Global Forces and the European Brewing Industry

Interbrew is a privately-owned organization. Its headquarters is situated in Belgium. The company was started in Brussels as the Den Hoorn brewery 1366. The 1954 expansion, brought about Dommelsch and Leffe in 1968. Artois Brewery became known as Interbrew after a merger took place with another Belgian brewery in 1987. Since then the company has grown quickly. Due to the momentum in the local market, Interbrew was propelled for international acquisition. By 2000 the organization was the world's fourth biggest brewer with business elements in 23 nations. Matured markets peaked-out and may begin to see decrease. These markets include North America, Western Europe, Australia, and New Zealand. Also, the growth markets include Eastern Europe, Central and South America, and Asia. Asia is the most encouraging with elevated expectations for China. This excitement is due to the progressing impacts of Asia's 1997 financial issues. The alliance to accomplish economies of scale has been an industry trend. This is because of the current cost structures, the

     In this paper I will be talking about the U.S. beer industry and in short an overview of the brewing industry worldwide. I will talk about the barriers to entry, economies of scale, government intervention, pricing, current market trends, product differentiation, and imports. The focus being mainly on the U.S. brewing industry oligopoly. The U.S. brewing industry has three major players: Anheuser-Busch, SAB Miller, and Coors/Molson. Anheuser-Busch is currently the largest brewer in the world, producing over 100 million barrels a year. Anheuser-Busch currently owns over 50% of the market in the United States, with Miller trailing behind at 20% and Coors at about 11% with the rest of the market occupied by imports and craft breweries. When analyzing any industry, how easy it is for newcomers to enter the market is a great importance. If there are high barriers to entry

The stakeholder group that will gain most of the benefit from lowering the drinking age to 18 is the alcohol companies. In a sense, the stakeholders between ages 18 and 20 and alcohol companies go hand in hand. Because these young adults are, for the most part, eager to purchase alcohol, the potential skyrocket in sales for that age group would ensure massive profits for alcohol companies. This is made clear considering that underage drinkers in the United States consumed “an estimated 19.7% of the total alcohol consumed”

However U18s act unreasonably sometimes in their desire to consume alcohol, they do not make the ‘sensible’ choice. Similarly the supplier whilst being rational in ‘maximising’ their

Economic Forces. While the country has been in a recession for a few years, there are finally signs of moving out of it. Spending has been increasing significantly and unemployment is at its lowest since the recession began. This is great news for Leinenkugel because beer is a commodity that is bought for pleasure and having a good time. With people able to have some extra money in their pocket, they can look forward to going out to bars or partying more which will help increase sales for us.

A documentary film made in 2009, Beer wars features and describes the American beer industry distinguishing between the large and small breweries. The large breweries feature some main corporate companies like Coors Brewing Company, Anheuser-Busch, and Miller Brewing Company whereas the small breweries include craft beer producers like Moonshot 69, Stone Brewing Company, Dogfish Head Brewery, Yuengling, and others. The documentary shows how the beer market is controlled through advertising and lobbying, which is harmful for the competition in the market. There is a reason why the small companies are falling behind and the large corporates are controlling the market, which in turn makes it essentially oligopoly economy.

A second key Government strategy is the pledge to secure the support of the alcohol industry in tackling irresponsible drinking, by building on the Public Health Responsibility Deal (RD) (Home Office, 2012). The RD was introduced in 2011, just before the Government’s Alcohol Strategy was published, and secured 4 main pledges from the alcohol industry which are as follows: firstly to ensure accurate and informative labeling of alcohol; secondly to deal with the issue of underage alcohol sales; thirdly to advertise and market in a responsible way, and finally to support community endeavors to tackle alcohol related harm (Department of Health, 2011).

Young people are considered to constitute the largest number of alcohol consumers and they account for a large portion of alcohol sales. This is despite the strict drinking laws that govern many countries as regards alcohol purchase and consumption. Underage drinking, which has been on the increase, is allegedly the major cause of alcohol-related problems facing the modern

Belgium is home of the finest ales and have been known to brew for centuries. So when Jeff Lebesch, an electrical engineer from Fort Collins, Colorado took a bicycle trip through Belgium it made him realize there may be a market back home to sell Belgian-style ale. Jeff returned home with hopes to experiment and brew his own beer in his basement from the various ingredients he received on his trip. When his friends approved of the ales he started marketing them to the local town. He later opened New Belgium Brewing Company in 1991. His wife, Kim Jordan was the company’s marketing director. They named their first brew “Fat Tire Amber Ale” after Jeff’s

With regards to Interbrew’s suppliers, Interbrew has begun to use a smaller number of its best suppliers and work closer with them. They also have gone to single suppliers for the major commodities and were moving towards extending this approach to all operations worldwide. This indicates that the suppliers will have low to medium power with Interbrew, as Interbrew will be placing such huge orders7 from them as they are the fourth largest brewer in the world. Interbrew is currently using this strategic sourcing and it has proved successful. This indicates that Interbrew should use a cost focus strategy as they can apply this method to all of their suppliers and generate additional savings through working with a smaller supplier base.

The brewing industry is interesting to examine due to its relatively unique structure. Up until November 2015, the market was dominated by four main players, known informally as the “Big Four”. AB InBev was the largest, followed by SABMiller, Heineken and Carlsberg. In November 2015, however, ABInBev and SABMiller agreed a formal $107 billion takeover deal, combining the brewers into a company which industry experts claim would control around half of the industry’s profits (Mickle, 2015). As a result of the sheer size and complexity of the merger, it is anticipated that the deal will not be finalised until the second half of 2016 as ABInBev must negotiate with anti-trust regulators around the world with respect to their potential monopolistic position. As the deal is yet to be completed, this report will analyse ABInBev independent of SABMiller.

Although sales of premium brands have fallen in a steady response to the growing popularity of the craft beer. The industry revenue has been stable over the past 5 years. As a result, from 2011 to 2016 the industry revenue is expected an increase and growth annually at 6.7 percent over the five years,with a total of $39.5 billion . (IBISWorld iExpert) In the long-term, these numbers are expected that grow 0.9 percent annually within the next five years. The potential growth will be seen in the traditional and premium beer sector. As a response, the giant companies in the industry Anheuser-Busch InBev and MillerCoors look forward into the merges and acquisitions as a strategy to maintain market dominance. The strategy is based on the

Despite the dominance of Carlsberg, in its annual report BGD could lay claim to being the largest Scandinavian beer exporter. This was because Carlsberg placed emphasis on licensing agreements or local production for its foreign markets, while BGD’s strategy was export led: ‘Eighty-three out of every hundred bottles of beer that we produce are sold in foreign markets.’ By 1995 the percentage of export sales by region of the world was as follows: western Europe 63 per cent, the Americas 10 per cent, eastern Europe 22 per cent, others 5 per cent. The development of BGD’s operations in some of these markets is now reviewed.

Heineken is the biggest of the European brewery businesses, and has three-quarters of its sales in the

|The global beer industry is dominated by large corporations who have merged with rivals to increase their global and domestic market share. |