To introduce an analysis of the brewery industry, one point must be underlined: the European brewery market is mature, which is essential to understand its trends and its forces. We are now going to use the Porter's model of the Five Forces Analysis to develop this analysis. First of all, consolidation is a key trend in the brewery industry. It has consequences reaching into economies of scale and into the access to supply or distribution channels. Actually, it is more difficult to enter into a market when there are significant leaders, which are able to develop a competitive productivity on the one hand and to pressure supply and distribution channel on the other hand. As the five largest global brewers accounted for 30% of production volume in 2002, we can suppose that there are entry barriers de facto. Even in the UK, the recent independency of the public house chains does not contradict this trend since it forces the brewing firms to be more competitive, which is easier for an existent firm than for a new one.
Tags: Porter's five forces of European brewery, European brewery, European brewing industry
[...] In the case of the brewing industry, even if the Western European market has become mature: its demand is now decreasing, partly because of the great number of substitute products: mineral water, soft drinks , the firms are looking at different lucrative opportunities, as in the markets of Eastern Europe or Asian Pacific. This supposed dwindling growth of the brewing market has therefore to be qualified. However it may be noted that numerous brewing producers do not differentiate their products, especially in Germany, where hundreds of firms indulge in making traditional beer. [...]
[...] The German market, which is the most important European market, is very characteristic. It is a highly fragmented market, and that seems not to be an advantage for the supplier's power. However, this yearning for local beers has also led the Germans to prefer to buy German beers. The German suppliers are thus advantaged. Furthermore, there are more and more acquisitions, which will reinforce the main German brand names. Their main challenge is to develop the knowledge management system and the linked technologies, if they want to keep on meeting the German demand. [...]
[...] To achieve its goal, Heineken products in huge quantities in 170 countries and takes over other brewing groups like BBAG in 2003. The concern also takes advantage of a wide network of distribution, the local breweries. Nonetheless the strengths of the leader may become its weaknesses. The traditional image of Heineken runs contrary to the new desires of diversity and innovations of the consumers demonstrated by the success of flavored beers. Grolsch This firm built in 2002 a new strategy based on the trends of the brewery industry. [...]
[...] Supplier power As the consumption of beer is decreasing in Europe, companies are looking for cost containment and brand reinforcement. Therefore, there have been a lot of acquisitions and alliances within the European brewing industry for the last ten years. Furthermore, the report suggests that the importance of the five largest global brewers 30 per cent of production volume- is going to increase in the same way as the cigarette industry where the five leading firms had 60 per cent in 2002. [...]
[...] The threat of entry does not appear too much severe in the European brewery industry. Threat of substitutes The actors of the beer market have also to face the threat of substitutes. First, it removes a wide panel of products, which can be substituted for beers. Indeed, all the refreshing drinks may replace lagers, in particular, of course, alcoholic fresh drinks like or “Smirnoff depending on the events. But we also should take into account what we call the soft drinks, non-alcoholic beverages, for instance Coca-cola®, fruit juices etc These competitors are all the more dangerous since health concerns and anti-alcohol campaigns become important. [...]
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