Foster's Oligopoly

Executive Summary:

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
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 store discounting. This will have an impact on the market, especially in the lower price categories and potentially devalue the brand name and image. As sited in
Shortly following the global financial crisis, when job losses and unemployment were rising, the beer industry growth increased significantly as shown in ACNielsen figures. The Rudd government’s stimulus package was a main driver of volumes for the increased growth, with a 6% rate in 2009. However, in the aggregate Australian liquor industry growth slowed to 1% during the March quarter.
Market Share:
During the first quarter of 2010, Foster’s group have reduced their market share, dropping to slightly below 50% for the first time in history. Carlton & United breweries, which produce the group’s flagship beer, VB, have continued to put pressure on the company with continued spiralling sales figures. The Pure Blonde brand was launched in 2004 to offset the reduced demand for VB sales. The Low-Carb Pure Blonde brand is now feeling the pressure of ‘copycat’ beers in the market with reducing sales and growth. Pure Blonde has enjoyed strong growth since its launch, however is no longer sufficient to offset the VB brand. Foster’s Group has 17 different beer brands under the group, this large number of brands seems to leave Foster’s in a worse strategic position than its biggest market rival Lion Nathan. Lion Nathan are currently producing or importing 7 brands. This, coupled with their increasing market share compared to Foster’s,