Business Analysis : Sabmiller Plc

Boston Beer Company (BBC) has enjoyed much success with their craft beers with Samuel Adams as their main focus. Being the leader of this segment, overtopping five of their competitors combined (Exhibit 1), the company now must decide how to take advantage of the light beer market. Boston Lightship, their current light beer, had been a small contributor in BBC’s product line. Currently, it is facing dwindling sales with product volumes down from 12 000 cases per month to 3000 cases per month.

For many years, beer companies had faced many economic challenges. In economic sphere, the beer company has reached a maturity stage and the growth has been moderate. In this maturity stage it is very hard for any one company to takeover the market form its competitors because of the tremendous competition. Expanding into foreign market is also one of the concerns for Canadian companies in this era. But apart from this there are some facts, which reflect the bright side of the beer economy in the Canadian industry and those are

New Belgium is, however, the third-largest craft brewery in the nation, with estimated sales of over $100 million, equaling approximately 700,000 barrels of beer per year. An analysis of the craft beer industry as a whole suggests that there is continued growth potential for New Belgium. Exhibit 5.1 of the New Belgium Brewing (B) case shows that craft beer is the fastest growing segment of the U.S. alcoholic beverage market, with an increase in market share of over 100 percent from 1999-2011. It is also an industry whose customers tend to be extremely loyal, making them less likely to view craft beer as a commodity. Consequently, craft beer has a higher probability of being immune to competition from inferior goods and substitutes. This is particularly applicable to New Belgium’s target market of “beer connoisseurs” that appreciate the high quality and taste of craft beer and who include “executives, lawyers, and accountants” with the continued ability to pay higher prices for craft beer, enabling the craft beer industry to achieve gross margins of up to 30 percent (Clark & Rogler, 2013).

The contest in the beer marketplace dropped in four disparate categories. Main and second-tier internal producers, import beer firms, and specialty brewers. The Main internal producers like Anheuser Busch, Miller Brewing Firm and Adolf Coors Company, accounted for 74% of the marketplace in Massif Man’s region. The subsequent tier internal producers had 12.5% allocate, import beer firms had a 12% allocate and the craft beer industry owned the rest. Massif Man Brewers were a subsequent tier company.

The brewing industry has traditionally been a successful commodity. In the year 1985, the brewing industry’s consumption and sales ceased increasing and became frame. During this time, Coors emerged as one of the most successful brewing industries in the country, raising their sales by 13 percent. Throughout this course, I have learned that a company will be able to maintain success if they are able to receive more earnings on capital than their expenses. Throughout the first 100 years or so, Coors was an extremely successful brewing company. How did Coors become so successful so quickly? Coors, in their early years, began selling only to a select few western states. Coors was very effective during the time when they were selling to these states. Their centralized location allowed them to easily ship to these states and low prices helped establish them early on as an effective brewer. Over time, however, Coors began to stabilize and lag behind competition. Being the most successful brewing company for such a long time may have hurt Coors in the long-run. As competing major breweries began implanting new strategies and tactics, and Coors would stick to what they had been doing all along. Coors needs to realize that in order to stay competitive in an industry adapting to change is a vital entity.

Another weakness of Anheuser Busch is their lack of exploration into the craft beer market. Today’s consumers are looking for more variety and something different in their beers. In this new market Anheuser-Busch’s focus on tradition could possibly handicap them and limit their potential for growth. Annheuser-Busch explored the possibilities of this market. They could attract more beer drinkers outside of their loyal customers.

The problems in the market is that sales and market share has declined slightly over the past years and in the past 12 months the competition has increased, new brands has entranced the market. However on the beer market the big and well-known brands are controlling the market, and consumer often tend to choose a brand they recognize. Therefore it is important that the brand is identifiable to the public (Marketline 2015, p. 21). This

Anheuser-Busch is a company that concerns itself with the manufacture, marketing as well as distribution of alcoholic beverages. Anheuser-Busch according to the company website, "is a wholly-owned subsidiary of Anheuser-Busch InBev" (Anheuser-Busch 2011). I chose Anheuser-Busch for this discussion based on its relative size and market share. Currently, the entity is considered one of United State's largest brewing companies. Hence it is likely that given its relative size and the huge chunk of the market it controls, Anheuser-Busch would have to contend with quite a number of economic issues. Indeed, the continued success of Anheuser-Busch in the highly competitive alcoholic beverages marketplace largely depends on how it handles these issues.

- The industry grow is staggered (less than 1%). This will result in a market share competition that will benefit the companies who have the means to survive, e.g. the means to lower their costs.

In the past 10 years, Anheuser-Busch has set its sights on capturing every stage of the brewing industry, starting with manufacturing, through distributors all the way to consumers. This began in 2008, as Anheuser-Busch merged with InBev to form the largest beer company in the world. Anheuser-Busch InBev then began buying up distributors and manufacturers throughout the world, threatening to overpower small local microbreweries like Listermann’s. This threat was enhanced in late 2016, as Anheuser-Busch InBev finalized its merge with the then second-largest beer company in the world, SABMiller. With these two significant mergers, Anheuser-Busch InBev now has the resources, money and reputation to launch a full-scale monopolization on the beer

The competitive market of producing beer has reached a new level of global monopoly. Anheuser-Busch is no longer an “American” owned beer producer since InBev transnational bought the American company in 2008 (Larson, 2017). But Anheuser-Busch wasn’t the only brew company to merger across borders. In 2007, Miller and Coors merged under South African Breweries, making beer loving Americans subject to an oligopoly, running the beer industry further and further away from American soil. Additionally, according to SABMiller, in 2012 only four firms accounted for approximately half of the global sales of beer, and 70% of revenues (SABMiller, 2012). The beer industries is achieving global dominance due to apparent strategic changes including: expansion of market share, economies of scale and leverage on market prices.

Light Beer Introduction and Expansion- Boston Beer has just unveiled their newest product of Samuel Adams Light to the better beer market. In 2004, the light Samuel Adams out sold the original for the first time in the company’s history. We believe that this will be the key to Boston Beer’s success to maintain its hold in the better beer industry and bring in new demand for Boston Beer. Financial Stability Boston Beer’s financials are impressive as compared to the big names in the beer industry. One of the more impressive areas is the lack of debt and the ability to leverage the company to new heights. In 2000, Boston Beer had no actual long term debt on the books and since has brought on very little. This is mainly due to the strategy of contracting to other brewers to maintain low risk for the well being of the company. The profitability, capital structure, and liquidity for Boston Beer all appear to be stronger than the averages in the alcoholic industry which shows the strong stability of the firm. Boston Beer’s Altman Z-score is at 3.49 which is considered safe and good investment grade quality. In conclusion, Boston Beer has many choices on where to take the company in the 21st Century. With overall high quality in its financial structure, Boston Beer has the ability to one day grow and become a dominant force within the beer industry as a whole. Valuation Models such as the free cash flow, long-run residual income, and abnormal earnings growth showed

The overall industry however is not a reflection on the specific segments; in particular the craft brewing industry. Boston Beer Company’s sales grew at a compound rate of 40% over the five year period ending 1994 emphasising the wave of success the craft brewing industry was experiencing. The growth spurred the founding of over 600 specialty beer companies. There were again, a number of social factors which could attribute to such figures including an increased popularity in the speciality beer reflecting trends in the overall food and beverage market for an

The multinational beverage and brewing company’s core business is beer, with a portfolio consisting of over 5,000 beer brands that span local and international markets. The company’s mission is “To be the world 's beer company, to enrich and entertain a global audience and deliver superior returns to their shareholders.” Combined with their vision of bringing people together in a better world. The company has a desire to exceed expectations, to surpass goals and achieve things no one would have ever thought possible. The company’s goal is offering the best beer to a global market. Plans between 2017—2020 is to invest $2 billion in U.S. operations. (Anheuser-Busch, 2016)

The premium beer segment is poised to grow at around 10% per annum and in the past year itself the growth of the premium beer has been at 9.1% by volume. (Appendix A: Exhibit 2)