The Ozempic boom: How the entire country of Denmark became a company town

By CHARLIE DUXBURY

in Kalundborg, Denmark

Illustration by Hanneke Rozemuller for POLITICO

March 26, 2024 6:00 am CET

This article is part of a special report, The New Factory Towns.

It's not the first time this small Danish town boomed with the times. The question for Mayor Martin Damm is when, or even whether, the bust will come again.

In the 1920s a bet by a businessman on a new shipyard in Kalundborg went bad. Decades later, a locally famous hair roller-maker — called Carmen Curlers — faded with the 1960s fashion for wavy hair.

Now, a few hundred meters from Damm's office, a new giant is rising amid a thicket of cranes and clouds of churned-up dust: a massive factory extension for Novo Nordisk, one of the world's biggest insulin makers and the company behind diabetes drug Ozempic and anti-obesity treatment Wegovy. 

"It's third-time lucky or something like that," Damm said. "The investment by Novo Nordisk is a big deal for the municipality."

The headquarters of Novo Nordisk, Europe's most valuable company, lies on the edge of the Danish capital Copenhagen, but its production hub has for decades been in Kalundborg, a town of 17,000 people on the western edge of the island of Zealand an hour and half train ride from Copenhagen.

Novo Nordisk's presence has turned Kalundborg into a 21st-century European factory town. Like Mainz in Germany, where local company BioNtech saw rapid expansion on the back of its groundbreaking Covid-19 vaccine, this Danish backwater shows how one big manufacturing player can still rise to dominate a local economic landscape even as many parts of Europe move into the post-industrial age.

Indeed, the impact of Novo Nordisk's success has rippled well beyond Kalundborg.

Last year, the company's surging profit and reinvestment rates were widely seen as a key reason why Denmark avoided a recession and why interest rates could stay relatively low, capping mortgage payments for many Danish homeowners. 

But the rise of Novo Nordisk has also raised concerns in a country of less than 6 million people about whether it could create an unhealthy "Nokia-style" overdependence on a single company or sector.

If Novo Nordisk's rate of sales and production growth were for some reason to slow or even reverse, the Danish economy would no longer reap the economic benefits, said Jens Nærvig Pedersen, an analyst with Danish lender Danske Bank.

"The Danish economy might suffer a similar fate to the Finnish economy following the demise of Nokia," Nærvig Pedersen said, referring to the Finnish mobile phone-maker that didn't survive the switch to smartphones.

"In Denmark's case, it would likely make a visible negative impact on GDP and unemployment and interest rates would likely also be higher," he added.

A 'sustainable' boomtown

In Kalundborg, the potential downsides of depending on Novo Nordisk seem far away.

Denmark's Foreign Minister (and former Prime Minister) Lars Lokke Rasmussen wielded the first spade at the new site in November. Novo Nordisk, he said, was building on a proud local tradition of industrial innovation, including by Carmen Curlers, the hair curler-maker that floundered in the 1960s.

"But I think Novo Nordisk is a more sustainable investment," he said with a smile. 

Around 4,500 people already work at Novo Nordisk's Kalundborg plant — equivalent to about a quarter of the town's population. The number of employees is set to grow by another 1,500, as the company pours in some €8 billion in planned investment.

Visited on a recent weekday, the site was buzzing as workers toiled amid a web of new pipes that will underpin the new factory. The approach roads were lined with scores of workers' vans from all over Europe. 

Damm, the mayor, said corporate tax revenue spiked over recent years, rising tenfold from around €2.7 million when he took over city hall in 2010 to around €27 million now.

The growth in well-paid jobs means the city's personal income tax receipts have increased, even as unemployment and benefits payments dropped. (The town's jobless rate is 2.3 percent, compared to 6.4 percent in 2010.)

The municipality has used its extra cash in two main ways. First, it has cut income taxes six times over 10 years; at 24.2 percent, the local tax rate is now around 2 percentage points lower than nearby municipal peers like Odsherred and Slagelse. 

Second, it has invested in local projects: A new train station serves the suburb around Novo Nordisk's site, and the town center's station is about to be upgraded. Meanwhile, new, council-funded piers project into the sea from a new public park. 

Dodging Dutch disease

Kalundborg is no 19th-century model town in the mold of British soap maker Lever Brothers' Port Sunlight or chocolate-maker Cadbury's Bournville, where the companies governed all aspects of local life and provided most of their residents' needs. 

On the main street, it was clear that despite the town's overall bright prospects, many retail outlets were still struggling. Signs in the windows of a clothing retailer and sporting goods brand both announced imminent closure. 

There are no grand factory- or municipal-funded housing projects here: It is the private market that's expected to respond to rising demand as more workers relocate to Kalundborg. 

Damm acknowledged that there would likely be a lag in supply: "One of our challenges is the lack of new homes, but they are coming now."

More broadly, macroeconomists also have their eye on potential risks associated with Novo Nordisk's growth, specifically that the Danish economy as a whole may become too dependent on it as the country's biggest taxpayer, and they regularly cite mobile telephone-maker Nokia as a cautionary tale. 

That once market-leading company generated 4 percent of Finnish GDP at the turn of the century before its failure to make the jump to smartphones triggered a rapid decline in earnings which hit the wider economy hard. 

"The government might become more complacent with respect to its objective of sound public finances if it felt it could rely on growing revenue from Novo Nordisk," said Danske's Nærvig Pedersen. He added that so far he had seen no sign of such complacency.

There is also the threat of so-called Dutch disease, where what looks initially like a windfall ends up having a damaging effect in the longer term. The syndrome was named for the impact of a boom within the natural gas industry of the Netherlands, which ultimately had a stunting effect on other sectors of the economy. 

In the Danish case, the risk would be that Novo Nordisk's rise could lead to a strengthening of the Danish currency, which could in turn make the country's exports more expensive on international markets, hitting companies' competitiveness and ability to grow. 

In Kalundborg, for those whose businesses appeal to the workers at Novo Nordisk, such concerns are problems for another time.

Jean Bienvenue, 25, working behind the counter at a café in the town center, said the factory's growth had been good for trade. 

"Sometimes we get orders for 20, 30 or 50 sandwiches," he said. "Once we had to make 100 sandwiches; it took us nearly an hour," he said.