brush the criticism aside. If you are under fire in your own country, they ignore you even at birthday parties, but this was different. I could go home to the Netherlands during weekends. To be in a different place. That helps. It gave me distance both figuratively and literally, although you are of course switched on 24/7.’

What are you most satisfied about?
‘It is a little post-rationalization, but I am most proud of the fact that we achieved stability. We communicated a great deal, both with employees and investors. We managed to constantly keep to our strategic course, in particular in these times of crises. And we made sure that the crisis involving Russia did not spread to other aspects of the organization. I should note that there was no problem with the greater majority of the company. And so you have to ensure it stays that way. You have to keep an eye on the big picture, on what you are pursuing. I am a yachtsman, and often use sailing as a comparison: We have to make sure we keep on course. The war is a heavy storm on our route — we either have to go through it or around it. And then we have wind force 12 due to inflation, but the course remains clear.’

You like metaphors, I see. You are a yachtsman, whereas I am a climber. That is why it struck me when I read that you drew some of your inspiration from the book Into Thin Air by Jon Krakauer…
‘A wonderful book. I once bought it at the airport in Hong Kong — I had finished it by the time I reached Singapore. A real page turner and an eye opener for all those involved with leadership. Every leader should ask themselves: What is the objective and what does the route there look like, what skills do I need and how are we going to treat one another. If you agree that you will turn back if you have not reached the top by 12, then you turn back at 12. Even if the top is nearby. Rob Hall — the protagonist in Into Thin Air — did not keep to that. We had all agreed that we would reach the top, he said. It was a real leadership moment. If he had returned safely after reaching the top, books would have been written about that leadership moment of Rob Hall. Now everyone followed him to their death. I have learned that setting just one goal can be dangerous. You must have several goals — not only to the top, but also back down safely. Not only focused on growth, but also setting your sights on the margin and profit.’

What is it like to be a Dutch CEO in a Danish company?
‘That is actually quite easy. The Danish and Dutch are similar in many ways, although there are of course differences.’

Such as?
‘Denmark is small, flat and has many islands, which largely explains the character of the Danish. Because Denmark is small, the Danish, just like the Dutch, have an external focus and speak for example excellent English. The country is flat, which shows itself in a lack of hierarchy. Everyone here is equal, for instance, the chauffeur is not going to carry your luggage, you do that yourself. As CEO, you serve the company, society. And because Denmark is made up of islands and peninsulas, the Danish are perhaps not as open to foreigners. Foreigners here do feel a little left out. The relationships are actually always transactional, businesslike. What’s more, the law of Jante plays an important role here: You must not consider yourself more important than others, you must not think you can teach others or that you are smarter than them. That can be difficult at times. In the Netherlands, if you hold a town hall meeting, you straightaway get all sorts of questions from people who think they know better. Here, everyone keeps quiet, not a single question is asked.’

Apart from CEO at Carlsberg, you have another demanding position: Chair of the KLM supervisory board...
Laughing: “A position on the side that got out of hand.”

The question looms whether you can actually combine two such important positions.
‘Let me say first and foremost that they can be combined according to all codes, according to both Dutch and Danish rules. The corporate governance code in the Netherlands says that if you are ceo at a business listed on the stock exchange, you are not allowed to be the supervisory board chair of another listed company. But KLM is not listed. However, it is certainly a business that is regularly in the spotlight. I was actually lucky that I was not able to travel because of Covid. This gave me the time to perform the two positions well alongside one another. That always went well, as a matter of fact. But what I have learnt is that when a company has its problems, you will really need to play your part, certainly as chair. Separate from that, and in all honesty: These positions are not a good combination in difficult times. They were intensely difficult times.’

You have been here for seven years, and you are almost 65... Will you stay much longer?
‘As you can imagine, that is a tricky subject for a company listed on the stock exchange. Let me just say that the new Carlsberg strategy runs until 2027. And I certainly hope to reach 2027, but probably not with this company. By then, I would have been CEO of Carlsberg for 12 years, which I think is too long.’

Once you close that door behind you, what do you want your legacy to be?
‘The company is fundamentally different to what it was when I arrived here in 2015. At the time we said: We want to increase the margins, we want to grow the brands, we want to increase the cashflow and reduce the debt. That has all been successful. What we actually did not manage to do, was realizing a major acquisition, another important goal, which is a pity. The irony is that ten years ago we did not have the cashflow and now we do not have the targets for a major acquisition.
But in all other respects, the mission was successful. The share price has doubled, the profitability has improved and the most important thing is that we have brought back that verve to the company. When I came here, the energy was completely gone. I then saw in a bookshop The Founder’s Mentality, a book by Chris Zook and James Allen. When I saw the title I thought: Golly, this is what this company is missing. The closer I get to Copenhagen, the more it seems to be missing. I confronted the people here with it. I said: We are literally and figuratively living here at the heritage site of the founders and this does not seem to move us, we do not take care of the quality of the beer, we do not look at what the customers want and the employees walk around as if they would rather work somewhere else. The founders were ahead of their time. The only thing I wanted was essentially to bring our company back to the purpose of back then and now: Brewing for a better today and tomorrow. The fact that this was a success is something I am most proud of. Carlsberg is back and the Danish are proud of Carlsberg. There is a firm foundation on which we can build further. And for me personally, I consider it a true privilege that I have been able to do this with a broad team — and for the second time for that matter. First at FrieslandCampina, and now here at Carlsberg. And succeeding in that is a great feeling.’

This article was published in Management Scope 06 2022.

This article was last changed on 29-06-2022