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. Companies
A. InBev
B. “Target Company”: Anheuser-Busch
C. Company comparison
IV. Marketing Mix
A. Product
B. Price
C. Place
D. Promotion
V. Environment
A. Legislation and regulations
B. Societal values and lifestyle
C. General economic conditions
VI. Industry analysis
A. Competitive Rivalry within an Industry
B. Threat of New Entrants
C. Threat of Substitute Products
D. Bargain Power of Suppliers
E. Bargain Power of Customers
VII. Industry forces summery
VIII. Company Analysis: Anheuser-Busch
A. Strength
B. Weaknesses
C. Threats
D. Opportunities
IX. Analytical comparison of InBev and Anheuser-Busch 34
X. Driving Forces in the Industry
XI. Anheuser-Busch’s Latest Actions
XII. Recommendations for Anheuser-Busch
XIII. References
I. EXECUTIVE SUMMARY
Anheuser-Busch has to rethink its current strategy and to focus on its core competence: brewing and marketing of beer. A strategic realignment acquires a disinvestment in the business units with low strategic fit, e.g. the theme park or the agriculture division. The integration strategy has to be ended. The money tied up there and additional funds by investors have to be used to acquire other breweries, especially in the emerging markets. At the same time, Anheuser-Busch should increase its interest in Grupo Modelo, to counteract demographic changes in its home market, the United States. Moreover, the brewery has to invest heavily in research and development, a key element for future success in the brewing industry. New beer and beer-mixed categories offer an opportunity for high profits, as new consumers feel attracted by these products. Besides all these changes, Anheuser-Busch should not take away too much attention from its home market and defend the leading market position. Thereby, the brand is the key element to success in the beer industry. Anheuser-Busch has to assure that it obtains the current brand reputation. The same applies to possible new acquisitions.
The brewing business is quite a lucrative industry for macro-breweries like Anheuser-Busch. The overall pressure caused by the industry forces is moderate to low. The big market participants have only to be aware of substitute products, rivalry and, to a certain degree, of new entrants. Substitute products, like wine or other liquors, are becoming more and more popular, putting pressure on the beer market. Anheuser-Busch has to react by introducing new products and has to help that beer keeps a fashionable image. The rivalry is only a problem in the mature markets, whereas the pressure is low in emerging markets due to the market growth.
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, 2005a).
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, 2005b).
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 2006 (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 United States 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, 2005b).
The United States beer sales totaled $206 million in 2004. In 1996, light beer became the largest segment in the American beer 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).
The breweries in the United States 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, the 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 has annually increased by 25 percent (Alcoholic Beverages, 2007). In the year 2002, China became the biggest beer market in the world (Kirin Brewery, 2005b). 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).
III. COMPANIES
A. InBev
InBev is the largest brewery and the second largest alcoholic beverage company of the world. The Belgian company employs about 77,000 people and is headquartered in Leuven (Belgium) (Wikipedia, 2007b).
In March 2004, the Belgian giant Interbrew acquired the Brazilian company Companhia de Bebidas das Americas and formed the industry leader InBev (InBev, 2007a). Today, the new company controls 13.1 percent of the global market (Bierclub Jessnitz, 2007). The top brands of the InBev are Beck’s, Stella Artois, Leffe, Bass, Rolling Rock, Labatt Blue and Hoegaarden (InBev, 2007b). In total, InBev has a portfolio of more than 200 brands (InBev, 2007a).
In 2006, InBev had overall sales of $19.5 billion, which meant an increase of 15 percent to the previous year (InBev, 2007b). At the beginning of 2007, InBev had a market capitalization of $44 billion (InBev, 2007a). The chairman of the board is Peter Harf and the Chief Executive Office is Carlos Brito (Wikipedia, 2007b).
B. “Target Company”: Anheuser-Busch Company
Originally, Anheuser-Busch started its business as a small brewery in St. Louis, Missouri. In 1860, the soap manufacturer Eberhard Anheuser bought the company and his son-in-law Adolphus Busch became his partner in 1869. In 1876, Busch introduced America’s first national brand: Budweiser (Wikipedia, 2007a).
Today, Anheuser-Busch is still located in St. Louis. The company was the largest brewer in the world and the biggest beer producer in the United States until the early 2000s (Alcoholic Beverages, 2007). Today, Anheuser-Busch is the world’s third largest brewing company. Anheuser-Busch’s operations include four general segments: domestic beer, international beer, packaging and entertainment, which contributed respectively 75.8 percent, 6.4 percent, 10.4 percent and 7.4 percent of the net sales in 2006 (Anheuser-Busch, 2007a).
Anheuser-Busch integrated backwards and forwards in the beer supply chain. For example, the company's subsidiaries include one of the largest manufacturers of aluminum beverage containers. Moreover, the brewery has interests in malt production, rice milling, real estate development, turf farming, metalized and paper label printing, bottle production and transportation services. An overview of the different business units is listed below (Anheuser-Busch, 2007d):
- Anheuser-Busch, Inc. is the company's principal subsidiary. The business unit operates worldwide and has been leading the United States beer industry since 1957. Anheuser-Busch Inc. produces more than 60 beers, flavored alcohol beverages and nonalcoholic brews. The business unit has 12 breweries in the United States and others around the world. Moreover, Anheuser-Busch Inc. imports other beers for distribution in the United States.
- Anheuser-Busch International, Inc. is responsible for the company's international beer operations. It develops its brands in markets outside the United States and invests in non-United States breweries.
- Anheuser-Busch Agricultural produces the raw materials for the company's beer production.
- St. Louis Refrigerated Car Co. manages rail/truck transload[1] operation and other properties in St. Louis.
- Manufacturers Railway Co. provides terminal rail-switching services to southern St. Louis industries, operates a fleet of insulated beverage railcars and grain hopper cars. The business unit’s two trucking subsidiaries provide delivery of cans, bottles and outbound beer for four Anheuser-Busch breweries.
- Metal Container Corp. produces cans and lids for Anheuser-Busch and different soft-drink companies in the United States.
- Anheuser-Busch Recycling Corp. is one of the world's largest recyclers of used aluminum beverage containers. It provides a positive alternative to mandatory deposits and helps to reduce container costs.
- Precision Printing and Packaging, Inc. produces labels for the company's beer packaging. Furthermore, it operates for other customers.
- Eagle Packaging, Inc. supplies 100 percent of Anheuser-Busch requirements for liner material for both the crowns and closures used in beer packaging.
- Longhorn Glass Corp. supplies glass bottles to the Anheuser-Busch brewery in Houston.
- Busch Entertainment Corp. is one of the largest theme park operators in the United States. The subsidiary operates nine parks throughout the country.
- Busch Properties, Inc. operates resort, residential and commercial properties.
In its core business, the beer brewing, Anheuser-Busch is mainly focused on the United States market. The brewery produces more than 60 beer brands, including Budweiser, Busch, Bud Light, and Michelob. The company also produces the specialty brands ZiegenBock Amber, Red Wolf Lager, and the nonalcoholic brew, O'Doul's.
Overseas, Anheuser-Busch operates 15 breweries - 14 in China and one in the United Kingdom; in China, Anheuser-Busch operates Budweiser Wuhan International Brewing Company, Ltd. and Harbin Brewery Group Ltd, which Anheuser-Busch acquired fully in 2004. Chinese production of Anheuser-Busch products started in Wuhan, after their purchase of a local brewery in 1997. The firm's outlook in China, where it invested some US$1.2 billion in the early 2000s, is favorable (Alcoholic Beverages, 2007). In the United Kingdom, the Budweiser Stag Brewing Company Ltd. produces and packages Budweiser. Budweiser is also locally brewed in eight countries outside the United States: Argentina, Canada, Ireland, Italy, Japan, Russia, South Korea and Spain. Anheuser-Busch strategic equity investments include 50 percent of Grupo Modelo in Mexico and 27 percent of Tsingtao Brewery Company Ltd. in China (Wikipedia, 2007a). Main competitors in the global beer market are InBev, SABMiller, Adolph Coors, and Heineken.
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[1] The transfer of 40ft container loads into truck-driven 53ft containers to reduce costs per unit and achieve faster and more accurate deliveries.