1) What are the dominant business and economic characteristics of the global beer industry?
- Extremely competitive
- Private label dominates
- Few large companies producing many labels
- Local government regulations
- New markets need to be discovered
- Saturation of existing markets
- Foreign exchange rates
The global beer industry continues to be extremely competitive, most large companies have multiple private label brands to address different tastes and needs throughout the world. The industry continues to face large challenges from local governments who are imposing strict rules and taxes for companies looking to due business in their country. The economy has changed the global beer industry’s profitability, as exchange rates continue to fluctuate, companies are trying to figure out ways to reduce operating expenses to offset the decline in exchange rate. There is also a need to expand into new markets and understand the needs of that market to be successful. Existing markets are almost to the saturation point and slow growth will be experienced for companies who don’t look to diversify.
2) What do you see as the key success factors for firms in the global beer industry?
- Understanding of new potentional markets
- Key people in positions who can be forward thinking
- Dirvisictation into other ventures to protect from economy changes - Consolidation
The beer industry has to continue to identify new markets, and how it can establish itself in those markets. Some questions need to be asked before entering new markets. Is their population growth? Is there an infustructor in place to support the industry? Is their availability of raw materials? There are markets out there that have not been tapped, but this industry needs to understand them before entering. Experienced people are also important for this industry to continue to be successful. The beer industry was created by local people who had a passion for creating a unique product, as the industry grew this passion has remained. The industry has to continue to cultivate this passion and give opportunities to people who want to succeed. Companies who look to diversify like Grupo Modelo (into a join venture with Nestle’ for kids water production) will be able to better ride out any economic issues that continue to arise. This gives the company the ability to weather any uncertainties.
3) What does the strategic group map of the global beer industry look like? How strongly is Grupo Modelo positioned in the industry? How favorable does it compare with its closest Mexican rival FEMSA? How favorably does Grupo Model’s position compare to that of Heineken?
Group Map of the beer industry:
- Brand Image
- Market penetration
- Product mix
Grupo Modelo is positioned very well in the industry. It is the #2 selling imported beer in the US and the #6 selling Beer Company in the world. It represents 17 brands, which help meet a certain market’s need. They lead most markets with #1 or #2 penetration in the area’s it serves. Grupo Modelo is positioned to be a world leader in the global beef industry.
FEMSA and Grupo Modelo are two very different companies, Grupo Modelo was born and breed in the beer business and has established its own brands, marketed those brands and has established itself well in all the markets it represents. FEMSA’s growth has been through partnerships with large companies for brand equity. They recently established a commitment with Heineken group in which Heineken will assume 100% of its beer operations in exchange for 20% ownership of Heineken Group.
Heineken has recently established a firm market share in Mexico with the partnership of FEMSA and Heineken Group. This now makes Heineken the #2 selling beer brand in Mexico....