This report drawn out information about the Australian beer industry and in particular Foster’s Group Limited, with reference to a newspaper article named ‘No Thirst for Foster’s’. Methods of analysis included facts and figures collected from the newspaper article and other research done on the topic. Findings from the research, coupled with economic theory have given a analytic view of the beer industry. Results from the research show that the Australian beer industry is an oligopoly with possible significant changes to take place in the near future. The report shows governmental, market and economic impacts faced by the market now and into the future. Foster’s group is faced with some important decisions about the direction of the company and its brands. Furthermore, the market is changing quite significantly into the future, particularly with the arrival of SAB Miller and Amatil Aust. (Coca Cola). The report is limited to the beer market, and does not take into account other types of alcohol or their effect on the market. The report is also quite narrow, in that there was very little research done outside the Foster’s and Lion Nathan companies.
Although Foster’s Group limited are one of the world’s truly global beer brands, the alcoholic beverage company is under increasing pressure as market share losses increase and the Australian beer market changes. The beer market in Australia has the characteristics of an oligopoly industry which has two main suppliers, Foster’s Group and Lion Nathan. Foster’s Group and Lion Nathan currently hold a 49.9% and 44% of the Australian beer market respectively. The other 6.1% of the market is made up of smaller businesses known as micro breweries. One of the more notable points when categorising the industry is the barriers to entry. Although it is possible and shown that micro breweries are able to exist, it is difficult for them to compete with the established brands, especially on price. This displays the importance of product differentiation within the Australian alcoholic beverage industry. Foster’s group has held a majority market share position for many years, with a 55% share in 2005. With the global financial crisis, job losses and unemployment rates were an increasing concern, which history shows, increases alcohol consumption. The government’s stimulus package also helped to improve market growth rates in 2009, which have now slowed significantly. Along with one of Fosters biggest brands VB, possible steeper taxes with the 2010 budget could continue the downward trend for the company.
Existing with two main market share holders, Foster’s Group Limited and Lion Nathan, the beer market in Australia has the characteristics of an oligopoly industry. With a small number of sellers yet a large range of branding within these businesses, product differentiation is very important. Currently Fosters produces or imports 17 different beer brands and Lion Nathan holds 7, however the products have such a varying customer base that brand loyalty and brand equity is of key significance. Currently Foster’s Group hold a 49.9% market share in the beer market, with Lion Nathan holding 44%, the remaining 6.1% is made up of smaller businesses which produce more boutique beer. The size of the brands and brewing operations owned by Foster’s and Lion Nathan make competitive entry into the industry difficult and expensive. When it comes to imported brands, the international seller is only interested in the businesses that will be able to move the most amount of their product. This will mean that the big businesses with a huge amount of resources will be able to budget large amounts on the introduction of new brands. By virtue of the fact these two major businesses of the oligopoly, a price war between these two giants would be a very destructive force. Furthermore, price can be heavily affected by the retailer through in...