...An institutional analysis of the beer market | Written by: Frank Bloemhof Student number: 294673 International Business School, Hanze University of Applied Sciences, Groningen Lecturer: Arnd Mehrtens Written by: Frank Bloemhof Student number: 294673 International Business School, Hanze University of Applied Sciences, Groningen Lecturer: Arnd Mehrtens | | | Date: 29 January 2015 Word count: 8,925 Abstract The global beer industry - An Analysis of opportunities and risks in light of its institutional characteristics, as exemplified in part by Heineken. In this report you will read about a novel concept in economics called the Three Pillar Model, with a particular focus on the pillar of entities. After a general introduction, specific information about the beer market will be given. This is followed by a short analysis of the company Heineken NV, a Dutch beer brewer operating in over 170 countries worldwide. To end the report a conclusion will be given. This is followed by, which will include among other things the recommendation to create a strong bond with the consumer. In the very end you will find a list of all the sources that were used to write this report. Contents Abstract 1 Introduction 3 1. Literature review 4 1.1 Three pillar model 4 1.2 Theories 4 1.2.1 Neoclassical economics 5 1.2.2 Institutional economics 6 1.2.3 Behavioural economics 8 1.3 Entities 10 1.3.1 Institutions 10 1.3.2 Organizations 10 1.3.3 Individual...
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... | |Industry Analysis | |The Beer Industry | |Spring 2010 | [pic] Beer Industry The term beer means “…any beverage brewed from a starch (or farinaceous) grain. Because the grain is made into a malt, another term for beer is malt liquor”. (The Beer Industry) According to the North American Industry Classification System, the beer industry is found in section 312: Beverage and Tobacco Product Manufacturing. NAICS states that “Industries in the Beverage and Tobacco Product Manufacturing subsector manufacture beverages and tobacco products. The industry group, Beverage Manufacturing, includes three types of establishments: (1) those that manufacture nonalcoholic beverages; (2) those that manufacture alcoholic beverages through the fermentation process; and (3) those that produce distilled alcoholic beverages…” Although beer is within the same section as wine and distilled spirits, they do not consider them the same. Within section 312 they have five separate sections: Beer can be found under section 312120 Breweries. Within this section the term Breweries is comprised of “establishments primarily engaged in brewing beer, ale, malt liquors, and...
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...World Beer Industry The history of beer or ale can be traced back to 7000 years ago in today’s Iran. Over centuries, beer gradually has become a routine diet in every society. Today, approximately 182.69 million kiloliters beers are consumed globally every year (Kirin, 2011). The world beer annual consumption has been consecutively increased for 25 years since 1985. In 2010, the world beer consumption increases 2.4% compare to 2009. However, the beer consumption around the world is various from different regions. China has been consecutively the top one beer-consuming nation on the earth for eight years, consuming 24.5% of the world beer consumption. On the list of the world's 25 largest beer-consuming nations, Nigeria, India, and Brazil reached the highest growing rate of 17.2%, 17.0%, and 16.0%. Asia, Latin America, and Africa have strong demand for beer and lead the world consumption of beer in recent years. Asia was consumed 5.3% more beer in 2010 compare to 2009, has maintained increasing rate for 10 years consecutively, and a 33.6% share of the world beer market was taken by Asia. In China, the annual consumption of beer is 31.5 litters per capita (Kirin, 2010), where as in Czech Republic, the consumption of beer is 131.7 liters per capita per year (Kirin, 2010). The Czech Republic has been the top one beer-consuming nation in per-capita consecutively for 18 years. Even though the beer consumption per-capita dropped about 21.1 633-milliliter bottles in 2010...
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...THE COMPETITIVE FORCES AFFECTING INDUSTRY MEMBERS: PORTER’S FIVE-FORCES MODEL FOR ANALYSIS Pressure from Buyer Bargaining Power--High The three components that make up the “buyers” of beer are made up of distributors/wholesales, retailers/restaurants, and consumers. Distributor/wholesalers embody an essential link in the market channel for breweries here in the US given regulations prohibiting the sale of beer directly to both retailers and consumers. Thus, distributors/wholesalers have quite a bit of bargaining power and can impact market share by way of their support, marketing, and promotions depending on the incentives offered by the manufacturer. Retailers and restaurants are another cog of the buyer channel. The main goal of the retailer is to drive traffic through their stores in order to improve sales and, coincidentally, balancing profit margins. As a result, retailers are looking to stock their shelves or bars with the beer products that are selling with a recent focus on more sub-premium brands due to the recent economic situation, as well as supporting their growth of craft beers which have been outgrowing the industry and offer higher average selling prices as well as higher margins. Lastly, consumers ultimately drive the preferences of both the distributor and the retailer channel as they are the end “user” of the beer beverage. With the plethora of beverage choices in the market, both alcoholic and non-alcoholic, along with the consumer becoming...
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...1. The U.S. brewing industry has become more concentrated over the last two decades for several reasons. a. The consumption of beer has been slowly declining, in order for companies to gain market share, they have to take customers from other companies. This would then lead to some companies to go out of business due to the lack of customers. b. Brand loyalty also increased. Advertisement played a large role. Larger companies were able to spent $0.40 per case of beer sold. Smaller mass-market brewers could not afford to spend near that amount. c. Technological change in canning and distribution lead to the concentration of the brewing industry, as well. The size that a mass-market brewer has to accomplish to acquire all economies of scale has grown. They must produce more beer and achieve more market shares. Not all companies reach minimum efficient scales of production. 2. The competitive structure of the brewing industry using Porter’s five forces model. a. Risk of entry by potential competitors. New micro brewing companies have low barriers of entry. New micro brewing companies do not rely heavily on brand loyalty or economies of scale. Mass market brewers our faced with higher barriers to entry because of brand loyalty of customers and absolute cost advantages. b. Intensity of rivalry of previously established companies new customers are always entering the market as they become legal age and the willingness to consume beer, so mass market brewers try to...
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...Five Force Analysis: Supplier Power The beer market’s prime suppliers are farmers. Most breweries buy their supplies on the relevant countries’ futures exchange. Hence the branch has an opportunity to diversify its risk by trading futures contracts as well as hedging other risks. Various farmers supply the hops, barley, corn and rice used to produce beer. In 2008, there were 2,053 companies that purchased these ingredients. The overall beer industry sold nearly 206 million barrels of beer in 2009. For major brewers, the volume of ingredients purchased, the large number of farmers available to purchase the ingredients from, low switching costs on the part of the brewer, and inability of the farmers to forward integrate, supplier power in considered low in regard to the major brewers. Craft brewers who purchase fewer ingredients and sometimes more specialized ingredients may cause supplier power for this segment of the industry to be somewhat higher; yet, overall, suppliers have put limited pressure on price and supplier power is LOW. There are only a few large suppliers of aluminium cans, plastic and glass bottles, which increase the supplier’s bargaining power. However, taken into consideration largest brewery companies existing we can assume that the suppliers of those goods have a incentive in taking care those as a customer and will therefore provide them with the best possible price, in order to keep them as a customer. Competitive pressure from supplier bargaining power...
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...afafasfasfasfafafas CASE STUDY – INDIAN BEER INDUSTRY Microeconomics Group Assignment Group 3: Shubham Arora – 3 Karthik B – 4 Manisha Garg – 19 Rama Lakshmi M - 32 Sstitute of Management S.P Jain Institute of Management and Research Research Indian Beer Industry – Case Study Analysis The Indian beer industry has been witnessing steady growth of 7-9% per year over the last ten years. The rate of growth has remained steady in recent years, with volumes passing 100m cases during the 2005-2006 financial year. With the average age of the population on the decrease and income levels on the increase, the popularity of beer in the country continues to rise. Industry Consolidation and Emergence of a new Bi-polar Market Dynamic The Indian beer industry has witnessed a big change during the last five years. The industry was previously dominated by competition between the Vijay Mallya-controlled United Breweries Group and the Manu Chabbriacontrolled Shaw Wallace. The scenario changed, however, with the entry of SABMiller in India. The international beer giant started by acquiring small breweries in the south but then completely changed the landscape with the acquisition of Shaw Wallace’s beer portfolio for a reported US$132m in 2003. This gave SABMiller ownership of strong brands like Haywards 5000, along with its existing brands. After the acquisition, SABMiller focused on spreading its footprint across India, including opening new breweries in states where Shaw Wallace did not have...
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...Welcome London | 2 November 2012 Heineken NV What’s Brewing Seminar Delivering Sustainable Top-line Growth Alexis Nasard Chief Commercial Officer and Member of the Executive Committee London | 2 November 2012 Heineken NV Disclaimer This presentation contains forward-looking statements with regard to the financial position and results of HEINEKEN’s activities. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. Many of these risks and uncertainties relate to factors that are beyond HEINEKEN’s ability to control or estimate precisely, such as future market and economic conditions, the behaviour of other market participants, changes in consumer preferences, the ability to successfully integrate acquired businesses and achieve anticipated synergies, costs of raw materials, interest rate - and foreign exchange fluctuations, change in tax rates, changes in law, changes in pension costs, the actions of government regulators and weather conditions. These and other risk factors are detailed in HEINEKEN’s publicly filed annual reports. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this presentation. HEINEKEN does not undertake any obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after...
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...TFI MDX15 C 05 TFI MDX15 C 05 Enero, 2015 Enero, 2015 SAB MILLER MEXICO Un Gigante emprendedor SAB MILLER MEXICO Un Gigante emprendedor Expansión de SAB Miller en México ante un entorno de una Industria con un monopolio regional; ¿es para el grupo un mercado atractivo? Cuál debería de ser la Estrategia para los siguientes años? 1. Introducción En Enero del 2015 SAMiller México se encontraba prácticamente a un par de meses de cerrar su año fiscal F15*, con un record de ventas casi llegando al máximo de sus volúmenes históricos alcanzado en el 2008, se veía un futuro retador para el siguiente año y era un momento trascendental para la Compañía. A pesar de que en el 2013 la CFC (Comisión Federal de Competencia) había dado un fallo en contra de las prácticas monopólicas y prohibición de exclusividades, más de un año después la Industria Cervecera en México seguía en un entorno dominado por 2 grandes jugadores Anheuser-Busch InBev (Grupo Modelo) y Heineken (Cervecería Cuauhtemoc-Moctezuma) ante un Mercado cerrado dominado regionalmente por ambos productores y con un entorno de acceso limitado para nuevos competidores en la Industria; a pesar de que el crecimiento en marcas Premium así como en Importadas y Artesanales había sido muy por arriba del crecimiento promedio del mercado, la participación de este segmento no llegaba a más del 5% en volumen y cada vez existían más competidores jugando en esta categoría con una gran diversidad de marcas y presentaciones...
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...Boston Beer Company- Britton McGlachlin As a relatively new entrant into the beer brewing industry, the United States has often been poked fun at and considered to be an inferior beer brewing country among global competitors. Up until 1984, most domestic beer options were pale lagers produced by the mass market brewers. If a person wanted to get a full and flavorful beer, it was considered that importing was the only option with beers such as Heineken and Beck’s establishing themselves as the premium beer leaders. American craft beers were virtually non-existent other than a few small basement and kitchen operations, and there were no widely distributed micro brewed, now known as craft, beers available. (History) In the early 1980s, Jim Koch, a would be sixth generation beer brewer, was convinced that he could find a niche in the competitive beer market for a high-quality American beer. In 1984, Koch used his great-great grandfather’s 150 year old recipe called “Louis Koch Lager” to brew his first batch of what eventually became Samuel Adams Boston Lager. (About) Jim began to take bottles of his beer bar-to-bar for tasting and received excellent feedback about the quality and flavor of his beer, which used all natural ingredients with no adjuncts. In 1985, Jim decided to debut in the Boston market with small batches focusing primarily on quality. Six weeks after its introduction, Samuel Adams was selected as “The Best Beer in America” in The Great American Beer Festival’s...
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...Industry Overview: Craft Breweries & Microbreweries Craft breweries and microbreweries produce beer in limited quantities when compared to large breweries (generally under 10,000 barrels per year) and usually distribute their beer within a limited geographic region. Craft breweries often specialize in specific styles of beer, and focus on providing customers a superior product, using traditional brewing techniques. Certain craft breweries sell beer directly on their premises, and are called brewpubs. Craft breweries are known to develop clever marketing strategies with limited budgets in order to connect with their target markets. Industry Overview BC In 2009, 209 breweries were identified by Statistics Canada and 49 of those establishments were located in British Columbia. However, an article by The Province estimates that by the end of 2013 there will be more than 60 independent breweries (this number includes microbreweries, nanobreweries and brew pubs). This increase in breweries is mirrored by an increase of 6.4% of microbrewery beer sales in British Columbia in March 2007 to 12.7% in March 2011. In the last two years, this number have only grown. In an article published July 3, 2013, The Province asserts that craft beer is almost at 20% of the market share for beer in British Columbia, while BC Business cites the Craft Brewers Association of British Columbia in stating that the market share is currently around 15% but that many brewers are experiencing sales growth...
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...discuss the trends in the global beer markets. Most companies started out on a local or regional level and changed the company’s focus to incorporate a multinational or global perspective. The global beer market has gone through a process of rapid change. In many emerging and developing markets, economic and societal developments and transformative improvements in the quality and appeal of beer brands have resulted in strong organic growth in the beer category. Developed markets have also undergone change as brewers responded to constrained or declining beer consumptions trends. There are several trends in the global beer market that accounts for the potentials seen throughout the industry. One of the trends is growth rate. Surpassing the United States in 2003, China is dominating the global beer industry. The global beer industry approximated $385.5 in 2005 and $376.7 in 2004 and were expected to increase at a steady pace. This indicates a growth rate of 2.3% during the year 2005. The consumers demand for beer has been hampered by adverse global economic conditions in which the growth of the industry is at a slow recovery. Grupo Modelo with its Corona brand is the No. 1 premium imported beer in Canada and the growth rate continues to accelerate. Another global beer markets trends is consolidation. Consolidation would be considered as one of the earliest trends within the beer industry. In the early development and rapid growth stage, the industry was very fragmented. In the...
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...Boston Beer Company Case Study Boston Beer Co. is a craft brewery with primary location in Boston, Massachusetts, which sold about 3.8 million barrels of its products in 2017. Their production consists of over sixty beers under the Samuel Adams brand, over ten flavored malt beverages under Twisted Tea brand and five hard sparkling waters under the Truly Spiked & Sparkling brand name. Majority of the beers produced by the company is positioned in the Better Beer category which includes craft brewers, domestic specialty beers and most imports. While the overall consumption of beer declined in the past decade, the consumption of high quality beers slightly increased, but this increasing trend is accompanied by large increase in the number of...
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...THE COMPETITIVE FORCES AFFECTING INDUSTRY MEMBERS: PORTER’S FIVE-FORCES MODEL FOR ANALYSIS Pressure from Buyer Bargaining Power--High The three components that make up the “buyers” of beer are made up of distributors/wholesales, retailers/restaurants, and consumers. Distributor/wholesalers embody an essential link in the market channel for breweries here in the US given regulations prohibiting the sale of beer directly to both retailers and consumers. Thus, distributors/wholesalers have quite a bit of bargaining power and can impact market share by way of their support, marketing, and promotions depending on the incentives offered by the manufacturer. Retailers and restaurants are another cog of the buyer channel. The main goal of the retailer is to drive traffic through their stores in order to improve sales and, coincidentally, balancing profit margins. As a result, retailers are looking to stock their shelves or bars with the beer products that are selling with a recent focus on more sub-premium brands due to the recent economic situation, as well as supporting their growth of craft beers which have been outgrowing the industry and offer higher average selling prices as well as higher margins. Lastly, consumers ultimately drive the preferences of both the distributor and the retailer channel as they are the end “user” of the beer beverage. With the plethora of beverage choices in the market, both alcoholic and non-alcoholic, along with the consumer becoming increasingly...
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...Entry and Diversification: Corona Beer (Modelo) Case Analysis Shirley Saucer Strategic Management BUS 599 Strayer University Professor Petty Introduction Corona Beer is the flagship for the Modelo Company brand. With ninety years of relevance in the alcohol beverage industry, undoubtedly Modelo has set certain standards and criteria, which many have taken notice. The Modelo Company has easily earned its stake within this industry, persevering through strife’s such as the prohibition era. In operation since March of 1922, Modelo has solidified what it means to be a top contender in the imported beer market. In fact they are one of the only brewing companies that are still family owned and operated. Within this paper we will discuss the trends in the global beer market, Modelo's international expansion, as well as challenges that they face from competitors such as the InBev Company and whether or not they should diversify their business strategy which has made them so successful. Beer has been brewed since around the 14th century when it got its beginnings in Europe. Beer comes in many flavors and shades and is varied depending on regional brewing methods. A lot has changed since the humble beginnings of beer brewing as a craft. With that being...
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