Global Forces and the Brewing Industry

Global forces and the European brewing industry

Mike Blee

This case is centred on the European brewing industry and examines how the increasingly competitive pressure of operating within global markets is causing consolidation through acquisitions, alliances and closures within the industry. This has resulted in the growth of the brewers' reliance upon super brands.

In the mid 2000s the major centre for production of beer in the world was Europe; its production was twice that of the USA, which in 2003 was the world's largest beer-producing country. In the alcoholic drinks sector beer sales are dominant: total sales across the world accounted for 74 percent of all alcoholic purchases (Euromonitor 2002).

Although the European market as a whole is mature, with beer sales showing slight falls in most markets, Datamonitor 2003 reported that the alcoholic beverage sector grew at an annual rate in value terms by 2.6 per cent year between 1997 and 2002.

Table 1 European beer consumption by country and year (000 hectolitres )

Country 1980 1997 1998 1999 2000 2001 2002

Austria 7651 9145 8736 8810 8762 8627 8734

Beigium 12945 10243 10011 10203 10064 9986 9901

Denmark 6698 6165 5707 5562 5452 5282 5200

Finland 2738 4170 4084 4087 4024 4085 4136

France 23745 21655 22663 22833 21420 21331 20629

Germany# 89820 107679 104550 104629 103105 100904 100385

Greece N/A 3940 4211 4354 4288 4181 4247

Ireland 4174 5406 5592 5699 5594 5625 5536

Italy 9539 14535 15501 15675 16289 16694 16340

Luxembourg 417 466 452 474 472 445 440

Netherlands 12213 13475 13225 13309 13129 12922 11985

Norway* 7651 2330 2203 2305 2327 2290 2420

Portugal 3534 6318 6494 6475 6453 6276 5943

Spain 20065 26238 26677 27772 29151 31126 30715

Sweden 3935 5459 5077 5258 5011 4932 4999

Switzerland* 4433 4249 4277 4212 4194 4141 4127

UK 65490 61114 58835 58917 57007 58234 59384

Total# 269358 302587 298295 300574 296742 297081 295121

*Non-EU countries, ＃1980 excludes GDR. Figures adjusted.

Source: www.Brewersofeurope.org

Table 2 Annual consumption per capital by country and year (litres)

Country 1980 1997 1998 1999 2000 2001 2002

Austria 101.9 113.3 108.1 108.9 108.1 107.0 108.5

Beigium 131.0 101.0 98.0 100.0 99.0 98.0 96.0

Denmark 130.7 116.7 107.7 104.6 102.2 98.6 96.7

Finland 56.6 84.0 80.0 80.1 77.9 80.2 79.5

France 44.3 37.0 38.6 38.7 36.2 35.9 34.7

Germany# 145.9 131.2 127.5 127.5 125.3 122.4 121.5

Greece N/A 39.0 42.0 43.0 40.0 39.0 39.0

Ireland 121.7 123.7 124.2 126.0 125.0 125.0 125.0

Italy 16.7 25.4 26.9 27.1 28.1 28.9 28.2

Luxembourg 115.8 112.0 107.0 110.0 108.2 100.9 98.5

Netherlands 86.4 86.4 84.3 84.4 82.8 80.5 79.2

Norway* 48.1 52.9 49.7 51.7 52.0 51.0 53.7

Portugal 35.0 63.6 63.3 64.9 64．6 61.3 58.6

Spain 53.7 66.7 66.9 69.1 72.0 75.7 73.4

Sweden 47.4 61.7 57.3 59.3 56.4 55.4 55.9

Switzerland* 69.5 59.5 59.9 58.8 58.3 57.2 56.6

UK 118.3 103.6 99.3 99.0 97.2 99.0 100.6

Total# 82.5 78.6 77.2 77.6 75.9 75.9 76.8

*Non-EU countries

Source: www.Brewersofeurope.org

The Interbrew market trend report 2002 states that within Europe the on-trade market (sold through licensed premises) beer accounts for 59 per cent of all alcoholic beverage sales by volume , while in the take-home market this figure increase to 72 per cent..

Two key trends within Europe were the rapid growth in leisure spending and the consumers' increased awareness of health and fitness. These factors had resulted in a drop in the volumes of beer consumed.

Another current trend across Europe is towards drinking a wider range of alcoholic beverages. There has been a growth in demand for flavoured alcoholic beverages, with wine consumption having shown large increases. Within the UK alone wine sales had grown from 14 per cent of the market in 1980 to 26 per cent of the market in 2002. Meanwhile there has been a negative trend in the overall consumption of spirits.

Acquisition, licensing and strategic alliances have all occurred as the leading brewers battle to control the market. There are global pressures for consolidation due to over capacity within the industry and this has resulted in a focus upon cost containment and brand reinforcement (see table 5). Interbrew's market trend survey 2002 shows that the consolidated global share of the top 20 brewers increased from 51 per cent in 1990 to 65 per cent in the year 2000. The report suggests that consolidation will further increase and compares brewing with the cigarette industry. In 2002 the five largest global brewers accounted for 30 per cent of production volume, whereas in the cigarette industry the five leading players had a 60 per cent market share.

Table3 European production by country and year (000 hectolitres)

Country 1990 1997 1998 1999 2000 2001 2002

Austria 7606 9366 8830 8869 8750 8588 8731

Beigium 14291 14014 14105 14575 14734 14966 15696