Global Forces and the European Brewing Industry

Résumé du document

This case study focuses on the brewing industry which developed in Europe. Because of the growing pressure in the global market, this industry is currently rethinking its strategy in order to strengthen the brand images and ensure the development of major firms. Consumer needs are changing and the companies have to adapt their strategies. For example, the Youth market is now asking for flavored beer. Imports and exports of beers have been flourishing and are playing an important role. For instance, Heineken, the biggest European brewery businesses, is ranked first in the top exported lager brands. Moreover, keen global competition leads to a wealth of acquisitions throughout the world such as Heineken/BBAG. Additionally, brands are looking at reinforcing their image worldwide. Large global brewers aim at economies of scale. Indeed, they control a series of key brands so that volume sales help to contain costs. Efficiency is also the rule. Relocation means concentration and consequently costs control as well as increasing volume capacity.

Extraits

[...] Global Forces and the European Brewing Industry This case study focuses on the brewing industry which has well developed in Europe. Because of the growing pressure in the global market, this industry is currently rethinking its strategy in order to strengthen its brand image and ensure development as a major firm. In order to understand the factors that may affect the market, we have subdivided our case study into: First, an analysis of the global environment Then a statement on the main key drivers of change Followed by the application of Porter's five forces framework Some notions on the dynamics of competition Finally, some crucial consumer needs Pest Political and legal factors: Regimentations for acquisitions restrictions of beer in Russia to promote Vodka) Excise duties on alcohol Limitations on alcohol imported for personal or professional use License arrangements Regimentations on alcohol advertising State laws applied to the alcohol degree of beers Germany) State regulation on under-age people ( ex: the US) Economic factors: Competitive pressure within global markets Maturity of the European market Increase in overseas operations ( exports and imports) Economic business cycles Sociocultural factors: Flavoured alcoholic beverages trend among youngsters Tradition and local history Health (deterrent effects) Consumer habits: preference for bottles or cans Religion Muslims) Technological factors: Improvement of production techniques New means of distribution originality in packaging Twist-off) Environmental factors: Pollution issues fertilizers, malt fermentation, excessive output) Recycling (cans and bottles) Key drivers of change Segmentation on consumer needs: Consumer needs are changing and the companies have to adapt their strategies according to consumer demands. [...]

[...] Additionally, brands are on the lookout for reinforcing their image worldwide. Large global brewers aim at economies of high scale. Indeed, they control a series of key brands so that the volume in sales helps to control costs. Efficiency is also a rule. Relocation means concentration and consequently costs control as well as increasing volume capacity. Pursuit of a good health care: Prevention policies have been implemented against alcohol. A new healthy of life' has been successful. [...]

[...] However, not doing it and keeping a ‘European way of life' image may cause the failure of the strategy. Consequently, some studies have to be done to determine if beer can be associated to Asian values without interfering with the European ones, or if the European values associated with beer won't go against the Asian ones. These points have probably been taken into account by the companies. And yet, as these points were not mentioned in the text, we thought it may be good to quote them. [...]

[...] Indicative bibliography by Oboulo.com: The British Brewing Industry, 1830-1980 by T. R. Gourvish (Author) and R. G. Wilson (Author). Ale, Beer, and Brewsters in England: Women's Work in a Changing World by Judith M. Bennett. [...]

[...] It's one of the major European trends. Declining consumption of beer: According to estimations, a new strategy is to be adopted in order to compensate a drop in beer consumption. The five forces framework Threat of entry The market is protected by: Capital requirement for entry (investment in utilities, facilities, machines) Regulations or government actions (healthcare) Economies of scale (mass production of beer) Experience (pioneer brands) Bargaining power of buyers Choice of the product (diversity) Central purchasing agency (bargain on the price) Bargaining power of suppliers High switching costs (expensive machines and specific industry) Threat of substitutes Alcoholic drinks Smirnoff) Cheap wine Soft drinks/ water Competition rivalry Mergers and acquisitions Exclusive contracts (with bars for instance) Slow market growth/impact of industry (maturity of the European market) Notions on the dynamics of competition Incumbent companies: Build or inherit entry barriers: Control of a range of key brands (global brands) Independence of some companies Heineken owned by a family) Reinforces barriers: Mass marketing Heineken) Globalization of distribution High market growth Russia) Against potential entrants: Strategic alliances Numerous acquisitions Interbrew acquiring Bass) Beer lobbying Heineken being valorized by the German parliament) Entrant companies: ‘soft' market management: Funds for non-alcohol advertising (to weaken competitive brewers) Competition in adjacent segments: New business target: the Asian market (new cultural segment) Starts price war: Advantages provided by local legislations (countries with low taxes being more likely to witness price war) Cost efficiency Crucial Success Factors Threshold product features: Consumers expect a beer to be: Alcoholic Cheap (at least not expensive) Available in many places (bars, supermarkets) Perceived value by customers: Local or global brand the German market) The brand image Reputation and historical background Packaging (cans or bottles) Originality in taste (especially among the young consumers) Conclusion The brewing industry is changing. [...]