1. Analysis of the global Beer industry and comparison of Competitors ab inbev and sabmiller
Justin Read

2. Roadmap Overview of the Global Beer Industry and the Big Four
PESTEL Analysis of the Global Beer Industry
Industry Driving Forces
Strategic Group Map of the Big Four
Industry Key Success Factors
Competitive Strength Assessment of the Big Four
Five Forces Analysis of the International Beer Industry
AB InBev Company Profile and Performance
SABMiller Company Profile and Performance
Recommendations for AB InBev and SABMiller

3. Global Beer Industry has been growing steadily
From 2009 to 2013 the Global Beer Industry has performed in the following ways:
Average year on year revenue growth of 2.7%
Average year on year volume growth of 2.1%
In 2013 the total market revenue was approximately $514.5 billion
Net revenue was approximately $177 billion
EBIT was $35.2 billion
Average profit margins are about 20%
Global beer market projected to grow 3.4% from 2013 to 2018
(Global Beer Industry Profile)

4. (Global Beer Industry Profile)

5. (Global Beer Industry Profile)

6. (AllianceBernstein)

7. Pestel Factors: Political Factors Indicates moderate impact on beer industry
Region
Political Factors
North America
Consistent tax and regulatory enforcement, politically stable
Central and South America
Some political instability and government interference in economy
Some institutional voids – consistent electricity, quality water, financial institutions
Western Europe
Consistent tax system, numerous regulations, minor political instability
Central and Eastern Europe
Tax and regulatory inconsistencies, some political instability
Asia Pacific
Higher degree of government participation in the economy
Africa
Institutional voids to overcome – consistent electricity and water, distribution channels, financial institutions
(AllianceBernstein)
(Global Beer Industry Profile)

8. Pestel Factors: Economic Factors Indicates regional importance for beer industry
North America
17% of global consumption of beer, 24% of net revenue, and 30% of global profit in 2012
Not as sensitive to economic downturns as other commodities
Central and South America
13% of global beer consumed, 14% of net revenue, and 24% of global profit in 2012
Monopolistic or duopolistic markets, GDP correlated with consumption
Western Europe
14% of global beer consumption, 17% of net revenue, and 12% of global profit in 2012
Structural decline in per capita consumption, fragmented market structure, aggressive concentrated retailers
Central and Eastern Europe
13% of global consumption of beer, 11% of net revenue generated, and 8% of global profit in 2012
GDP correlated with consumption
Asia Pacific
36% of global beer consumption, 27% of net revenue, and 18% of global profit in 2012
High growth in consumption, mix of market development
Africa
6% of global beer consumption, 7% of net revenue, and 10% of global profit in 2012
Low consumption per capita, GDP correlation with consumption
(AllianceBernstein)
(Global Beer Industry Profile)

9. Pestel Factors: Sociocultural Factors are positive for the beer industry
Region
Sociocultural Factors
North America
Well established beer culture
Slow population growth, some change in culture with minority population growth
Central and South America
Beer is popular; it is paired with soccer, nightlife activities, and dancing
Younger demographics
Western Europe
Strong historical beer culture. Very nationalistic culture
Older population, low growth rate
Central and Eastern Europe
Large population, younger demographics
Social acceptance and encouragement of alcohol consumption
Asia Pacific
Generally not a well established beer culture
Growing population and per capita consumption
Africa
Not a well established culture of beer
Large population, low per capita consumption
(AllianceBernstein)
(Global Beer Industry Profile)

10. Pestel Factors: Technology and Environmental Factors are globally similar
Region
Technology Factors
Global Similarities
Energy and water efficiency manufacturing upgrades
Wastewater treatment
Reduced materials use in packaging
Digital engagement of consumers
Region
Technology Factors
Global Similarities
Watershed health in key grain growing regions
Supply of water for quality and quantity of hops and grains
Wastewater management
Reduction of waste from packaging
(AllianceBernstein)
(Global Beer Industry Profile)

11. Pestel Factors: Legal Factors are similar in aim but differ in impact by region
North America
Worker safety, product quality standards, appropriate advertising, distribution channels- especially in the US where the three tier system is required, and packaging requirements
Central and South America
Fewer laws concerning worker rights, pay requirements, anti trust, and other areas of operation addressed in North America
Less likely to be effective oversight and rule enforcement in this region
Western Europe
Intrusive regulatory system, varies by country, can involve the purity of the ingredients, what ingredients can be included in beer, how the beer is produced, and requirements to meet in order to sell
Central and Eastern Europe
Significant regulatory differences and inconsistencies within and between countries in the region
Ambiguous and inconsistent application of laws
Asia Pacific
Intrusive regulatory system by virtue of more active government role in economy
Regulate production, sales, content, packaging, distribution, licenses
Africa
Lower capacity to enforce any labor, consumer, or production laws and a higher chance for corruption to hamper the efforts in law enforcement
(AllianceBernstein)
(Global Beer Industry Profile)

12. (AllianceBernstein)

13. Industry Driving forces indicate the importance of the emerging markets
Change in Long-term Growth Rate
US and European markets saturated,
slowed overall growth
Emerging markets beginning to accelerate in growth
Increasing Globalization
Opening of the emerging markets to the beer industry
Marketing Innovation
Shift towards engaging consumers digitally and more accurately
Growing Preferences for Differentiated Products
Ciders, occasion specific drinks, near beer, pre mixed drinks, fruit beer
Consumers in all markets are open to non-traditional beer products
(AllianceBernstein)

14. (Theheinekencompany.com)
(SABMiller)
(AB InBev)
(Grundberg)

15. Key Success Factors Highlight Importance of Efficiency and cost reduction
Water and Energy Efficient Production
Sustainable image, reduce input costs, promote water security
Economies of Scale
Mass-market segment, price based competition
Largest segment of beer sold
Changes in Cost and Efficiency
Includes two previous factors, large part of competitive advantage in industry
(AllianceBernstein)

16. Key Success Factors Highlight Importance of Efficiency and cost reduction
Strong Network of Wholesaler/Retailer Distributors
45% of beer sold to retailers - supermarkets,
33% to on trade - restaurants
Breadth of Product Line
Consumers demand a wide range of product and increasingly new products
Well Known and Recognized Brand or Brand Portfolio
Important to stand out in groups of random brands, customer loyalty
(AllianceBernstein)

17. Competitive Strength Assessment Reveals AB Inbev and SABmiller lead the pack

18. Competitive Strength Assessment Reveals Heineken is a solid third place
(Theheinekencompany.com)
(Grundberg)

19. Threat of New Entrants -- Moderate
+ Increase threat of new entrants: readily accessible suppliers, retailer need to stock a wide range of beer, many underserved
regions with high growth prospect, national breweries enter global market
- Barriers to entry: Capital investment in brewing equipment, need for international supply chain, establishing distribution
networks, government regulation, oligopolistic market, global brand recognition
(Global Beer Industry Profile)

20. + No switching costs for end consumers of beer and substitutes
Threat of New Entrants -- Moderate
+ Increase threat of new entrants: readily accessible suppliers, retailer need to stock a wide range of beer, many underserved
regions with high growth prospect, national breweries enter global market
- Barriers to entry: Capital investment in brewing equipment, need for international supply chain, establishing distribution
networks, government regulation, oligopolistic market, global brand recognition
Threat of Substitutes – Moderate to Strong
+ No switching costs for end consumers of beer and substitutes
+/- Retailers like supermarkets need to stock a wide range of beer and substitutes, they aren’t likely to replace beer with
substitutes. Threat is strong but consistent and limited
+/- On trade retailers, like restaurants and bars, tend to heavily favor beer or one of its substitutes and aren’t likely to change
(Global Beer Industry Profile)

21. + Breweries rely heavily on
Threat of New Entrants -- Moderate
+ Increase threat of new entrants: readily accessible suppliers, retailer need to stock a wide range of beer, many underserved
regions with high growth prospect, national breweries enter global market
- Barriers to entry: Capital investment in brewing equipment, need for international supply chain, establishing distribution
networks, government regulation, oligopolistic market, global brand recognition
Bargaining Power of Suppliers
Weak to Moderate
+ Breweries rely heavily on
third party suppliers and
have minimal vertical
integration
+ Grain suppliers can serve
other buyers in the alcohol
industry, agriculture industry,
or food industry
- Hop growers operate on a
smaller scale, reducing
bargaining power
- Low switching costs for
breweries when moving
between suppliers
Threat of Substitutes – Moderate to Strong
+ No switching costs for end consumers of beer and substitutes
+/- Retailers like supermarkets need to stock a wide range of beer and substitutes, they aren’t likely to replace beer with
substitutes. Threat is strong but consistent and limited
+/- On trade retailers, like restaurants and bars, tend to heavily favor beer or one of its substitutes and aren’t likely to change
(Global Beer Industry Profile)
(Global Beer Industry Profile)

22. + Breweries rely heavily on
Threat of New Entrants -- Moderate
+ Increase threat of new entrants: readily accessible suppliers, retailer need to stock a wide range of beer, many underserved
regions with high growth prospect, national breweries enter global market
- Barriers to entry: Capital investment in brewing equipment, need for international supply chain, establishing distribution
networks, government regulation, oligopolistic market, global brand recognition
Bargaining Power of Suppliers
Weak to Moderate
+ Breweries rely heavily on
third party suppliers and
have minimal vertical
integration
+ Grain suppliers can serve
other buyers in the alcohol
industry, agriculture industry,
or food industry
- Hop growers operate on a
smaller scale, reducing
bargaining power
- Low switching costs for
breweries when moving
between suppliers
Bargaining Power of Buyers Moderate
+ Supermarkets represent
almost half of all buyers,
and are often
consolidated
+ Small or non-existent
switching costs for buyers
+ Producers sell only a small
amount of their product,
rely heavily on retailers.
Large buyers, like
supermarkets, need to stock
a wide range of beer
- Many oligopolistic markets,
with limited choices for
buyers to switch to
Threat of Substitutes – Moderate to Strong
+ No switching costs for end consumers of beer and substitutes
+/- Retailers like supermarkets need to stock a wide range of beer and substitutes, they aren’t likely to replace beer with
substitutes. Threat is strong but consistent and limited
+/- On trade retailers, like restaurants and bars, tend to heavily favor beer or one of its substitutes and aren’t likely to change
(Global Beer Industry Profile)

23. + Breweries rely heavily on
Threat of New Entrants -- Moderate
+ Increase threat of new entrants: readily accessible suppliers, retailer need to stock a wide range of beer, many underserved
regions with high growth prospect, national breweries enter global market
- Barriers to entry: Capital investment in brewing equipment, need for international supply chain, establishing distribution
networks, government regulation, oligopolistic market, global brand recognition
Bargaining Power of Suppliers
Weak to Moderate
+ Breweries rely heavily on
third party suppliers and
have minimal vertical
integration
+ Grain suppliers can serve
other buyers in the alcohol
industry, agriculture industry,
or food industry
- Hop growers operate on a
smaller scale, reducing
bargaining power
- Low switching costs for
breweries when moving
between suppliers
Bargaining Power of Buyers Moderate
+ Supermarkets represent
almost half of all buyers,
and are often
consolidated
+ Small or non-existent
switching costs for buyers
+ Producers sell only a small
amount of their product,
rely heavily on retailers.
Large buyers, like
supermarkets, need to stock
a wide range of beer
- Many oligopolistic markets,
with limited choices for
buyers to switch to
Rivalry – Strong
+ The global beer market is dominated by
the big four, which control almost 50% of
the market
+ The mass-market products offered are
hardly differentiated, with standard and
premium lagers representing almost 84%
of beer sold around the world
+ Beer is subject to downward price
pressures by retailers and consumers, and
economies of scale are very important in
price-based competition
+ North America and Western Europe, the
two largest profit pools, are saturated
markets and have low or negative growth
prospects
Threat of Substitutes – Moderate to Strong
+ No switching costs for end consumers of beer and substitutes
+/- Retailers like supermarkets need to stock a wide range of beer and substitutes, they aren’t likely to replace beer with
substitutes. Threat is strong but consistent and limited
+/- On trade retailers, like restaurants and bars, tend to heavily favor beer or one of its substitutes and aren’t likely to change
(Global Beer Industry Profile)

24. Five Forces Analysis indicates the global beer industry isn’t particularly attractive
Breweries already established in the industry have a more attractive position
Newcomers would have to overcome decent barriers to entry and then fight an uphill battle in mainly oligopolistic markets
There are numerous substitutes for beer and many substitutes for any given brand within the beer offerings
Buyer power reduces the attraction for breweries
Emerging markets fragmented (China) or oligopolies (Africa), developed markets saturated and/or declining

25. AB InBev Competes internationally with a Transnational strategy
Interbrew + AmBev + Anheuser-Busch = AB InBev (2008)
Best Cost Provider generic strategy
Price based competition in mass-market beer
Differentiation based competition in craft, occasion, near beer, and premixed drinks
Transnational Global Strategy
Focused Brand Strategy – Three-Tier Marketing
Global, International, and Local Champions
Growth Driven Platforms
Emphasize key markets, investment in premium and craft, share of throats, and regional beer brands
Heavily concentrated in the Americas
(AB InBev)

26. (AB InBev)

27. AB InBev grows through acquisition and diversification
Cost saving focus at AB Inbev
Success in acquiring brewers, integrating them into the AB InBev group, and streamlining their performance and efficiency
Anheuser-Busch
Modelo Group
Oriental Brewery
Numerous smaller craft brewers
AB InBev also operates soft drink bottling plants in the Americas to capitalize on economies of scope
$3,497 million in net revenue from soft drink operations
(AB InBev)
(Leonard)

28. AB Inbev’s Swot reveals advantages in strengths and opportunities
Present in large profit pools and emerging markets
Well recognized brand portfolio
Effective marketing strategy
Innovative product development
Dominant player in its markets
Cost saving expert
Weaknesses
Limited geographic distribution and presence
Too focused on cost saving, losing sales volume in American markets
Bad current ratio
Opportunities
Acquire breweries in markets to establish or improve market share
Emerging markets where population is underserved
Threats
Climate impact on grain or hop supply and quality
Declining consumption per capita in some saturated markets
Dominated markets becoming fractured by new entrants
Possible changes in regulations, taxes, trade agreements
(AB InBev)

29. AB inbev’s strategy and execution have resulted in general success
Year
Current Ratio
Net Profit Margin
Return on Assets
Return on Equity
2010
.801
11.1%
3.5%
11.4%
2011
.627
14.9%
5.2%
15.6%
2012
1.01
18.2%
5.9%
17.6%
2013
.729
33.3%
10.1%
28.5%
2014
.680
19.6%
6.4%
18.4%
(AB InBev)
(Financials.morningstar.com)

30. Sabmiller competes internationally with a multi-domestic strategy
South African Breweries + Miller = SABMiller (2008)
Best Cost Provider generic strategy
Price based competition in mass-market beer
Differentiation based competition in craft, occasion, near beer, and premixed drinks
Multi-domestic International Strategy
Focus on local breweries, local expertise, deep knowledge of individual markets
Less focus on international brands in portfolio
Apply global efficiencies through regional hubs to local breweries
Spread out globally, initially focused in emerging markets
then entered the US
(SABMiller)

31. (SABMiller)

32. Sabmiller grows through acquisition and diversification
SABMiller also expands by buying breweries and applying global efficiencies to them to increase profitability
SABMiller is dispersed across a much wider range than AB InBev
Strong presence in China with CR Snow
Strong presence in Africa through SAB
SABMiller has invested more into the soft drink business than AB InBev
20.6% of beverages sold by volume by SABMiller were soft drinks
Work with Coka Cola in Central America, South Africa, and 21 countries in Africa
(SABMiller)

33. Sabmiller’s SWOT indicates strength through its local focus
Strengths
Present in every region in the world
Present in mostly monopoly or duopoly markets
Wide portfolio of local and national beers
Deep knowledge of markets
Consolidating global operations to increase efficiencies
Weaknesses
Weak current ratio
No global beer brands
Patchwork brand awareness
Opportunities
Acquire breweries in markets to establish or improve market share
Emerging markets where population is underserved
Benefiting from the growth of the African markets in the long term
Threats
Climate impact on grain or hop supply and quality
Declining consumption per capita in some saturated markets
Dominated markets becoming fractured by new entrants
Possible changes in regulations, taxes, trade agreements
(SABMiller)

34. SABmiller’s strategy and execution have resulted in general success
Year
Current Ratio
Net Profit Margin
Return on Assets
Return on Equity
2010
.651
10.6%
5.1%
9.6%
2011
.705
12.4%
6.1%
10.9%
2012
.698
19.4%
7.5%
16.8%
2013
.669
14.1%
5.8%
2014
.538
20.2%
6.3%
12.8%
(SABMiller)
(Financials.morningstar.com)

35. Recommendations for ab inbev emphasize expansion beyond the americas
Increase exposure to Asia Pacific and Africa in particular
Large potential for future growth
Risk losing opportunity to establish oligopolistic market if wait to move
Opportunity to establish more international champion brands for different regions
Enter markets via acquisition and invest initially to dominate and get returns later when the market takes off

36. Recommendations for SABmiller focus on investment in china
China is one of the quickest growing markets with the highest volume of consumption, and a quickly growing consumption per capita
SABMiller already is in a joint venture in China with the CR Snow brewery, the largest brand in the country
CR Snow is a leader among many competitors, with around 20% of a highly fractured market (Zekeria)
SABMiller should invest heavily with the goal of controlling over 40% of the market, which is about the level of control AB InBev has in the US
Goal is to increase the profit margin on the high volume operations in China

37. Thank you

38. Works Cited
Global Beer Industry Profile. (2014). Beer Industry Profile: Global, Leonard, Devin. 'The Plot To Destroy America's Beer'. Bloomberg Businessweek 2012: n. pag. Print. AllianceBernstein,. The Bernstein Global Beer Guide: Third Edition. Hong Kong: Bernstein Research, Print. AB InBev. (2015) Annual Report of AB InBev. Retrieved from inbev.com/content/dam/universaltemplate/abinbev/pdf/investors/annual-and-hy-reports/2014/AB_InBev_AR14_EN_full.pdf SABMiller. (2015) Annual Report of SABMiller. Retrieved from documents/reports/2014/financial-reports/annual-report-2014.pdf?sfvrsn=8 ‘Anheuser-Busch Inbev’. N.p., Web. 28 Mar Grundberg, Flemming. 'Carlsberg Beer Gets Makeover'. WSJ. N.p., Web. 27 Apr Theheinekencompany.com,. 'The HEINEKEN Company - Age Gate'. N.p., Web. 27 Apr Financials.morningstar.com,. 'Balance Sheet For Anheuser-Busch Inbev SA ADR (BUD) From Morningstar.Com'. N.p., Web. 28 Apr Zekaria, Simon. 'Sabmiller Expands In China, Buying Kingway Beer'. WSJ. N.p., Web. 3 May 2015.