Case Analysis

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 ë ecutive summary
° Anheuser Busch is one of the leading brands
of beers. company was established in 1864 in
St. Louis, Missouri, United States, Anheuser
Busch has grown to be one of the world͛s
largest beer companies, Operating 12
breweries within and 15 breweries outside of
the United States, It is best known for the
world͛s top two selling beers, Bud Light and
Budweiser current market share of the
company globally is 10.8.
° Chinese Beer market is an increasing market with a
huge potential. Ranked 1st for volume per year but 11th
rank for litres per person. Low average price for beer.
Huge foreign interest on this market but foreign
investment usually failed. In 2004 company acquire
Harbin brewery in china. Foreign companies tend to
face problem as provincial regulation are there to
protect local companies and furthermore to keep the
ta revenues within province. Regulatory roadblocks
were designed to keep ta revenues at home. Many
recognized global brands were unable to make there
mark because they didn͛t understand the customer
taste and preference
 Vision'
° èhrough all of our products, services and
relationships, we will add to life͛s enjoyment.
 hission'

° Be the world͛s beer company (Products and

services; Self-concept)
° ënrich and entertain a global audience
(Customers; Markets)
° Deliver superior returns to our shareholders
(Concern for survival, growth and profitability)
 Value' We believe in͙

° ruality in everything we do. (Self-concept)

° ë ceeding customer e pectations.
° èrust, respect and integrity in all our relationships. (Philosophy)
° Continuous improvement, innovation and embracing change.
(Philosophy)
° èeamwork and open, honest communication
° ëach employee͛s responsibility for contributing to the company͛s
success
° Creating a safe, productive and rewarding work environment.
(Concern for employees)
° Building a high-performing, diverse workforce.
° Promoting the responsible consumption of our products.
° Preserving and protecting the environment and supporting
communities where we do business. (Concern for public image)
 Y
a egic objec ives:

° ë pansion production into China through

acquisition of Chinese major beer companies
° reposition its brand by catering to elite and create
perception of being a premium brand
° increase ownership by 27% by year 2009
° e pand there operation up to there central
province in order to e pand there market share
° In order to sustain growth and stability it needs to
acquire smaller brands which would enable it to
enhance its brand portfolio and e pand its
business under the umbrella of company name
 _ndus
 Analsis

° èhe China beer industry is the world͛s largest by

volume. èotal domestic volume in 2005 was 307 million
hectoliters, up 10.2% vs. 2004. ë cellent growth has
continued in 2006 with officially reported domestic
volume increasing 13% through September vs. the
same period, prior year.
° China͛s per capita beer consumption in 2005 was 23.4
liters, which was slightly lower than the estimated
global average of 24.8 liters. However, China͛s per
capita consumption already surpasses that of Hong
Kong (21.5) and èaiwan (21.1). China beer industry
volume growth will slow.
 Industry
° èhe chart below shows China͛s èop 10 brewers by output in
the first half of 2006 and it specifies the foreign ownership of
each èop 10 brewer, if any'
° Foreign companies tend to face problem as
provincial regulation are there to protect local
companies and furthermore to keep the ta
revenues within province. Regulatory
roadblocks were designed to keep ta
revenues at home. Many recognized global
brands were unable to make there mark
because they didn͛t understand the customer
taste and preference which is clearly visible as
they hold 0.5 percent of Chinese market.
 = Y ANALYY_Y
° =oli ical and legal
° Decentralized power structure
° Unstated hierarchy of power
° High ta on transportation
° Big power of the local and provincial authorities
° Logistics laws
°
° conomical
° Important growth of China economy
° Huge and fragmented market
° Increase of urbanization rate
° Yocial
° Low income and standard of living
° echnological
° Poor level of infrastructure
° nvi
onmen al
° Development of urban areas
° Reduce emissions of carbon dio ide
° Recyclage of bottles
° Obligation to share technology and knowledge
for foreign firms
Market Share In China
 SèRAèë
IC
ROUPS
High

CRSB
èsingtao

Yanjinj
Market In-Bev Led

Share
Harbin
Chongpi

Other
Local Brew
Low

Few Product Range Many

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e
s Five Fo
ces
° èhreats of new entrants'
 High barriers to entry'
° Fragmented market
° Distribution networks
°
overnment Regulations
 ëconomies of scale in marketing, production and
distribution.
° Rivalry (price competition has been decreasing)'
 Increasing competition from imported beers
(however, national brewers own part of these
breweries).
 2,200 wholesalers and 560,000 retail establishments.
 Creative and enticing advertising by majors.

rowing popularity of micro-breweries and other
craft-beers.
 Alternative' e pansion to super-premium beers and
other segments with lower demand elasticity.
° Substitutes'

rowth in'
° Premi ed drinks
° Alternative malt beverage
° Alternative non-alcoholic drinks (from juices to mineral
water)
 However, beer remains the largest drink sector.
° Buyer͛s Bargaining Power'
 It changes from segment to segment, but in
general'
° Low switching costs
° Brand loyalty
° Increasing health conscience

° However, for craft-beers, which are perceived as having higher

quality, these characteristics may not always hold.
° Suppliers͛ Bargaining Power'
 Most supplies come from competitive industries
which are more fragmented than the beer
industry.
° Farmers
° Labor (the case of unionized labor)
 èhe more consolidated supplier is that one
supplying bottles/cans.
 ÷e Yuccess Fac o
s

° Low cost structure (Scale of economies and learning)

° ëffective marketing & advertising strategy to e panded
market share
° Successful brand loyalty and recognition
° Product innovation and production efficiency
(packaging and automation)
° International e pansion to countries with increasing
consumption trends
° Strategic price increases and premium pricing
 
iving Fo
ces
° ha
e ing innova ion - thanks to a rather uniform character of the
product, breweries are trying to find other possibilities of
differentiation, which is based mainly on building the brand assisted
by advertising.

° Long- e
m indus
 g
ow h
a e AIn the decade between 1988 and
1998 the 10 largest brewers hardly arose from 35.8% to 37.6%.
Over the last five years this development has accelerated strongly,
the 10 largest increased by nearly 20% and have now 57% of the
global market.

° os efficienc Aèhe price of the beer does not grow respectively
with the price of supplies, breweries are forced to develop more
effective ways of operation.
 CPM

Anheuse
-Busch  (YABhille
 sing ao


i ical Yuccess Fac o
s Weigh a ing Yco
e a ing Yco
e a ing Yco
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0.15 4 0.6 3 0.45 3 0.45
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0.1 4 0.4 2 0.2 4 0.4
  

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 3 0.75 4 1 3 0.75
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AL 1 3.5 3.2 3.05

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 NAL ANALYY_Y FA Y

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 IFë
÷ Y _N NAL FA Y W _Î
 A_NÎ W _Î
 
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_n e
nal Y
eng hs
1. High level of ë pertise in 0.20 4 0.80
the beer industry coupled
with financial strength
2.
lobal reputation through 0.05 4 0.20
brand recognition and
uniqueness in taste
3. High level of operating 0.15 4 0.60
efficiency and quality
consistency
4. Recruitment policy focusing 0.05 3 0.15
on highly capable employees
5. Ability to select partners in 0.10 3 0.30
joint-venture business
_n e
nal Weanesses
1. Language barrier and lack 0.10 2 0.20
of understanding of culture

2. Lack of decentralization is 0.05 1 0.05

an obstacle for e pedient
decision-making in regional
market

3. Limited brand awareness 0.10 2 0.20

among Chinese beer
consumers

4. Inability to distribute 0.10 1 0.10

fresh beer across the
country
5. Lack of emphasis on 0.10 1 0.10
economy beer segment

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'#2
° FS Average is 30/7 = 4.29
° IS Average is 32/7 = 4.57
° ëS Average is -26/ 7 =-3.71
° CA Average is -17/ 7 =-2.43
° Directional Vector Coordinates'
° -a is' CA Average + IS Average
° =-2. 43 + 4.47 = 2.04
° y-a is' FS Average + ëS Average
° =4.29-3.71= 0.58
 SPACë Matri


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 _YY Y FA 
° Fragmented Market
° Price wars
° Regulations
° Distribution problem
 Financial Ratios
  

 
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 Al e
na ive Y
a egies

° Build beer factories in major Chinese markets

° Increase market share
° Develop partnership with local manufacturers
° Acquire small local beer manufactures to
e pand business and manage distribution