China, with 7 per cent annual growth, had become the largest single market by volume, while Brazilian volumes had overtaken Germany in 2005 (Euromonitor, 2006). Table 1 details the overall decline of European beer consumption. Decline in traditional to several factors. Governments key markets is due such as Tesco or Carrefour, which often use eut-priee offers on beer in order to lure people into their shops. are campaigning strongly against drunken driving, affecting the More th an one-fifth of beer volume is now sold propensity through supermarkets. to drink beer in restaurants, pubs and German retailers such as bars.
There is increasing awareness of the effects of Aldi and Lidl have had considerable alcohol on health and fitness. Particularly ln the United their own private-Iabel Kingdom, there is growing hostility towards so-called beers. However, although on-trade volumes are fallin_ binge drinking, in Europe, the sales values are rising, as brewers excessive alcohol consumption in pubs and clubs. Wines have also become increasingly introduce higher-priced success with (rather th an brewery-branded premium products such popular in Northern European markets.
However, as extra-cold beer consumption other hand, a good deal of this increasing demand per capita varies wic;lely between lagers or fruit-flavoured beers. On the countries, being four times higher in Germany than for premium products is being satisfied by the in Italy, for example. Some traditionally import of apparently exotic beers from overseas consumption low- European markets have been (see Table 2). showing good growth. Brewers main purchasing The drive against drunken driving and binge (accounting costs are packaging for around half of non-labour costs), ra drinking has helped shift sales from the on-trade material such as barley, and energy.
The European (beer consumed on the premises, as in pubs or packaging restaurants) to the off-trade (retail). Worldwide, the industry is highly concentrated, by international companies off-trade increased from 63 per cent of volume in and Owens-Illinois 2000 to 66 per cent in 2005. The off-trade is Dutch brewer Heineken complained increasingly dominated by large supermarket chains dominat such as Crown in cans in glass bottles.
During 2006, rise in packaging costs. of an 11 per c GLOBAL FORCES AND THE EUROPEAN BREWIN (JY European beer consumption by country and year (000 hectolitres) 1980 2001 2000 2002 2003 ~ 2004 7651 8627 8734 8979 8881 8970 12945 10064 5452 4024 9703 5202 4136 20629 100385 4247 5536 9935 5181 4179 21420 103105 4288 5594 9986 5282 4085 21331 100904 4181 5625 9901.
NIA NIA NIA NIA 4174 9539 417 8762 16289 472 16694 445 16340 440 12213 7651 3534 20065 3935 13129 2327 6453 29151 5011 4194 57007 12922 2290 6276 31126 4932 11985 2420 5948 30715 4998 4127 59384 6698 2738 23745 89820 land =-ance 3ennanyt NIA 3reece ay* :::ortugal ::Jain : eden : vitzerland 4433 65490 -~ n-EU countries; t1980 excludes 4141 58234 4862 4370 20200 95639 21168 97107 3905 5315 17452 94994 NIA NIA NIA 5~6 17194 17340 NIA NIA 12687 2490 6266 373 12771.
2270 6008 33451 4969 4334 60302 12747 NIA 6224 NIA NIA 4635 4262 59195 4566 NIA NIA GOR. Figures adjusted. rce: www. Brewersofeurope. org. able 2 Imports of beer by country Acquisition, tria = =elf1ce 3ennany .. 5reece _and Imports 2004 (% of consumption or production» =algium ~:; mark and Imports 2002 (% of consumption untry or production) 5. 1 4. 74 2. 6 2. 3 23 3. 1 4. 1 NIA 27. 15 NIA 3. 2 5. 4 :oain 1. 1 11. 7 : eden NIA : 15. 4 10. 9 titzerland 3 licensing and strategie alliances have ail occurred as the leading brewers battle ta control the market.
There are global pressures for consolidation due ta overcapacity within the industry, the need ta contain costs and benefits of leveraging 6. 4 strong brands. For example, Belgian brewer Interbrew 10. 2 NIA purchased parts of the old Bass Empire, Becks and 7. 3 31 Whitbread in 2001 and in 2004 announced a merger with Am Bev, the Brazilian brewery group, ta create 4 the largest brewer in the world, InBev. The second NIA NIA largest brewer, the American Anheuser-Busch, 37 38. 4 14. 4 2002, South African Breweries acquired the Miller has been investing in China, Mexico and Europe. ln Group (USA) and Pilsner Urquell in the Czech NIA NIA NIA Republic, becoming fast-growing SABMilier.
Sm aller players in Chinese and South American markets are being snapped up by the large international 18 15. 6 12. 3 brewers tao. Medium-sized is withdrawing Australian brewer Fosters from direct participation in many international . port figures do not include beers brewed under licence in home ntry; countries vary in measuring 3ource: www. brewersofeurope. org. % of production or consumption. markets, for example selling its European brand-rights ta Scottish & Newcastle. Table 3 lists the worlds top 10 brewing companies, accounted which for around half of world beer volumes.
There remain many small specialist and regionalca ~ CH APTER 2 THE ENVIRONMENT Table 3 The worlds top 10 brewery companies by volume: 2005 Company Share global Country of origin volume (%) sales in 2005 of â‚¬313m, it is less than a twentieth of the size of Heineken. Its key products include Grolsch premium lager and new flavoured beers (Grolsch lemon and Grolsch pink grapefruit). ln The Netherlands InBev 10. 8 Brazil-Belgium Anheuser-Busch 9. 4 USA SABMilier.
7. 3 South Africa (relocated to UK) Grolsch holds the rights for the sale and distribution of the valued US Miller brand. About half its sales are obtained overseas, either through export or licensing of production: the United Kingdom is its Heineken 5. 7 Netherlands second largest market. ln 2005, Grolsch centralised Morelo 2. 9 Mexico its own production Carlsberg 2. 9 Oenmark to increase efficiency and volume, and opened a Coors 2. 6 USA sm ail additional TsingTao.
2. 4 China Baltic Brewery Holdings 2. 2 Oenmark/UK Asahi 2. 1 Japan on a single new Dutch brewery trial brewery in order to support innovation. Innovation and branding are core to the companys strategy. The company believes that its strong and Source: Euromonitor International, The World Brewing Industry. distinctive beers can succeed in a market of increased homogenisation.
Brewers, such as the Dutch company Grolsch (see below) or the British Cobra Beer, originating in the Indian restaurant market. Its brand is reinforced by its striking green bottles and its unique swing-tops. InBev (Belgium/Brazil) InBev was created in 2004 from the merger of Belgian InterBrew and Brazilian AmBev. With a turnover of Four brewing companies â‚¬13. 3bn in 2006, it is the largest brewer in the world, Heineken (The Netherlands) different countries. Heineken is the biggest of the European brewery include Becks and Stella Artois.
Through a series of businesses, and has three-quarters acquisitions, holding number one or number two positions in 20 of its sales in the region. Total sales in 2006 were â‚¬11. 8bn (EBbn). About 5 per cent of sales are in Asia-Pacific and Its well-known international brands InBev has become the second largest brewer in China. The company is frank about its strategy: to 17 per cent of sales are in the Americas. The transform companys the world to the best. It aims to do this by building biggest brands are Heineken itself and Amstel.
The company remains a family-controlled itself from the biggest brewing company in strong global brands and increasing efficiency. business, which it claims gives it the stability and Efficiency gains will come from more central independence coordination to pursue steady growth internationally. Heinekens strategy overseas is to use locally acquired comparues as a means of introducing of purchasing, from the optimisation the including media and IT; of its inherited network of breweries; and from the sharing of best practice Heineken brand to new markets.
It aims to strengthen across sites internationally. local companies continue, InBev is now emphasising technology. by transferring expertise and The result is to create economies of scale Although acquisitions organic growth and improved margins from its existing businesses. for both the local beers and K~ineken. Heinekens four priorities for action are to accelerate revenue growth, Scottish and Newcastle (UK) to improve efficiency and cost reduction, to speed Scottish and Newcastle is a European-focused up strategy implementation and to focus on those markets where the company believes it can win. brewing group based in Edinburgh.
ln 2005, its turnover was f:3. 9bn (â‚¬5. 5bn). Its key brands include John Smiths, Kronenbourg, Grolsch (The Netherlands) Royal Grolsch NV is a medium-size brewing group, established Kanterbrau, Baltika and (in Europe) Fosters. It is the fourth largest brewer in international in 1615. With overall Europe in volume terms, and market leader in the UK, France and Russia.
The company has made many GLOBAL FORCES AND THE EUROPEAN BREWING INDUSTRY . ions in the UK (including Bulmers eider), . Greece and Finland. The groups 50 per cent ent in Baltic Beverages has given it exposure fast-growing ic countries. markets of Russia, Ukraine and ln China, Scottish and Newcastle a 20 per cent stake in CBC, the countrys brewery. ln India, the companys les is the countrys fifth United largest brewer, with the _- her brand. ln the USA, Scottish and Newcastle second largest importer of foreign beers. The ,¦¦ -r-,ny emphasises the development of innovative emium beers, and is closing down its more rent breweries.
Questions 1 Using the data from the case (and any other sources available), carry out for the European brewing industry (i) a PESTEL analysis and (ii) a five forces analysis. What do you conclude? 2 For the four breweries outlined above (or breweries of your own choice) explain: (a) how these trends will impact differently on these different companies; and (b) the relative strengths and weaknesses of each company.