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Global Forces and The European Brewing Industry
Global Forces and The European Brewing Industry
In the mid 2000s the major centre for production of beer in the world was
Europe; its production was twice that of the USA, which in 2003 was the
world’s largest beer-producing country. In the alcoholic drinks sector beer
sales are dominant: total sales across the world accounted for 74 percent of
all alcoholic purchases (Euromonitor 2002).
Although the European market as a whole is mature, with beer sales
showing slight falls in most markets, Datamonitor 2003 reported that the
alcoholic beverage sector grew at an annual rate in value terms by 2.6 per
cent year between 1997 and 2002.
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9 35 01 75 89 94 40
Luxembou
rg 417 466 452 474 472 445 440
Netherla 122 134 132 133 131 129 119
nds 13 75 25 09 29 22 85
Norwa
y* 7651 2330 2203 2305 2327 2290 2420
Portu
gal 3534 6318 6494 6475 6453 6276 5943
Spain 20065 26238 26677 27772 29151 31126 30715
Swede
n 3935 5459 5077 5258 5011 4932 4999
Switzerland* 4433 4249 4277 4212 4194 4141 4127
UK 65490 61114 58835 58917 57007 58234 59384
Total 26935 30258 29829 30057 29674 29708 29512
# 8 7 5 4 2 1 1
*Non-EU countries, # 1980 excludes GDR. Figures
adjusted.
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Count
ry 1980 1997 1998 1999 2000 2001 2002
Austr
ia 101.9 113.3 108.1 108.9 108.1 107.0 108.5
Beigi
um 131.0 101.0 98.0 100.0 99.0 98.0 96.0
Denma
rk 130.7 116.7 107.7 104.6 102.2 98.6 96.7
Finla
nd 56.6 84.0 80.0 80.1 77.9 80.2 79.5
Franc
e 44.3 37.0 38.6 38.7 36.2 35.9 34.7
Germa
ny# 145.9 131.2 127.5 127.5 125.3 122.4 121.5
Greec N/A 39.0 42.0 43.0 40.0 39.0 39.0
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e
Irela
nd 121.7 123.7 124.2 126.0 125.0 125.0 125.0
Italy 16.7 25.4 26.9 27.1 28.1 28.9 28.2
Luxembourg 115.8 112.0 107.0 110.0 108.2 100.9 98.5
Netherlands 86.4 86.4 84.3 84.4 82.8 80.5 79.2
Norwa
y* 48.1 52.9 49.7 51.7 52.0 51.0 53.7
Portu
gal 35.0 63.6 63.3 64.9 64.6 61.3 58.6
Spain 53.7 66.7 66.9 69.1 72.0 75.7 73.4
Swede
n 47.4 61.7 57.3 59.3 56.4 55.4 55.9
Switzerland* 69.5 59.5 59.9 58.8 58.3 57.2 56.6
UK 118.3 103.6 99.3 99.0 97.2 99.0 100.6
Total
# 82.5 78.6 77.2 77.6 75.9 75.9 76.8
*Non-EU countries
Count
ry 1990 1997 1998 1999 2000 2001 2002
Austr
ia 7606 9366 8830 8869 8750 8588 8731
Beigi
um 14291 14014 14105 14575 14734 14966 15696
Denma
rk 9145 9181 8075 8024 7460 7233 8534
Finla
2823
nd 4804 4697 4700 4612 4631 4797
Franc
21684
e 19483 19807 19866 18926 18866 18117
Germa 11480 11170 11280 11000 10850 10840
92342
ny# 0 0 0 0 0 0
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Greec
N/A
e 3945 4022 4359 4500 4454 4443
Irela
6000
nd 8152 8478 8648 8324 8712 8113
Portu
3557
gal 6623 6784 6760 6451 6554 7121
Anheuser-
1 Busch USA
South
2 African South Africa
Breweries/Mi
ller
Heinek
3 en Netherlands
4 Interbrew Beigium
5 Carlsberg Denmark
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6 Am Bev Brazil
Scottish & United
7 Newcastle Kingdom
8 Coors USA
9 Modelo Mexico
10 Kirin Japan
Source: Coors Brewers Limited UK
Percentage
Brand Name Ownership Export sales of
(million
hectolitres) global sales
Heineken Heineken 17.7 82
Carisberg Carisberg 8.9 87.6
Amstel Heineken 8.5 78.7
Anheuser-
Budweiser Busch 8 17.1
Groupo
Corona Extra Modelo 7.7 32
Stella Interbrew 6.8 88.5
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Artois
Fosters Fosters 5.7 68.7
Skol Carisberg 5.2 18
Tuborg Carisberg 5.3 63.3
Becks Interbrew 2.7 62.5
Source: Impact/ Interbrew SA/ Industry Estimates/ Company
reports
Compa Leading
ny Home Country Market Share Brand
Heine
ken Netherlands 11.70% Heineken
Interbrew Belgium 10.40% Stella Artois
Carisberg Denmark 6.90% Carlsberg
United
Scottish&Newcastle Kingdom 6.90% Kronenbourg
Mahou
SA Spain 2.90% San Miguel
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Holsten
Brauerei Germany 2.60% Konig
United
Diageo PLG Kingdom 2.20% Guinness
Binding-
Brauerei Germany 2.10% Radeberger
SA
Damm Spain 2.10% Super Bock
Brau&
Brunnen Germany 1.90% Jever
Source: Euromonitor 2002
Import
(% of
Count Consumpti Export(% of
ry on) Consumption)
Austr
ia 5.3 4.8
Belgi
um 19 39
Denma
rk 1.7 34.1
Finla
nd 1.9 6
Franc 25.5 12.4
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e
Germa
ny 3.2 10
Greec
e 4 10
Holla
nd 6.1 51.9
Irela
nd 11.9 28
Italy 26.4 3.9
Luxemburg 37.6 -
Norwa
y* 4.1 0.8
Portu
gal 4.7 11.2
Spain 13 2.3
Swede
n 11.6 -
Switzerland* 14.8 0.6
United
Kingdom 8.6 5.6
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Interbrew (Belgium)
Interbrew is one of the oldest beer companies in the world. It
has operations in 21 countries and Interbrew’s beers are sold in
more than 120 countries. The company strategy is to build
strong local brand reputation as well as to market its
international labels. These include Becks, Stella Artois, Bass,
Hoegaarden and Labatts. Interbrew has been on the acquisition
and organic growth trail as a determined strategy since 1993.
In the five years to 2003 the company had made over 20
acquisitions and 35 per cent of the operating income during
2002 was derived from this acquisition programme. 2004 saw
the merger between interbrew and Brazil’s largest brewer Am
Bev. Interbrew’s philosophy is reinforced by its claim to be
‘The World’s Local Brewer’.
In 2001 the company acquired Bass (UK), Whitbreads (UK)
and Becks (Germany). At the time of acquisition Bass brands
accounted for 24 percent of the UK market. The acquisition
from Bass was unconditional and when the UK regulatory
authorities challenged the decision to acquire Bass, Interbrew
was forced into a sale situation. Due to this forced sale the stock
market at that time formed the view that Interbrew had overpaid
for the company.
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Using PESTEL analysis can help to highlight the biggest influences on the strategy
of the organization, both currently and in the future. These influences can be both
positive and negative. In addition, influences often cross the divide between the six
headings; the important point is that they appear somewhere in the analysis. The
key is to identify and concentrate upon those factors or trends likely to have the
enable us to:
Political
From the case study we notice the political intervention of the government that
made strict prosecutions against drunken driving and the alcohol abuse through
Other measures such as the prohibition of the sales of alcoholic drinks in public
places this initiative taken by the government were one of the reasons that
transformed the buying behaviour of European market that is the fall in the sales of
beer in these countries. Though would be classified under the head of social
analysis the government has caused in the buying behaviour. In the late nineties
many restrictions were put on the brewing industries such as the use of cans in
Denmark. Also in Germany local production laws like the “Reinheitsgebot” were
introduced to regulate the brewing industry in this country. At that time Europe is
Economical
The effects that the economy has on the brewing industry are that there were
economic advantages that these industries were enjoying such as cheap labour and
quality raw materials at a cheaper price. During these times acquisitions, licensing
and strategic alliances have all occurred as the leading brewers battle to control the
acquisitions. Finally there were low growth in the consumption of beers which made
the sales fall drastically in certain European countries for example the beer
consumption in Germany between 2002 and 2003. The EMU has lowered interest
rates hence; Spanish companies can now access the same interest rates as
German companies, compared to four years ago when they paid 4.5 percentage
points more in interest than German companies. This creates a level playing field for
Social
The sensitisation campaign made by the government has created growing concerns
about health issues and drink-driving this is one of the main reasons why the sales
of beers have fallen in the European countries. There was an increasing acceptance
of low alcoholic drinks that is why people switched from beer to wine to reduce the
excessive alcohol consumption in pubs and clubs. The off-trade German retailers
such as the Aldi and the Lidi have emphasized on the importance of supermarkets
in the distribution and the growth of their own-label brand beers rather than the
brewery-branded beers and in other parts of the world there was an increasing
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acceptance of European brands. Poland, Hungary and the Czech Republic have
Technological
From the case we are able to understand that technology had brought in efficiency
and development the manufacturing units not only were able to obtaining the
economies of scale but also over produced. This actually encouraged players to
search for the market. The internet has redefined the concept of commerce, and
has forced every organisation to look at the way it operates. Also increased
efficiency in production from new technologies has brought down unit costs, giving
have to strike a balance between the forces of globalisation and the need to
Environmental
The environmental impact on the European brewery industry is that the current
could result in a change in the industry’s raw material supply base would increase
the costs of raw materials. Also the drought has affected the raw materials that
come from Australia which has created a fall in the supply of the raw materials.
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Legal
The legal aspect is that lot of Mergers and Actuations are
These forces, which go beyond the immediate competitors in the industry, are:
These five forces determine the ultimate profit potential of an industry as a whole.
Within an industry, individual firms who develop particular strengths may be able to
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gain competitive advantage whatever the profit position of the industry as a whole
is:
strength of these forces: sometimes one will dominate; often it's a collection of two
or three.
which are significant in each case will allow an understanding of the dynamics of
understand the directions from which they face the greatest competitive pressures -
attractiveness. The threats to new entrants largely depend on the barriers to entry.
High entry barriers exist in some industries whereas in other industries are very
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easy to enter. This strategy would prevent competitors from countries like Japan
and the USA to come in the industry and compete with firms from the region.
Profitable markets that yield high returns will draw firms. This results in many new
entrants, which eventually will decrease profitability. Unless the entry of new firms
can be blocked by incumbents, the profit rate will fall towards a competitive level
(perfect competition).
The existence of barriers to entry (patents , rights, etc.)The most attractive segment
is one in which entry barriers are high and exit barriers are low. Few new firms can
Brand equity
Capital requirements
Access to distribution
Government policies
Industry profitability; the more profitable the industry the more attractive it will be to
new competitor
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Threat of substitutes
The presence of the substitute products can lower industry attractiveness and
profitability as they limit price levels. When the government passed regulations on
drinking alcohol drinks in public many people switched from beer to wine and other
drinks like coca- cola which have become substitute of beer. Also when campaigns
were made on the effects of alcohol on health many people have adopted other
leisure activities like jogging. The existence of products outside of the realm of the
alternatives:
Substandard product
Quality depreciation
Power of suppliers
Suppliers are the businesses that supply materials and other products to the
industry. The items bought from the suppliers (raw materials, components) have a
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little power because they may be small farmers and packaging companies. The
of raw materials, components, labor, and services (such as expertise) to the firm
can be a source of power over the firm, when there are few substitutes. Suppliers
may refuse to work with the firm, or, e.g., charge excessively high prices for unique
resources.
Supplier competition - ability to forward vertically integrate and cut out the buyer
4) Power of buyers
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The bargaining power of customers is also described as the market of outputs: the
ability of customers to put the firm under pressure, which also affects the customer's
Buyer volume
RFM Analysis
For most industries, the intensity of competitive rivalry is the major determinant of the
mortar
It used by a company which can intensify competitive pressures on their rivals. How
products and services. Companies that are successful with introducing new
technology are able to charge higher prices and achieve higher profits, until
reduce a business' own cost and thereby intensify pressure on its rival.
region. That is why Heineken is the largest European brewery business and the
world’s fourth largest brewery company. It can be seen from table 1 that the sales of
beer in the Netherlands have fallen between 2001 and2002 because of the adoption
of the different policies of the European government such as the regulations of alcohol
drinking and the introduction of the monopolies and the mergers commission. On the
other hand it can be seen that though this business is in the Netherlands, most of its
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products are sold in the European countries as the imports of beer has increased for
the Netherlands (from3.2% to 14.4%). Also it can be seen that the business has been
incurring more costs for its packaging which has risen by 11%. This is because the
packaging and components such as cans and glass bottles. On the same wavelength,
the other half in the Netherlands with the introduction of its two differentiated products.
Grolsch’s sales have been very much affected because the UK’s market is one of its
main markets and there the sales have fallen drastically between 1980 and2001. This
has arrived because countries like the UK were turning off-beer with many European
countries. In addition to that, the policies of the government against “binge drinking” in
the UK to stop excessive alcohol consumption in pubs and clubs have made people
switch from beer to wine. Also it can be seen that the sales of Grolsch may not have
increased greatly as the UK has imported only with 2% increase from2002 to 2004.
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The future
Forecasts from Euromonitor 2002 conclude that the world market for beer
between 2002 and 2007 will increase by 35 percent in Eastern Europe and the
Asian Pacific region by 28 percent whilst Canadean’s latest annual global beer
report forecasts sales of 1.5bn hectoliters in 2005.
The Interbrew market report 2002 concludes that most beer markets in Europe
are now relatively mature with limited potential for growth resulting in the focus
now moving towards Asia and Eastern Europe.