Business Environment Related To The Beer Market Marketing Essay

There is a trend of consolidation among the main firms of the U.K. brewery market as the companies are responding to increasingly competitive and globalising industry environment. A variety of mergers and acquisitions have already been taking place and as a result, the top four firms have capitalised on 85% of the full total market share. The numbers depict a big 4 concentration (Bock, 1972). It is usually figured the brewery marketplace in U.K. has an ‘Oligopolistic market structure’ (George, Joll & Lynk, 1992).

Horizontal integration is the acquisition of business activities at the same degree of the value chain. It is on the other hand with the vertical integration where the company expands by upstream or downstream activities to come closer to the end customer (Barney, 1997). Since the scope to vertically incorporate features been diminished by the government by the launch of the ‘Beer Orders’ in 1989, the brewers can achieve the economies of level by integrating horizontally.

Mintel (Lager-December 2009) – Important changes are occurring in the market place, degrees of alcohol intake is declining which ensures that the competition is increasing with more players to arrive and declining consumption. Marketplace is shifting towards the off-trade because of the price difference which is a damage to the lager market since it derives 75% of its product sales from the on-trade channel. Mintel’s research also shows that men will compromise on choice where drinking in home is concerned (In-Home Drinking -UK, June, 2009). Even though UK gets the tag of “Binge Britain”, the truth is that the alcohol consumption is declining as people are moving towards a wholesome lifestyle. The government is taking measures to reduce alcohol intake and increasing obligations and promoting anti-drinking campaigns. Recession also accumulates as a catalyst as money squeezes and people save well on money.

EXTERNAL MARKET ENVIORNMENT:

The government is taking extreme procedures to control unnecessary drinking. Taxes rose by 18% alone in 2008.

The consumer self confidence is picking up due to the signs of recovery so the prediction is that buyer will loosen its’ pocket with regards to discretionary purchases. The relationship between lager penetration and customer confidence is seen in the graph below.

DEGREES OF BARRIERS TO Access:

There are a few points to be looked at in barriers to entry the brewery market including the dominance of the countrywide brewers in the low cost and distribution marketplace. Furthermore, there have been mergers and acquisitions on the market so only a few companies acquire the major portion of the marketplace. There is high expense of capital on large scale production that makes it difficult for the small brewers to expand. The federal government is performing as a catalyst to all these elements as the regulations usually do not favour the brewing market and the high tasks and taxes are producing the businesses bleed. But still, the amount of microbrewers in U.K. is growing at high tempo. Though large in quantity, these microbrewers account only for 1.3% of the full total market. So, it is usually inferred that there is a high degree of barrier to enter in the U.K. beer marketplace on a national level.

SCP CONDUCT:

Conduct can be defined as the factors such as pricing behaviour, product approaches, research and creativity etc. that stems out of the structure of the market in which firm operates (Faulkner & Campbell, 2006).

The price structure is very competitive and it is straightforward for the consumers to change to another brand, as a result Ab-InBev is usually competing at the same degree of prices with the additional nationalised brands. In terms of innovation, the business has attempted to launch low alcohol concentrated drinks which is definitely in sync with the market.

Price:

The U.K. brewery industry is a homogeneous item industry to an extent and more or less, the prices of different brands is same.

Product Differentiation:

Although till now, not really there wasn’t a large product differentiation available in the market, but now companies are innovating and creating services with varied tastes and flavours so that they can attain the economies of level.

Collusion:

Collusion is the activities in oligopolistic marketplace where competing organizations join forces to increase profit (Phlips, 1988). This has been apt in regards to this case study of breweries as lots of Mergers and Acquisitions will be taking place. Companies want to share their operating costs and expenditures and increase their manufacturer range.

Performance:

Barney (1997) suggests that most the oligopolistic firms make more than normal profits, but it has been proven wrong in the brewery market in the recent years. This seems as a limitation of the S-C-P unit. The external and internal factors are restricting the scope to enhance profits.

PORTER’S FIVE FORCES ECONOMIC Examination:

Threat of different entrants:

The threat of new entrants is very low for Ab-InBev. Although no. of breweries is growing every year, nonetheless they are only at the micro level. Porter (1979) explains that the risk of new entrants can be blocked by elements like high capital need, access to distribution, government plans etc. , these conditions are performing as barriers in the event of brewing sector. In the national industry, due to quick mergers and acquisitions simply a handful firms have acquired the significant share of the market. The expense of capital for large scale production can be very high. Also the federal government policies are not in favour of the brewing market, it really is having support whatsoever from the federal government. Hence, the threat of new entrants is little.

Supplier Power:

According to Porter (1979), the bargaining power of suppliers is also known as the marketplaces of inputs. Suppliers of pieces, recycleables, services to the firm can be a way to obtain power over firm. And in this case the supplier vitality is high. The purchasing comes from two primary areas which are packaging and recycleables. The packaging industry is highly concentrated and just a few corporations are operating the main market. The costs of the raw materials are also rising due to environmental conditions and market demand and hence the supplier vitality is high.

Buyer Power:

It may be the bargaining power of consumers and also known as the market of outputs. The energy of buyers is quite solid. The switching costs to some other brand are incredibly low, thus enabling the customer to get whatever he wishes. And beer drinkers are easily attracted by the existing social trends and advertisements.

Threat of Substitutes:

The threat of substitute product is moderate in the market. Although the tendency of in-home drinking is growing and males will probably compromise on the decision of alcohol, it isn’t a threat of great level. The potential threats of substitutes will be wine coolers, breezers, pre blended drinks and cocktails.

Soft drinks have become a threat as people are getting away from alcohol consumption (Source: Mintel,

On-Trade CARBONATED DRINKS, September 2007).

Also, it seems that the beer industry in U.K. features matured and the customers want to try brand-new tastes and different types of alcohol.

The Intensity of Competitive Rivalry:

The market framework is oligopolistic and a handful of companies compete with each other for an upper hand in the market. Your competition in prices is huge and it is very simple to switch from one brand to some other. The rivalry among the prevailing players is solid. The industry on the whole is usually on a decline, so in order to gain volume to improve the market share, it should be snatched from another organization (one company’s gain is definitely other company’s loss). It really is an industry with cut-throat competition.

PESTEL ANALYSIS:

Political factors:

The government plans are causing enormous risk to the brewery sector. The government is campaigning massively against dui.

Economic factors:

U.K. traditionally has already established a higher consumption of alcohol for most years and has earned the word ‘Binge Britain’. But in the recent trends the consumption of alcohol offers been on a decline.

Britain’s GDP is usually on a declining trend that may affect the sales. Moreover the fee of unemployment is rising making it even more complicated for the key generation be easy on the pockets.

Social Factors:

Consumers are getting a lot more aware of health hazards and are moving towards a healthier way of life and tackling ‘beer bellies’. Binge drinking in pubs and restaurants can be on a decline.

The U.K. population is ageing and this group of 18-34 is decreasing who are more likely to take in beer. This will bring about even a further decrease in volumes (Source: Keynote)

Technological Factors:

There have already been technological advancements which have helped the company to make the production and the process of creating drink much more precise and easy. Through a long time of experience, the company has attained advanced excellence and the know-how to produce beer more effectively. There were plenty of mergers and acquisitions and it has got resulted in increasing the capability of production as a whole.

Environmental Factors:

Smoking from pubs have already been banned which has caused a significant decline among the consumers in pub appointments as observed where the beer marketplace derives its’ maximum sales.

More and even more brewers will be turning towards a greener universe because they are utilising eco-friendly credentials to woo elevated consumer interest. However, not many people are interested if the products are more environment friendly (Mintel: ).

Weather can possess an impact on the product sales of beer and the key summertime have an impact over the revenue of beer.

SWOT ANALYSIS:

Strengths:

It is the greatest brewer on the globe and holds one or two 2 position in 20 countries. AbInbev owns a variety of internationally renowned brands which gives the company an advantage over the competitors.

The company is quite strong in marketing and branding and its’ carefully planned outdoor campaigns reach out to a large number of men and women strengthening the brand picture. Also innovative and creative promotions have carved out a niche of consumers.

Weakness:

The company is growing at a fast pace and it will be hard to sustain it. The business lacks in different and innovative goods are expected like extra cool lagers or ciders and extra fruity flavoured drinks.

Opportunities:

The business can focus even more on the off-trade segment as the tendency of in-home drinking is increasing (recession offers fuelled in-home entertainment) and the product sales from the supermarkets happen to be increasing.

The company can focus on the sales of extra frosty beers and additional fruity drinks are they are popular.

Threats:

The major danger to the company is the government policies. The government policies are increasingly exerting pressure on the industry as a whole so that you can arrest the challenge of drunk driving and reducing the intake of alcohol. Heavy taxes have already been laid in the recent years to control the consumption of alcohol.

Another danger is that people are preventing the consumption of alcohol in order to attain healthier lifestyles.

Major sales of lager come from the on-trade revenue. The continuous closure of pubs in U.K. is usually a risk to be dealt with. In line with the estimate by BBPA (Origin: BBPA ) pubs are closing at the amount of 27 weekly.

The possible threat of regional brewers: Mintel (Mintel Survey: Ales and Stouts, UK, May 2008) says that lately the consumer has been demanding the merchandise with provenance and heritage and this has motivated the revival of classic brews and new products.

Conclusion and Recommendations:

FORECAST:

Mintel (Resource: Mintel International Group, Ales and Stouts, September book reports already done 2008) forecasts that the market for ales and stouts in particular will decline by 9% during 2008-2013. The future for Ab-InBev in conditions of beer industry is that it will continue to face problems because of factors like process essay topics health issues, government policies and total decline of the liquor market. Furthermore, in case of ales and stouts persons are turning to niche, regional brands and that is reason for the upsurge in the numbers of micro-breweries in U.K. which are now on a 50 yr excessive. But as the forecasts for the recession happen to be that it is coming to end, it’ll reassure the confidence in the buyer and the sales are likely to be benefitted. The off-trade product sales will continue steadily to grow as the style of in-home entertainment raises. If the business does not innovate new products, it is likely to handle stiff competition from services like Organic ales.

Suggestions:

There can be a scope to tap the female drinking market by introducing beers with flavour, like the wines have rose, light and red variants with numerous flavours and associations. As well, this would portray a more upmarket photo to a typically male dominant market. For example, Cider and Cask ales have been gaining popularity, though still an extremely small market, nonetheless it is possible to attract customers with a diversity in item.

As the tendency of drinking alcohol is shifting more towards home, it’s important that the lager market starts attracting the female market to be able to avoid gender compromise on alcoholic beverages.

Measures to attract guys of age 35+ should be taken. As the older males are drifting from the consumption of alcohol, new drinks should be launched to entice them. Also, individuals are motivated to take beer if it’s extra cold consequently these sorts of products ought to be launched.

The company can minimize its costs by developing its own packaging. All in all, In that competitive context, the company can survive simply by horizontal integration and imaginative thinking.

Total Word Count: 3018

APPENDIX

UK excise duty costs on beer, 20003-08

Date of change

£ per hectolitre

% change

Index

Annual fee of inflation %

14/04/2003

12.22

2.8

103

2.1

22/03/2004

12.59

3.0

103

2

20/03/2005

12.92

2.6

103

2

26/03/2006

13.26

2.6

103

2.4

26/03/2007

13.71

3.4

103

3.0

17/03/2008

14.96

9.1

109

4.5

SOURCE: HMRC/Mintel

Percentage of Modification in this structure of the united kingdom people, 2003-08 and 2008-13

SOURCE: GAD/Minte

APPENDIX : 2

Average summer temperatures and final number of sunshine time in the UK*, 2002-07

*June-August 2007

SOURCE: Met Office/Mintel

UK volume and worth sales of cask-conditioned ales, 2001-06

SOURCE: Mintel

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