Analysis of the Macro-Environment
The macro-environment where the European brewery industry operates is analyzed via the PESTEL framework. PESTEL assists in the understanding of political, economic, social, technological, environmental, and legal peculiarities of the environment. Firstly, the governments are fighting drunken driving leading to a reduction in the consumption of beer. Secondly, sales shifted from the on-trade to the off-trade. From the social perspective, the concerns about the negative influence of alcohol on health and drunk driving are rising. However, technological development allows brewers to produce non-alcoholic beers. Simultaneously, one could witness an increased price for raw materials. From the legal perspective, the environment is characterized by acquisition, strategic alliances, and licensing that help the leading brewery companies control the market.
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Analysis of the Sector
Porter’s five forces framework is used to analyze the sector. The newcomers face high initial costs for establishing a factory, purchasing raw materials, and packing. They are also pressed by the tendency towards consolidation that stems from the over-capacity in the brewing industry. The traditional breweries also have to modernize because of the growing popularity of non-alcoholic beers and beers with flavors. Thus, the producers should be concerned with how to attract new customers and retain old ones. Still, the power of suppliers is relatively low because producers could easily switch between them. Even though ten brewing companies occupy more than 60 percent of the market, there are numerous local ones that compete with each other.
Impact on Strategic Groups
The strategic group of the Western European brewing industry includes such companies as Anheuser-Busch InBev, SABMiller, Heineken, and Carlsberg. From 2000 to 2009, the share of the global volume of these companies increased approximately two times. Many companies have also undergone acquisitions. For example, Belgian Interbrew merged with Brazilian Am Bev and became InBev, the largest brewing company in the world. Additionally, the middle-sized foreign companies yielded to the local giants and withdrew from the European brewing market.
Opportunities and Threats
The first opportunity for the brewing companies that operate in the European market is to diversify produced beverages due to technological development and the rise of demand for non-alcoholic and flavored beer. Secondly, smaller companies have an opportunity to merge and acquire a larger market share. Besides, it would be easier to sustain the market competition. The third opportunity is derived from focusing on targeting the generation of baby boomers because they are known to prefer beer more than younger generations.
One of the most significant threats to the industry is the public concerns about the danger of alcohol and a fight with drunk driving. Secondly, local companies should be acting more actively to sustain the competition with foreign brewing companies, such as Chinese Tsingtao, that enter the European market. Thirdly, companies should be concerned about reducing waste and lowering the environmental costs of beer production because consumers tend to prefer “green” producers.