The Brewery Group Denmark

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Exploring Corporate Strategy
CLASSIC CASE STUDIES

The Brewery Group Denmark: Faxe, Ceres and Thor
Flemming Agersnap
The case study explains the strategic moves of Brewery Group Denmark (BGD), a small Danish brewery fighting for a position in a world market. The case shows how small companies can co-exist with giant competitors in an international context and how a coherent international strategy can be built whilst allowing for different local strategies. BGD is an example of a firm which has achieved a distinctive position in a highly competitive industry by focusing on importing Danish beer into selected markets, through a network of alliances. The case provides an opportunity to consider the strengths and weaknesses of the company’s strategy and options for future development. l l l

It is better to be dominant in a small niche than to be a marginal supplier in a big market. (Claus Nielsen, international sales director, BGD) Denmark is a beer-drinking country with a long tradition of brewing beer. The Danish brewing industry is dominated by the Carlsberg Group, holding a market share of 70–75 per cent and a worldwide position with sales and production in many countries. In the Danish market there were four mid-size breweries and a number of smaller ones competing with Carlsberg. In 1989 two of the mid-size breweries merged their brewing activities into a joint venture ‘Bryggerigruppen’, The Brewery Group Denmark (BGD). This made it the second largest brewer in Denmark and was the background to significant international expansion.

BREWERY GROUP DENMARK (BGD), FAXE, CERES AND THOR
Together BGD supplies about 15 per cent of the beer consumed in Denmark, although its share varies within the various Danish regions. Located in Aarhus, Jutland, Ceres has had a strong market position there for many years and over the last 30 years it had merged with breweries in neighbouring towns. One of these breweries was the Thor brewery in Randers. In 1996, Thor had a strong position in the northern part of Jutland. Located on Zealand, Faxe had only a small local market, but it had long been an important supplier to restaurants and retailers in Copenhagen.

This case study was prepared by Flemming Agersnap, Copenhagen Business School. It is intended as a basis for class discussion and not as an illustration of either good or bad management practice. © Flemming Agersnap, 1996, 2001. Not to be reproduced or quoted without permission.

Exploring Corporate Strategy by Johnson, Scholes & Whittington

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The Brewery Group Denmark: Faxe, Ceres and Thor

Exhibit 1 Financial statistics for BGD, 1989–95
1995 Turnover (DKK million) Export share (%) Profit before tax (DKK million) Return on equity (after tax) (%) Number of employees 2.274 59 103 18 1,089 1994 2.204 59 93 18 1,005 1992 1.977 52 46 12 1,039 1990 1.607 51 16 7 824 1989 1.624 43 −19 −8 930

At an early stage, both Ceres and Faxe felt a need for growth in order to obtain sufficient volume gains in production and subsequent reductions in costs. They first expanded in the domestic market to become national distributors, but any substantial growth could be obtained only through exports. Exhibit 1 shows the financial data for the years after the establishment of the joint venture.

Organisation and management
Exhibit 2 shows the organisation structure of BGD. After the merger in 1989, the positions of chief executive officer and of international sales director were filled with people without previous experience of breweries. Claus Nielsen came with a background from the international pharmaceutical industry. Hiring a manager from outside also solved the problem of choosing a candidate from one of the two existing sales organisations. BGD was formed as a limited company, where the Faxe and the Ceres companies each owned 49 per cent and their common bank 2 per cent. All beer and soft drinks activities were transferred to BGD. The parent companies also had a few other small...
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