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The Global Brewery Industry
- 1. The Global Brewery Industry Presented by Sobithan Sekar
- 4. ABInbev Brand Portfolio Budweiser brand is sold in North American Zone. The Budweiser family of brands had 11.6% share of the U.S. market and remained the number one brand in Canada. Budweiser is the number one beer in North America. Stella Artois Brand is the number one International beer brand in Argentina. Beck is the number one German beer in the world; Germany is the largest market grew in both volume and share.
- 8. Excise Duties in United Kingdom for Beer in Pence( 1973-2008) Source: Alcohol: Tax, price and Public health (2008) Assessed via www. ias.org.uk
- 9. Overview of Brewery Industry
- 10. Top Ten Global Brewers (1998-2004) Source: Ebneth and Theuvsen (2005) It is an unprecedented drive for consolidation primarily effected through a series of high profile mergers and acquisitions. The aggregate volume of the world top ten brewers has grown at more than the four times the pace of total industry volume since the mid 1990s Top ten brewers= 914(1,475 mhl); Others =563 ;563*4= 952
- 11. Transaction multiples of major Merging and Acquisitions in the Brewing Industry 2000-2005 Source: Ebneth and Theuvsen (2005)
- 12. Trends of Cross Country Acquisition and Merging Year Activity 1999 Merging between Brazilian Brahma and Companhia cervejeira Antarctica in 1999 which led to the creation of Ambev the largest brewing company in South America. 2000 Merging of Carlsberg (Denmark)and orkla (Norway) to form Carlsberg breweries; Carlsberg ( Denmark) acquired Kronenbourg (France) . 2002 Acquisition of Hart wall (Finland) by the Scottish & Newcastle (United Kingdom). The acquisition of Miller (USA) brewing by South African Breweries(SAB) 2003 Acquisition of Brau AG (Germany) by Heineken (Netherlands) 2004 Belgium Interbrew and Brazilian Ambev merged to create the largest brewer in the world Im-bev 2005 Anheuser-Busch,(USA) the industry leader, took over Harbin , the biggest brewer in northeast China, for $718m 2006 SABMiller (South Africa) has agreed to buy the Foster’s beer brand in India in a $120m deal as it seeks to build a stronger foothold in the subcontinent. 2007 On 19 November 2007 , the board of Royal Grolsch NV accepted a €816 million offer for the company by SABMiller. The takeover was completed with the delisting of Grolsch's shares on 20 March 2008. 2008 Kohlberg Kravis Roberts provided a rare fillip for the private equity industry after confirming its maiden acquisition in South Korea in a deal worth $1.8bn. 2009 Kirin Holdings , one of Japan’s leading beer and beverage companies, has won exclusive negotiating rights to buy up to 43.25 per cent of San Miguel Brewery (dominant beer in the Philippines) in a deal that could be worth more than $1bn.
- 16. For Example Impact of NAFTA on Brewery Industry.
- 21. Beer Markets in four emerging economies:
- 22. Relation between PEST ad Meta level Trends in the Brewery Industry: Source: Author (2009)
- 23. The five forces of Brewery Industry competitiveness
- 25. Product life cycle theory for brewery Industry: It can be argued from the Figure 4.6 that the markets in the early stage of the product life cycle (Africa, China and Central and Eastern Europe) is characterised by rapid growth, explosive proliferation of firms and low barriers to entry and later when the market becomes mature (Latin America, USA, UK and France) the customers become more knowledgeable and markets in this stage are characterised by competitive nature where growth rates are expected to be flat or slightly declining.
- 26. Overview of Different markets in Brewery Industry:
- 27. Promising Growth in Emerging Economies Chief operating officer of the Asia division of Australia’s foster Brewing group (2005) predicts that China’s market for beer will grew at a rate between 10 and 25 percent per annum. The segment of foreign beer is expected to grow 15-30 percent per year. Global consumption, by comparison, is growing at 1.2 percent per year.
- 28. Consumption Characteristics of different beer markets: Source: Author (2009) compiled from Carlsberg Annual report (2008)
- 29. Consumption Characteristics of different beer markets: Source: Author (2009) compiled from Carlsberg Annual report (2008)
- 30. Carlsberg Strategy in China In 1998 Carlsberg opened a US$80m Greenfield brewery near Shanghai to produce premium beer. However, following losses over several years, Carlsberg sold its equity stake to Tsingdao, a leading brewery in the north of China, at a loss. Apparently Carlsberg overestimated the growth of the premium segment and underestimated the pace of upgrading of local brands and the marketing drive of international competitors such as Sapporo in Japan.
- 31. InBev China: 30 plants in eight provinces * Xinjiang Xinjiang Guangxi Hunan Hubei Hainan Gansu Qinghai Ningxia Shaanxi Jiangxi Anhui Fujian Neimongu Shanxi Shandong Xizang Sichuan Yunan Guizhou Henan Heilongjiang Jilin Liaoning Zhejiang Jiangsu Hebei Beijing Shanghai Guangdong Gansu Jiangsu Province 74 million inhabitants Market Position: #2 Breweries: 2 Zhejiang 47 million inhabitants Market Position: #1 Breweries: 7 + 1 bottling center Guangdong 86 million inhabitants Market Position: #1 Brewery: 3+ 6 bottling centers Hunan 90 million inhabitants Market Position: #1 Breweries: 2 Hubei 67 million inhabitants Market Position: #1 Breweries: 5 Hebei Province 67 million inhabitants Market Position: small Breweries: 1 *including 10 sites of Zhujiang brewery Jiangxi 43 million inhabitants Market Position: significant Breweries: 1 Fujian 35 million inhabitants Market Position: #1 Breweries: 2
- 32. Number of FDI in Central and Eastern Europe: There are total of 161 FDI investments in the CEE market alone.
- 33. Local Nature of the Industry: Source: Author (2009) Compiled from Larimo et al (1990).
- 35. Local nature of the Industry The previous table clearly illustrated that there is a limited demand for the foreign Beer brands due to the local nature of the industry and the consumer preference for local brands. For example: In Czech Republic beer is a part of Czech cultural phenomenon in itself and undisputedly beer belongs to the life in Czech Republic. Table 4.11 indicates the major beer holder’s which are occupied by the local brand owners. The decline of beer consumption is due to the shift in the consumer consumption pattern from beer to wine.
- 38. First Mover Advantage CEE markets are characterised by the constant increase in beer consumption. This large beer market will create good opportunities for market penetration of established brewing companies and will strengthen the brewing industry. Some of the largest brewers like Carlsberg are interested in exploiting the profitable growth potential of the Russian market as well as number of other markets in CEE (Carlsberg Annual report, 2008).
- 41. InBev in 1990 Fully owned operations and minority stakes
- 42. InBev Today Operations agreements Operation in thirty countries over the world.
- 45. ABInbev Brand Portfolio Budweiser brand is sold in North American Zone. The Budweiser family of brands had 11.6% share of the U.S. market and remained the number one brand in Canada. Budweiser is the number one beer in north America. Stella Artois Brand is the number one International beer brand in Argentina. Beck is the number one German beer in the world; Germany is the largest market grew in both volume and share.
- 48. SABMiller: Internationalisation path of SABMiller Source: Author (2009) adopted from SABMiller Annual Report (2008)
- 49. Reason for Aggressive market strategies: Improve the nation’s competitive advantage of SABMiller. Source: Author (2009) compiled from SABMiller Annual report (2008) and Porter (1990)
- 52. Anheuser-Busch Heineken Miller Fosters Kirin Coors Brahma Groupe BSN SAB Carlsberg Interbrew 1992 Brewer Rank Volume ( Mhl ) 1 9 2 3 4 5 6 7 8 10 17 0 50 100 150 InBev Anheuser-Busch SABMiller Heineken Carlsberg BBH Modelo Scottish & Newcastle 200 5 Brewer Rank 1 8 2 4 5 6 7 0 50 100 150 Volume ( Mhl ) 3 200 InBev’s Strong Track Record of Growth 250 9 10 Tsingtao Molson Coors Source: AbInbev Impact / internal data
- 54. Internationalisation Path of Carlsberg:
- 57. Carlsberg Strategy in China
- 59. Integration and National Responsiveness matrix:
Notes de l'éditeur
- The reason I am here is because my post graduate dissertation was on Brewery industry. It was tilted as International business strategy of brewery Industry in the perspective of national responsiveness and National Integration. So i am here to share with you some of my facts and ideas.
- I think its is our social responsibility to find out weather there is truly any global or local beer as beer is the widely consumed alcoholic beverage and the third most popular drink after water and tea. For example: People and places always differ. Red means danger or stop in Britain, Death in Turkey but its a good fortune in China. Patterns of global diversity and the implications of these differences have been studied from a range of perspectives, but we are concerned with how this diversity and related differences affect the brewery industry. The basics of brewing method and taste are shared across the national and cultural boundaries. Bitter: we have bitter beer which is a synonymously used in England and pale ale which is famous in Scotland. And Extra special bitter which is used in USA. And Stout and Porter beers Which are really dark in colour and famous with the streets and river porters of London Lager beer: It is the cool fermented beers of Central European origin Wheat beer: It is brewed with a large proportion of wheat and had its origin in Germany Hybrid beers : which is invented by the German immigrants in California. Lambic beers: which has a Belgium origin and its is naturally fermented one with the wild yeast rather than cultivated. Although globalisation was a general trend in many industries brewery industry has always lagged behind and remained fragmented.
- Hard to find any global product within the industry. Most of the largest brewery like AB- Inbev still sells 90% of its Budweiser brand in the USA. (Budweiser is the world’s largest single beer brand, it accounts for only 3.6% of world beer sales each year.); Heineken generates 61% of its profit within the EU.
- It was in the 1990s there was a fear that most brewers are very small and vulnerable to take over by packaged goods companies.
- From the pace of merging and acquisitions : 1.Internationalisation is going in a rapid pace 2.If beer is mainly local why these merging and Acquisitions is taking place? 3. Why cant brewery industry choose exporting or licensing rather than FDI as a main mode of market entry?
- If there is a cross border market entry and Acquisition ./What about the local nature of the country and the cultural clash between the countries.
- The desire of citizens to upgrade was more in prosperous economies bcz of the buying power of the customers.
- For example In 1989 when communalism collapsed Hungary was found to have a better climate for foreign investment than the other countries in the region. In1999 SABMiller bought Pilsner Urquell for US$ 629 m.
- Ione cannot ignore the impact of the market liberalisation in any market as
- There is a decline in the Beer consumption in the developed economies as the market is reaching saturation
- Developing economies are in the early stage of the product life cycle theory as they are largely characterised by huge population, rising incomes and ongoing urbanisation and Countf the product life cycle and still they have a long way to go . Countries like Africa, China, Vietnam and India , CEE are charecteriesed
- China is one such example where it shows the promising growth which is in stark contrast to Developed economies like UK
- The adaptation to the subtle tone of serving the customers can be a tricky task if the consumer characteristics of the respective country is not analysed.
- The adaptation to the subtle undertone of serving the customers can be a tricky task if the consumption characteristics of the respective country is not analysed. The customer loyalty to local tastes and brands creates barriers to entry for international brands in countries like Denmark, Uzbekistan and Western China .
- On this map of the world, the red indicates where InBev was active in 1990. The company was primarily a local European organization, with a limited presence in Central and Western Africa.
- Fifteen years later, this is what the world of InBev looks like. Y ou can see that there has been a sea of change in terms of InBev’s global presence , which is the result of the company’s pro-active, leading role in the consolidation of the world’s brewing industry .
- When did it all begin? InBev’s roots go back to the Den Horen brewery, which began making beer in 1366. Interbrew was formed in 1987 when the two largest breweries in Belgium merged: Artois, located in Leuven, and Piedboef, located in Jupille. After the merger in 1987, InBev acquired a number of local breweries in Belgium, including Hoegaarden. By 1991, the Belgian beer market was becoming consolidated, and a second phase of targeted external growth began outside of Belgium’s borders. The first transaction in this second phase took place in Hungary.
- In 2001, the company established itself in Germany, with the acquisition of Beck’s and Diebels. During this same period, InBev built a beachhead in China by acquiring stakes in the KK Brewery and the Zhujiang Brewery in 2002.
- Overall Acquisition of the Breweries in emerging economies allowed SABMiller to have a high equity control mode.i.e. Allows them to serve the local market with the local product.
- In 1992, we were number 17 in the ranking of the world’s top brewers, in terms of volume. In 2005 we are the world’s No. 1 brewer, with a beer volume of 191 975 million hl (223.5 m hl in total volume including soft drinks). InBev has achieved this through both organic and targeted external growth. Going forward, we have committed to achieving both our company mission and vision…
- Carlsberg was too early in internationalisation ; they didn't have the same international pressure like AbInbev; they are not aggressive in their market penetration strategies initially they had the foot hold strategies on the emerging economies sad slowly increased their resource commitment to mitigate any risk associated with it.
- For example:
- Heineken comes in to a market with international lagers namely Heineken and Amstel and offer one as the premium price point and offer second as the main stream brand with average price point. Where such a condition is not feasible they aim for segmented leadership.