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Brewing Industry Analysis

Seminararbeit 2007 36 Seiten

BWL - Industriebetriebslehre

Leseprobe

Table of Contents

I. Executive Summary

II. Brewing Industry Background
A. Market Overview
B. Current Conditions
i. United States of America
ii. Germany
iii. Worldwide

III. Market profitability and financial ratios
A. Market efficiency
B. A short survey of the compared companies
i. SABMiller
ii. The Boston Beer Company
iii. Redhook Ale Brewery
C. Financial Performance
i. SABMiller
ii. The Boston Beer Company
iii. Redhook Ale Brewery
D. Company Ratio Comparison

IV. Porter Five forces analysis

V. Human Resources

VI. One Capital Cost Issue

VII. Is Bigger Better?

VIII. Key factors and future prospects
A. Driving Forces
B. Industry Outlook

IX. References

I. EXECUTIVE SUMMARY

In the brewing industry exist two profitable segments: The big, global breweries and the small, specialist brewing companies. Companies, who do not differentiate from its competitors or do not have the critical mass, find themselves in a “stuck in the middle”-position. They need to adapt their strategy to find an alliance, or look for differentiation. The advantages of the global brewing companies are: They have bigger cash reserves on hand to survive in competition, posses a better market access and distribution network, profit from economies of scale, have strong market positions, as well as well-known and strong brand names. The small breweries sell beer in their niche with special taste, image or regional background.

The beer consumption in the mature market of Western Europe and North America stagnates. New markets emerged in Eastern Europe, Asia and Latin America. The industry becomes more global. The big breweries expand in these emerging markets by acquiring regional companies. The concentration process of the past years is expected to continue.

In the traditional beer markets, job opportunities are not good. Breweries replace employees only in the range of normal fluctuation. In contrast to the emerging markets, where the need of specialist is high and the job opportunities are very good.

The brewing industry has also to be aware of changing consumer attitudes toward healthier lifestyle, and the growing popularity of wine and beer-mixed drinks. Therefore new products have to be placed. Research and development is believed to be a key element in the future of the industry. Good job opportunities are given in this field.

II. BREWING INDUSTRY BACKGROUND

A. Market Overview

Beer has a long tradition, starting almost from the beginning of civilization. Thereby the taste of beer varied enormously over time and different cultures. In the 18th century beer became the style that we know today (Craft Beer, 2007).

Today beer is a part of our western lifestyle. In the United States beer has become the most popular beverage behind water and tea (Malt Beverages, 2007). The worldwide beer production still increases – in the year 2004 about five percent up to 1.5 billion hectoliters (Balz, 2005). While sales in North America and Europe slow down, new markets have begun to grow in China, Russia, Latin America, Eastern Europe, Asia and Africa. Today’s world beer market has the following proportional allotment:

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Table 1 – Beer Consumption by Region in 2004 (Kirin Brewery, 2005b).

The biggest beer markets are China and the United States. Both countries make up more than 30 percent of the beer consumption worldwide. Germany is the most important country on the European beer market, as table two shows.

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Table 2 – Beer Consumption by Country in 2004 (Kirin Brewery, 2005a).

The brewing industry is a very concentrated market. The biggest ten companies account for nearly 60 percent of the world beer market. The concentration process still continues.

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Table 3 – The biggest breweries in 2005 (Bierclub Jessnitz, 2007).

Furthermore, there are differences in the sorts of beer. Different types of commercial beer are pilsner, lager, ale, stout, light, malt liquor, dry, ice–brewed, bottled draft, and non alcoholic. The market is further segmented by price and quality. The categories are super premium, premium, and popular–priced beer (Alcoholic Beverages, 2007).

B. Current Conditions

i. United States of America

For a long time, the United States had been the largest beer market worldwide. In 2002, China surpassed the U.S. by becoming the top producer and the largest market (Alcoholic Beverages, 2007).

After 1996, the United States beer market grew twice the number of sales in the early 1990s. In 2003, the production reached about 6.2 billion gallons. In the same year, the American beer consumption slowed down and grew only 0.7 percent at a slow pace (Alcoholic Beverages, 2007). Today the American beer market suffers from a small decline (Kirin Brewery, 2005a).

The United States beer sales totaled $206 million in 2004. In 1996, light beer became the largest segment in the beer American market (Malt Beverages, 2007). In 1999 light beer had a market share of 40.1 percent, premium beer of 25.9 percent and popular–priced beer accounted for the remainder (Craft Beer, 2007).

The American beer market is highly concentrated. The largest four companies – Anheuser–Busch, Coors Brewing, Stroh’s, and Miller – account for about 85 percent of the beer market (Craft Beer, 2007). Imports make up around 12 percent and domestic craft breweries roughly 3 percent (Malt beverages, 2007).

Throughout the 1990s and the early 2000s, microbreweries and brewpubs in the United States had annual double digit increases in sales. Craft beer became the fastest growing segment of the alcoholic beverage industry. In 1997 the number of breweries in the United States, 1,273, exceeded for the first time the number in Germany, 1,234. In 1983, only 43 American breweries existed (Alcoholic Beverages, 2007).

U.S. breweries continue to grow in foreign markets. The domestic beer industry exports to almost one hundred countries in the world. In 2003, most American beer was exported to Mexico, Hong Kong, China and Canada. The most beer was imported from Mexico, Netherlands, Canada and Ireland (Alcoholic Beverages, 2007).

ii. Germany

Germany is known as the beer homeland, but for years the German beer industry has suffered from a decline in consumption. In 1970 every German drank roughly 141 liters; today’s per capita consumption has dropped to 115 liters (Frankfurter Allgemeine Zeitung, 2006). In the years 2002 and 2003, the Dutch brewer Heineken and the Belgian brewery Interbrew took over 18 percent of the German market. More mergers are foreseen in the near future. Analysts think that global companies will control about 70 percent of German production by 2010 (Alcoholic Beverages, 2007). The concentration process will be a big change in the brewing tradition of the country.

In 2006, the German beer market generated total revenues of $27.5 billion, whereas the standard lager segment made up 40.5 percent of the market’s overall value. Germany is, with a volume of 9.7 billion liters, the biggest beer market in Europe. The Oetker Group leads the market with a production of 1.4 billion liters (German–Beer, 2007).

iii. Worldwide

Beer dominated the alcoholic beverage industry with 74 percent of volume in the early 2000s. The worldwide beer production still increases. Especially Eastern European countries, particularly Russia, have high rates of growth. But also in Latin America the beer market continued to grow. The two largest beer markets in that region are Brazil and Argentina, which have average annual growth rates of 5 percent (Alcoholic Beverages, 2007).

China has been the fastest growing beer market in the world since 2004. Since 1990 the beer production increased annually by 25 percent (Alcoholic Beverages, 2007). In the year 2002, China became the biggest beer market in the world (Kirin Brewery, 2005a). In the future, the market is expected to grow further. Many foreign breweries entered the market through acquisitions. Analysts expect a high concentration of the market by the end of this decade (Alcoholic Beverages, 2007).

The biggest drags on earnings for the breweries in 2006 were the high cost of goods, such as grains, packaging material (for example aluminum and glass), energy and fuel. As a result, many breweries could not maintain their operating margins despite volume growth, merger synergies, or product innovation (Mathis, 2006).

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Details

Seiten
36
Jahr
2007
ISBN (eBook)
9783640839261
ISBN (Buch)
9783640839438
Dateigröße
580 KB
Sprache
Deutsch
Katalognummer
v167370
Institution / Hochschule
University of West Florida
Note
1,7
Schlagworte
brewing industry analysis

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Titel: Brewing Industry Analysis