Coopers Brewery
CASE 3: COOPERS BREWERY
Analyze the Australian brewing industry. What characterizes this industry?
To analyze the competitive structure of this industry, we can apply Porter's Five Forces. This model of industry analysis uncovers the following aspects of the Australian brewing industry:
Threat of new entrants: The Trade Practice Act of 1974 lead to national consolidation and a focus on economy of scale. This created an advantage for high volume firms already competing in the industry, because large capital requirements cause a cost disadvantage for new entrants. This can be seen in the steady decline in the number of breweries in Australia, implicating that the capital requirements necessary to compete against the biggest firms on a national level are high. In the brewing industry there is also a focus on differentiating beer on branding, image, origin and taste to create brand loyalty among customers. This focus increases the product differentiation, and in connection with the economy of scale and capital requirements, creates high entry barriers to the industry. There could also be a low access to the distribution channels in the market, because of long-term relationships between distribution channels and existing companies. Overall, high entry barriers characterize the Australian brewing industry.
Bargaining power of suppliers: This can be considered relatively low in the brewing market, because of easy available raw materials such as malt and hops. The bargaining power of supplier may also depend on the size of the firm and its geographical location. In the Australian brewing industry the two largest groups, Foster's Brewing Group and Lion Nathan, holding a 94 per cent market share will be in a better bargaining positions with their suppliers then Coopers Brewery, holding only 3 percent of the national market. The threat of forward integration is also considered to be low, because of the large difference between brewing and farming.
Analyze the Australian brewing industry. What characterizes this industry?
To analyze the competitive structure of this industry, we can apply Porter's Five Forces. This model of industry analysis uncovers the following aspects of the Australian brewing industry:
Threat of new entrants: The Trade Practice Act of 1974 lead to national consolidation and a focus on economy of scale. This created an advantage for high volume firms already competing in the industry, because large capital requirements cause a cost disadvantage for new entrants. This can be seen in the steady decline in the number of breweries in Australia, implicating that the capital requirements necessary to compete against the biggest firms on a national level are high. In the brewing industry there is also a focus on differentiating beer on branding, image, origin and taste to create brand loyalty among customers. This focus increases the product differentiation, and in connection with the economy of scale and capital requirements, creates high entry barriers to the industry. There could also be a low access to the distribution channels in the market, because of long-term relationships between distribution channels and existing companies. Overall, high entry barriers characterize the Australian brewing industry.
Bargaining power of suppliers: This can be considered relatively low in the brewing market, because of easy available raw materials such as malt and hops. The bargaining power of supplier may also depend on the size of the firm and its geographical location. In the Australian brewing industry the two largest groups, Foster's Brewing Group and Lion Nathan, holding a 94 per cent market share will be in a better bargaining positions with their suppliers then Coopers Brewery, holding only 3 percent of the national market. The threat of forward integration is also considered to be low, because of the large difference between brewing and farming.