“Beer is a malt beverage. Indeed, it is the malt beverage” (Duetsch 28). The beer industry is one of the oldest industries found in the world. Sumerian texts mention the art of brewing, dating back to 5000 years ago. The brew had an important role in the past – it has been used in religious rites as payment for work and was drunk by European monks to maintain their fast. The word “beer” comes from the Latin word bibere, meaning “to drink.” (CBC In-depth 2004). In the 12th century, brewing became a commercial enterprise in Europe.
The production of beer varies from brewer to brewer, but in general there is recipe that most brewers follows below:
In America its production relies on four main ingredients-malted barley, hops, yeast, and water. Processing them has become rather standardized. Malting germinates the grains of barley, thereby developing enzymes that convert starch to sugar. Adding the malt to water, flavoring the resulting “mash” with hops (and frequently with rice or corn, too), and then processing this mix yields “wort,” which is cooked and filtered. Yeast is then added for the fermentation stages. Several subsequent steps of filtration, carbonation, and storage are taken toward the end of production. Finally, regular canned and bottled beers are pasteurized to extend their shelf life, whereas so-called draft beers, such as Coors and Miller Genuine Draft, rely on other means to curb perishability, such as constant cold storage throughout all stages of distribution (Duetsch 28).
Contrary to the thinking of some novice beer consumers, beer is best when it first leaves the brewery. Aging may be good for other alcohols, such as wine and whiskey, but is catastrophic for beer. Consequently, beer packages carry dates of production, and distributors and retailers continually rotate their stocks to ensure freshness, just as if they were dealing with milk (Duetsch 28). Beer can be classified into distinct categories: ale, stout, and lager, these classification distinguish certain differences in the production process of beer where differentiation of ingredients is key in producing different variations of flavor.
Globalization has proceeded at a much slower pace in beer industry than other related business. can be exemplified by a comparison of the soft drink and beer sectors. In the soft drink sector, the top four producers share 80 percent of the market, whereas in the beer sector the top four producers share only 20 percent of the market (Lewis, 152). Traditionally, the beer industry has been one that has thrived domestically, but with the rise of globalization the dynamics of production and marketing have changed. The opening of new markets with the reduction of trade boundaries, along with technological advances in production and transport, have lead to one of the most pivotal transformations in this industry to date. As the beer industry now enters an era where global capitalism promotes ideologies of free trade and competition, new ideologies in production and marketing are transforming one of the oldest world industries. International brands are now taking hold in the 21th century due to these new dynamics. Various breweries are employing new international marketing, production, and distribution tactics. The prevalence of acquisitions, mergers, and minority partner positions are just a few of the tactics major breweries are employing in attempts capitalize in opportunities globally. Alternatively, other smaller breweries continue to uphold tried and tested regional marketing, production, and distribution strategies of the past. As competition rises, profits are falling for many breweries. Therefore, breweries need to integrate tactics to internationalize products to truly succeed in the global market.
The beer industry is considered a classic scale economy industry (Lewis 152). The cost of unit production falls as the scale of production grows. Therefore, the larger the size of the brewery, the more likely cost savings will be passed down to the distributors or retailers. With the expansion of globalization ideals into many sectors, the brewing industry is now entering an era where strategic restructuring leading towards concentration is the norm. Consequently, consolidation implies that the larger the global presence, the more likely breweries will capitalize through an economy of scale. Although some regional areas remain where small breweries thrive (Germany, which will be discussed later), the trend is growing where mergers producing brewing powerhouses are the new face of the beer industry. Examining some key examples of these practices will demonstrate how the structure of the beer sector is transforming due to globalization towards consolidation making independent breweries obsolete in the industry.
North and South America
Breweries are actively marketing their domestic beers on more international levels. Globalization in general has lead to the need to internationalization of products to gain maximum profits as new opportunities in the global market open for brewing companies. “As the global beer market compresses, a good deal of the merger and acquisition activity is taking place in Latin America” (Vuyk 36). Moreover, free trading zones, such NAFTA, create an environment where industries can be restructured from a national to a continental scale. Corona’s success within the United States is such an example. The region of the Americas is actively taking measures to consolidate the beer industry. One such example is Anheuser-Busch’s minority partner position with Grupo Modelo, producer of Corona Extra. The beer industry within Canada has also been experiencing the hand of globalization. Molson, the oldest Canadian beer, is now owned by Coors (a U.S. brewery). The following discussion examines how various breweries are taking new strategic measure to effectively penetrate the global market.
The United States
A close examination of the U.S. beer industry will demonstrate how traditionally the breweries have developed domestically through out most societies. The first commercial brewery was established in the United States in New Amsterdam (now New York) in 1632. The American beer industry has evolved immensely since this pivotal moment (Simson 82). Beer has had a long history in the United States, being first brought to this nation on the Mayflower (Simson 82). Between the Civil War and prohibition in 1920, brewing became one of the United States leading manufacturing industries (Stack 435). Prior to 1895, 90 to 95 percent of beer was kegged and sold to saloons (Stack 443). New technologies helped restructure the beer industry to increase the shelf life of the product, thus opening up the market to the individual consumer, not just saloons and mass retailers.
Prior to 1950, the American beer market was composed of many small brewing firms. 1947 there were over four hundred independent companies operating a total of 465 separate plants (not counting microbreweries of less than 10,000-barrel capacity)” (Destch 32). These firms supplied beer to various regional markets. The cost of transportation was relatively more expensive than the cost of production, thus making the structure of regional markets more appealing to brewers than national, or even global markets. In addition, aging of beer could be detrimental to the final product. Consequently, national markets seemed unfeasible due to the possibility of lost profits to spoilage of product. “A critical change to the American market was the technological and scientific innovations that allowed breweries to brew large quantities of beer and ship them properly (Stak 439). Innovation and science allowed some of the regional breweries, like Milwaukee’s Pabst Brewery, to reach a greater markets and expand. Artificial refrigeration, mechanized bottling, and pasteurization allowed Pabst Brewery to become the largest American brewery by 1877. Now, most beer is supplied by a few giant firms whose shipments span the nation. Currently, five companies operate 31 breweries, which together have an annual capacity exceeding 200 million barrels, enough to supply all domestic consumption. In the decade of the fifties, numerous regional brewers thrived with brands popular regionally but unknown at the national level, brands such as Grain Belt, Pearl, Iron City, Narragansett, and Blitz-Weinhard. Therefore, concentration was relatively low. “In 1950 the leading brand nationally, which accounted for less than 7 percent of sales nationwide, happened to be Schlitz. Moreover, each company focused on just one brand and a few packages” (Duetsch 28). This can be exemplified by Anheuser-Busch, who specialized in Budweiser, and Miller brewed hardly anything besides Miller High Life. This now is dramatically different, with Anheuser-Busch and Miller dominating the industry. “Together they account for roughly two thirds of all American output. Their brands are too numerous to remember easily” (Duetsch 28). This shift into concentration from fragmentation of the American beer industry has been the most significant structural change in this industry has undergone this century.
Although the numerous regional markets operated by various breweries no longer exist, national breweries still employ tactics of first implemented by these breweries. Because of the effects of ageing and the relative high cost of transport verse production (beer is mostly composed of water), national breweries have dived the American market into five regions. Each region has a brewing headquarters, which is responsible for production and distribution within that area. The markets are as follows:
1. A Northeast market, centered in New York
2. A Southeast market, including Florida and Georgia
3. An upper Midwest market, centered in Wisconsin
4. A lower Midwest market, with Texas for its hub
5. A Western market, dominated by California
The six states associated with the regional markets account for nearly half of all the brewing capacity within the United Sates (Duetsch 32).
The beer industry has seen an immense transformation throughout this century. Concentration has raised dramatically at all geographic levels due to technological innovations and the transport innovations, which made transport cheaper. Two companies of long-time national standing have been especially successful, Anheuser-Busch and Miller. They have more than displaced the regional brews that once held sway, except for Coors, which has expanded from its regional origins to rank third nationally. None of these three breweries has grown by merger; rather they contribute to concentration by internal expansion and development of new brands. Mergers have, in this industry, served as a salvage mechanism for failing brands and companies. Larry Duetsch best summarizes why there has been a dramatic rise in concentration within the American beer industry.
First, technical economies of scale in production rose. Second, two explosions of advertising expenditures-one during the 1950s and early 1960s and the other during the 1970s and early 1980s-rocked the industry, shaking the financial foundations of all but the biggest brewers because brand image is critical to success in this industry. Third, strategic behaviors of various sorts, such as price discrimination and product proliferation, have favored A-B and Miller over the others. Finally, several kinds of exclusivities have bestowed advantages on A-B and Miller-in particular, advertising exclusives in live network sports sponsorships and, to some unknown degree, informal exclusive dealing in distributorships (61).
Another reason for the rise in concentration could be attributed to the challenge that import beers pose for the domestic market. In 2002, imports grew 6 percent, one percent ahead of domestic beers, accounting now for 11.3 of total consumption (Poop 19). The two top import competitors are Corona Extra (Grupo Modelo, Mexico) and Heineken (Heineken, Holland). Incidentally, Corona Extra’s Grupo Modelo, which was the top selling import, is 50 percent owned by Anheuser-Busch (Popp 24). Although domestic breweries did not merge for structural concentration in the domestic market, companies like Anheuser-Busch employ a similar strategy by increasing it’s market share in international breweries. A notable example is Anheuser-Busch’s role in the Chinese market. Experiencing 5 percent growth per year, China is the most rapidly and largest beer market in the world. Anheuser-Busch’s decision to increase ownership of Tsingtao Brewery Co. Ltd to 27 percent through 2010 has contributed to Anheuser-Busch success in the Chinese market (Popp 19). Anheuser-Busch demonstrates innovative ways to combat the competition presented by import brands.
Jean Talon built Canada’s first commercial brewery in 1668 in Quebec City, establishing the beer making cottage industry for the next century. The techniques of production were transformed by John Molson and the establishment of his first brewery in Montreal. This marked the beginning of the industry’s development period. Consequently small independent breweries began to flourish across the country. In 1847, Labatt entered the scene in London, Ontario, beginning to establish itself as one of the major player in the Canadian brewing industry. In 1870’s brewing had begun to establish itself as a modern industry. Brewers were scattered across the country, from the Maritimes to British Columbia. Ontario’s brewing heritage was sharply divided by prohibition in 1916. Furthermore, temperance closed the vast majority of small regional family operations. When prohibition was repealed, a number of syndicates tried to revive the fortunes of the small breweries but were unsuccessful (CBC In Depth 2004).
The evolving history of the Canadian beer industry is undergoing dramatic changes in the 21st century. Recessions, environmental issues, breakdown of provincial barriers, free trade, more beer in Canada, and decreased consumption, are changing the face of the brewing industry. This can be exemplified by the merger of Molson Inc. (the oldest family owned business in North America) and Coors Breweries, announced July 2004 (CBC Archives 2004). This merger would make Molson and Coors the fifth largest brewery in the world. Although Molson is the top selling brand domestically within Canada, the new market dynamics which have been have been advocating the internationalization of brands has lead to this crucial merger between these two breweries. In addition, Canada’s Molson has acquired Brazil’s second largest brewer, Kaiser. Molson already owns a share of Brazil’s Bavaria brewery. Moreover, Labatt’s, the other significant brewery in Canada, minority partner position with Femsa of Mexico (this is discussed in further detail in the next section) demonstrated how breweries are transforming themselves to be global player in the emerging world market. Considering also that Interbrew (Belgium based brewery) has acquired Labatt, shows that the relationships among breweries grow more complex everyday.
Grupo Modelo and Femsa Cerveza have the Mexican market all to themselves, as the two dominant breweries within the nation. Both breweries boast phenomenal growth rates with in the last decade, forecasting 5 % growth year on year. Economic growth and improving incomes within the nation, alongside the evolution of demographics (17 % of the population will reach drinking age with in the next decade) help propel the beer industry with in Mexico as one of the most thriving sectors (Walting 32). Grupo Modelo founded in the 1920’s is producer of Corona, the largest beer exported to the United States. Moreover, the other dominant brewery, Femsa Cerveza, emerged in the early nineties from Monterrey based industrial conglomerate VISA as part of the maneuverings undertaken to raise capital needed for the acquisition of the bank Bancomer from the federal government. Although Femsa Cerveza is relatively new to the market (and not as established as Grupo Modelo), the hold 45 percent market share, compared to Modelo’s 55 percent market share, this is a very healthy figure demonstrating the development of the market within the Mexican nation.
Grupo Modelo’s sales jumped 27.3 percent within the decade of the 90’s, one of the largest periods of growth it has experienced. “Strong distribution netoworks, high prices of imports, and quality of local quality products” confine the foreign brands in the Mexican market, while allowing domestic brands to thrive (Walting 32). Anheuser-Busch lack of success in the Mexican market has lead them to seek a minority partner position within Grupo Modelo, trying to minimize their losses in the their market. Modelo has had tremendous success not only in the domestic market, but in the United States, increasing their sales of Corona by 30 percent during the past few years (Walting 33).
Femsa Cerveza has also had phenomenal success within the domestic market, in addition to it’s exports. Their product “Sol” has experienced a 20 percent increase in exports, the largest in company history. Femsa Cerveza, is also partially owned by minority partner Labatts of Canada (30%) (Watling 33). Pursuing a segmented marketing strategy, partly due to the influence of Labatts, Femsa has developed various brands appealing to regional areas and different socioeconomic standing. For example, these leading brands: Superior (southern Mexico), Tecate (northern Mexico), and Carta Blanca (Monterrey); exemplify the different branding strategies of the this company to differentiate it’s products. Moreover, in 1998, Femsa began making plans to list their company on the Mexican stock exchange, a pivotal accomplishment for a new developing company within a thriving and growing industry. Furthermore, Interbrew, one of the key global competitors in the global beer market (based in Belgium) has taken steps to acquire Femsa. It could be stated that in Mexico, domestic brands are being propelled into the international market through foreign investment.
Traditionally, the Latin American market has been fragmented, with many various independent breweries that lack dominance on the international level. Consolidation in the Latin American market can be expected as many international brewers seek to grow in what is becoming a condensed global market. Examining some of the activities that major brewers have been involved in within Latin America will demonstrate the continued trends leading toward consolidation of the beer industry. Anheuser-Busch, who is often considered the champion of economies of scale, exemplified their global tactics with Grupo Modelo’s partial acquisition. They also hold minority stakes with the breweries of CCU in Chile and. Although Heineken has aquired 61 percent of CCU through a joint venture, Anheuser-Busch still owns an estimated 20 percent stake in this company. Moreover, in Brazil, where AmBev sells Anheuser-Busch products locally, has been acquired through a joint venture by leading Belgium Brewer Interbrew, tangled relationships between breweries arise through such consolidation tactics (Vuyk 37). Heineken’s tactic of building solid partnerships in Latin America started with Femsa in Mexico and Quilmes in Argentina. “With Quilmes it also obtained a minor shareholding in the company, which gave it a foothold in most South American countries” (Vuyk 37). The Belgian-Canadian Brewer Interbrew was a relatively small player in Latin America, with a joint venture in Venezuela and a sizable import position in Cuba, until it’s acquisition of Companhia de Bebidas das Americas (AmBev) in Brazil (Cioletti 8). AmBev is the world’s fifth largest brewer with about 65 percent of the Brazilian market and holds a significant position throughout Latin America. Consolidation of the Latin American market will continue it’s trends as large multi national breweries secure their positions as global players in the beer industry.
European beer market is the largest in the world in terms of consumption, production and value. Heineken the biggest brewer in Europe only accounts for 5 percent of the European sales. Germany, producer of 44 percent of the Europe’s beer, incidentally only contain medium sized breweries (European Business Review 1995). Also it must be noted, the private sector and public sector companies employ different business strategies, and there is a great diversity among European breweries and business classifications with in the European beer industry. This could be attributed to fragmented and decentralized markets, quite contrary to that found in the Americas. Breweries in the European community tend to take more regional approaches than international approaches in production and marketing, this could be a factor leading to the fragmentation of the European market. “Euromonitor sites Eastern Europe as the primary driver of global beer growth over the last five years” (Foote 42). Per capita beer consumption in Russia, for example, has more than doubled in the last decade (Foote 43). Increased in merger and acquisition activity in the region over the next couple of years can be expected if these trends continue.
The United Kingdom currently has the highest percentage of on site alcohol sales than anywhere else in Europe (70%). Extraordinarily, breweries have been declining in the United Kingdom. In 1963 there were 304 breweries, in 1993, this number was reduced to 94 (Lewis 154). This could be attributed to the structure and traditional ideologies of the British beer industry. Furthermore, the British beer industry is very heavily vertically integrated. British law allows breweries to own public houses and retail outlets, and binding the outlet to only sell the breweries beers (Lewis 153). This raises concerns in British governments regarding the limiting of competition due to vertical integration. Traditionally, British beer has been classified as either ale or stout. In the 19th century, the lager revolution swept Europe. Initially, the lager revolution by passed Britain by, allowing many smaller breweries to survive (most smaller breweries produced the traditional ale). Now 66 percent of beer sales come from lager, demonstrating a dramatic change in product consumption with in the UK (Lewis 154).
The lack of international ownership and internationalization of products in the beer sector can be attributed to vertical integration and the historical domination of ale. The UK market was one that seemed impenetrable, or requiring special regional knowledge to truly succeed. Not until the 1980’s did international ownership in British companies take hold. Lewis makes an excellent argument for why British beer never took hold on a global level. “With the exception of Guinness, British beer has not been successful at the international level because their owned brands were domestic in focus or scope, while all their international brand were licensed to foreign firms” (154).
A 1986-89 investigation of brewery practices lead to some regulation of the vertical integration practices. The report was highly critical of the brewery practices finding that a complex monopoly system existed through vertical integration. The report was slightly successful in alleviating some of the pressures vertical integration posed on smaller breweries by the larger brewers, but did not eliminate the vertical integration structure completely. The new pressures and regulations, also known as the Beer Orders, in the domestic market, along with new opportunities abroad, changed the tide for the British beer market, consequently making international ownership more appealing during the 1990’s.
Privatization, the opening up of China toward foreign investment, and new programs in central and eastern Europe all pulled UK breweries toward more internationalist approaches. Bass was the first of the British breweries to take the initiative and acquired Prague Breweries. Bass successfully captured 16 percent of the Czech market after their acquisition (Lewis 157). Another example is UK’s Cobra Beer Ltd, attempting to make India it’s biggest market in 10 years. Cobra will now begin commercial production in Rajasthan, India. Instead of having Cobra imported to India, from the UK and Poland, domestic production in India through a license with Mt Shivalik Breweries will prove more logistically viable of an option leading to greater profit opportunities (PTI 2004). The techniques of the past, promoting products focused in the domestic market and producing foreign lager brands under license, have proven to be short sighted (Lewis 159).
Amsterdam, the home of Heineken beer, was one of the first international cities known for trading in the world. It is no wonder then why Heineken became one of the truly first to employ internationalist approaches to beer distribution and production. Economic history in the Netherlands has been one that has prompted and been influenced by innovation and development. In 1592, brewer’s widow Weijntgen Elberts established the Haystack brewery in the heart of Amsterdam, the largest brewery in the region. No one knew then that the brewery would establish the first international beer in the world. Gerard Adriaan Heineken, a 22-year-old entrepreneur, purchases the “The Haystack” brewery in 1864 (Heineken International 2004). 1900, the company begins efforts to expand to Asia. In the United States, alcohol is banned, but after prohibition, Heinken enters the U.S. market. Modern communication and advertising become an integral part of the company as Heineken moves into foreign markets. Heineken creates an international springboard for future global expansion. When Peter Feith, new head of exports, is appointed to the company. Under his leadership, Heineken will take its first steps towards becoming a truly international company.
In1929, Heineken participates for the first time in the construction of a brewery in a tropical region. Building starts in Surabaya in the Dutch East Indies (now Indonesia). By 1930’s Heineken enters the United States. Hieneken’s development continues during the century and establishes itself globally by the 1980’s as a household name in the beer industry. Heineken has become the second largest brewer in the world with the world’s most international brand, selling in over 170 countries (Heineken International 2004). But the timeline for development, is one that compared toward American breweries, has developed at a much quicker pace. This epitomizes in the decade of the 90’s, where Heineken moves into the strategies of acquisition to promote internal growth. In 1992, Van Munching & Co., its sole importer in the United States, is purchased by Heineken. Moreover, Heineken is also stepping up its presence in Russia with the purchase of St. Petersburg brewery Bravo.
Although Heineken is the largest brewery in Holland, do not be fooled to assume the control the complete market. Although they own Amstel, another Dutch barand, Royal Grolsch Breweries is also an established Dutch brewery. The Dutch’s economic history made it easy for breweries to understand the necessary steps needed to compete successfully in a global market. Moreover, the difference regionally between Holland and other larger countries (such as the United States where a large regional market had to be conquered first), demonstrated the ability of the Dutch to appeal to different demographics in order to gain a greater market share of the region. Heineken has long employed logistical moves in joint ventures, acquisitions, and other strategic moves to consolidate the European market and export Heineken on a international level.
“While there is no longer an outwardly apparent regulatory standard applied to the beer industry, there are cultural implications of the tradition and past regulations of Reinheitsgebot (beer purity law), which have induced a culture of regulation of an industry out of a historical, traditional, and exclusionary perspective” (German Weissbier 2004). The German beer purity law or Reinheitsgebot was enacted in 1516. This law permitted only four ingredients in the beverage: water, hops, barley, and yeast.
Germans believed that the law protected public health from harmful additives and public interest from misrepresentative advertising in the beer industry. This law impacted the culture for centuries, and resulted in developing a thriving domestic market, with many. barriers to entry for foreigners. Brewers outside Germany long argued that the law was unfair, and finally the European Court of Justice ruled in their favor. The Purity Law was officially lifted in 1987, but the law’s tradition continues in Germany.
Germany has over 1,300 official breweries, demonstrating the diversity of the German market; the variety of brewers makes concentrated market share unheard of. Consolidation is an attractive venture within the new economic structure of the European Union for many multi national breweries. Many multi-nationals in the beer industry are seeing opportunities to buy into a market while independent breweries are still available. Interbrew, the group who recently acquired Spaten & Franziskaner (two of Germany’s largest independent breweries), is one such multi national brewery taking steps toward consolidation in the German market (BBC News 2004). Interbrew will now control 11% of the German market, a high percentage due to the fragmented market with high competition. But tradition in Germany within the industry dictate market standards, and domestic brands hold much of the market, so many independent brew masters are staying away from lucrative acquisition deals from foreigners as imports into Germany struggle to attain high percentages within the market. With the consolidation trends of globalization, small independent brew master may be in danger as multi national breweries begin to take hold of the German beer market to reshape German tradition.
Eastern Europe and Russia
“When Central and Eastern Europe opened up in the early 1990s, beverage companies from Western Europe and around the world lined up to step through newly opened doors and into the arms of 300 – million thirsty consumers” (Foote 42). The emerging markets of Eastern Europe provided an opportunity for low investments with opportunities for high growth and returns with established brands. Moreover, many local domestic breweries have been acquired by industry leaders such as Miller. The decentralized and unconsolidated market of Easter Europe and Russia will likely undergo restructuring through acquisitions and mergers. But with so many multinationals sitting on solid foundations in the beer business, it seems likely that much of that activity will involve those same players reinforcing their positions rather than new players moving in
Although per capita consumption is still much less than in the industrialized nations, the potential growth for the beer market is apparent. Demand in China and Tailand is rising 20-25%/yr and consumption in India is expected to rise sharply. Furthermore, the phenomenal growth rates that China is experiencing have caught the attention of many multi national breweries in attempts to grow and consolidate the market. Therefore, brewers from Europe, Japan and the US are establishing ventures across the Asian region. “The Association of Southeast Asian Nations will reduce tariffs in ASEAN to 0-5% by 2008. Therefore beer makers, looking at the 60 mil population in Thailand and the 330-mil people in the total ASEAN market, are setting up bases” (Nikkei Weekly 32).
As China experiences the largest growth rates of its time, it’s now surprise they surpassed the United States as the world’s largest beer producer in 2002. China’s beer industry was set up by German entrepreneurs a century ago. Their breweries are still the most prominent, led by Tsingtao, the country’s best-known brand abroad. Some 60 foreign beer makers have joint ventures or other investments in China. But like many other developing areas, the market is fragmented and few have prospered . Global companies are seeing new opportunities to buy into the Chinese market as Beijing eases limits on foreign ownership and breweries sell shares on stock markets abroad. Anheuser-Busch’s aggressive bid for Harbin Brewery reflects its status as China’s leading foreign brand. Anheuser-Busch, the world’s biggest brewer, has a 27 percent stake in Tsingtao and owns 98 percent of the Budweiser Wuhan International Brewing Co. in the central city of Wuhan, where its Budweiser and Bud Ice brands are brewed. SABMiller has a stake in China Resources Breweries, the country’s second biggest after Tsingtao (Todd, 40).
The top 10 brewers worldwide now account for more than half of the entire world’s beer, which is an industry first (Todd, 39). The fragmented beer market is rapidly contracting. Recognizing that mature domestic markets lack room for adequate growth, breweries seek growth through acquisitions and mergers in high growth opening markets, such as China, and other markets in Asia and Latin America. Industrialized nations have a difficult time growing due to established markets and consolidation within their domestic sphere. International approaches that promote growth through consolidation abroad in fragmented markets allows for strategic international development of multi national breweries.
Globalization has impacted the beer industry to transform from its traditional domestic dominated structure. Decades ago, one would only hear stories of the quality of German beer at Oktoberfest (a German beer festival). Now thanks to acquisitions, Interbrew can make stories reality; offering the first mass scale endeavor at German beer exports internationally. Globalization will positively impact the industry by introducing new products, that otherwise would have been unavailable, to international markets. Moreover, globalization has tangled a web of intricate relationships among brewers on a enormous international level.
This discussion identified how the largest breweries are taking steps to establish themselves in a multi national manner. Strategic acquisitions, joint ventures, mergers, and minority partner positions are contracting the domestic beer market towards globalization. Most brewers see consolidation and globalization of the industry as an ongoing trend as well as continued volume growth in less developed markets (Todd, 39). Developing markets is where this activity will be most ramped. Moreover, it also will be found in fragmented markets, as companies such as Interbrew try to restructure the German market and enter and establish themselves in the Latin American market. These practices soon will eradicate many independent small breweries, and as global giants reshape the landscape of the industry. Although such unions may capitalize on the economies of scale, measures should be taken to insure an oligopoly dose not arise within the industry as it consolidates.
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