Global Forces and the European Brewing Industry

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Global forces and the European Brewing industry –Case 1

Table of Contents
Introduction……………………………………………………………2 PESTEL……………………………………………………………….2 Porter’s Five Forces…………………………………………………..4 Strengths & weakness of Companies………………………………..5 Impact of Trends on the Companies………………………………..7 Bibliography……………………………………………………………8.

Introduction
This case shows how global forces have impact on European brewing industry and how these companies are trying to overcome the obstacles. In spite of restrictions and awareness campaigning runed by the government, these companies are trying to grow through acquisitions, alliances and closures within the industry. Companies are concentrating on expanding their existence into other markets. Some other companies are concentrating on innovation, branding. Moreover they are fighting on cost cutting such costs include packaging costs which will reduce the cost of overall manufacturing. PESTEL

Political factors:
* Government organising public events in order to make public aware about the effects of alcohol consumption on the health. * Government is imposing restrictions on consumption of beer and alcohol products. * If anyone is influenced by alcohol in doing crime they are fined with high penalty. (The European Brewing Industry, 1999) Economic factors:

* The government restrictions have lead to increase in sales of alcohol in supermarket. * Government campaigning and restriction on drinking resulted in decrease in the sale of alcohol product consumption in clubs and pubs. * Companies are trying to achieve economic of scale through cost reduction. * Brewing companies are engaged in various marketing strategy to grow their market through acquisition, mergers and introducing premium products. * Super markets are offering cut price offers.

* Heineken is facing problem in packaging cost (The European Brewing Industry, 1999). Socio culture factors:
* Consumers are becoming more health conscious.
* Growing unfriendly or aggressive behaviour towards binge drinkers. * People have started drinking wines in North European market. * Drinking in the pubs and clubs has been reduced. (Demographics of Europe) Technological factors:

* Companies are transferring expertise and technology to achieve economic of scale, efficiency and cost reduction. * Centralization of production is done to increase efficiency and volume. * Trial breweries are established to enhance innovation.

* Support from media and IT are taken. (European Brewing Industry, 1999). Environmental factor:
* European brewers market in Germany and United Kingdom is decreasing and growing around the world with 7% annual growth in China. * German retailer’s sales are increasing from local private brands rather than brewery-branded. * Merger and acquisition are carried on by the companies to overcome competition and to have better control over growth. * Shift in sales from on-trade to off-trade. (Europa, 2010). Legal Factors:

* In the European countries, the advertisements which are related to Alcohol consumption in large volume are forced to apply certain laws by Government. * The laws in European countries are strictly against Drinking and Driving, under age drinking and Domestic violence consuming alcohol has compelled many customers to reduce the consumption of drinking. (Institute of Alcohol Studies, 2009).

Porter’s Five Force Analysis
After doing the environment (Europe) analysis of brewing industry using PESTEL, now we study the entire brewing industry internally, using porters five force analysis. FORCE1: Threat from Substitute Product

Three important components of brewage industry are Distillers, Wineries and Beer Manufacturers. Due to socio-cultural changes, the European consumers turned health conscious and were looking for substitutes like wine, fruit flavored exotic beers which...
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