Alcoholic Beverage Industry Term Paper

  • Length: 20 pages
  • Subject: Business
  • Type: Term Paper
  • Paper: #40458327
  • Related Topic: Brewing, Lion, Beer

Excerpt from Term Paper :

Alcoholic Beverage Industry

Throughout the world, in all industries it is now a period of consolidation and this process is now taking place for a large number of companies from different continents and different countries, and the only reason for consolidation is the fact that they come from a common industry. The undisputed largest economy in the world is now the United States and this also contains the largest companies in the world for the manufacture of beer. The expansion capacity, within the home country for the large manufacturers, have now almost ended, and the expansion that is now to take place will be in countries outside the home country. The attempt in this essay will be to study the situation of the beer companies in some parts of the world where the highest expansion is taking place, and how there are attempts by companies to spread into other countries to maintain their rates of growth.

Analysis:

Before getting into the area of analyzing the situation in the beer market, let us first analyze the situation in the total beverage market. The world may now be assumed to have a population of 6.2 billion (Population Reference Bureau). These are the people to whom we shall refer to as consumers and they drink an estimated 91 billion (Beverage Digest Fact Book 2003) gallons of non-alcoholic beverages, along with 30 billion gallons (World Book Encyclopedia 2001) of beer, 6.04 billion gallons (Adams Handbook Advance 2003, Wine Institute Statistics 1999) of wine and 768,586 million gallons of spirits. (Reuters Data monitor Drinks Database).

The leadership in terms of price in the American market is still in the hands of Budweiser, and when they announce an increase in price, the increase is followed by the other brands like SAB Miller among others within a period of six months. Some of the people in the market have been concerned about the misbehavior in pricing by SAB Miller and this gets reflected in their stock prices, but these antics have not led to gains in market share for the company, and ultimately they have to follow the lead of the brand leader. (Beverages: Time to chill out and have a drink) it is also easy to see from the above that the acceptance of price increases is based on a belief that (A Micro-econometric Model of the U.S. Consumer Demand for Alcoholic Beverages) In comparative terms, the products like Coca-Cola Co and PepsiCo make up as much as 75% of the market capitalization of S&P 500 beverage index. These two companies represent about 2% of the bigger S&P 500 overall index. (Prudential Equity Group)

The largest brewery in the world is Anheuser-Busch Companies, Inc. with its head office situated at 1, Busch Place, St. Louis, MO 63118. According to the philosophy of the company it wants to be the life of the party in all its operation, in both its theme parks as also its breweries. Apart from the brewery operations, the company is one of the largest among the theme park operators, manufacturers of aluminum cans in the United States and the largest recycler of aluminum cans in the world. The share of the company in the United States in the sales of Beer with a share of just less than 50% and the company has the brand called Budweiser, which is the top ranked beer in the country. There are also a number of other brands manufactured by the company and among them are Bud Light, Michelob and Busch. The other activities of the company are in the manufacture of certain well-known theme parks like Busch Gardens and Sea World and water parks like Water Country USA and Adventure Island.

The company is being run by the Busch family for four generations and the present individual in charge is Chairman August Busch III. The company has been a public limited company for a long time and the total turnover in 2003 was reported to be $14.14 billion with a steady growth of sales of 4.3% during the year. The net income was also reasonable with the final figure for the net income being $2.07 billion during the last year and the growth in profits was higher than the growth in sales at 7.3%. It is a fairly large sized company with a total number of 23,316 million during the year of 2003 and the growth in sales or profits did not require a high growth in terms of employees which grew only by 0.6%. (Anheuser-Busch Companies, Inc.) This is clearly seen as a company which has almost reached its capacity in terms of growth and in line with today's philosophy of business probably does not want to expand into other lines of business outside its area of core competence.

Another very important beer company in the United States is called the Adolph Coors Company and it is listed in the New York Stock Exchange. This is the third largest company in the country producing beer after Anheuser Busch and Miller Brewing. The biggest brand of the company is Coors Light and the nickname for this brand is "The Silver Bullet. Again the leading brand contributes a large proportion of the sales to the company and amounts to more than 50% of the revenue. Apart from the leading brand, the company has a number of other brands like Blue Moon Belgian White Ale, George Killian's Irish Red Lager and Keystone. The company is essentially a beverage manufacturer and makes certain other products like Zima, which is a clear malt-based drink and Coors Non-Alcoholic. To sustain the spread of the company in Europe, the company bought a major brand in the United Kingdom from Interbrew called Carling and that has made it the second largest seller of beer in the United Kingdom.

The heirs of the original Adolph Coors still control about a third of the voting stock of the company. The financial year-end of this company is in December, and this is another Public Company. In terms of size this is a smaller company than the leader and the sales last year was about $4 billion and the growth over the previous year was about 5.9%. The base profits were also lower at about $174.7 million and there was a better growth than the leader as the growth in one year was about 8%. Being a smaller company, the number of employees was also less and about 8,500 employees were on the rolls in the last financial year. As the company had expanded substantially in Europe in the previous year, the growth in terms of employees was also high at about 2.3%. The top management of the company is still directly controlled by the family and the Chairman was Adolph Coors and the Chairman of the Brewing Company was Peter H. Coors. (Adolph Coors Company)

Now let us look at the second largest brewing company in the world, and that is SAB Miller, but we shall look at the London end of things. This has the name of SAB Miller plc and is situated at 1, Stanhope Gate, W1k 1AF in United Kingdom. The company originated due to the purchase of Miller Brewing by the South African Breweries, which is also called SAB. This purchase has made the company the second largest brewer in the world, after Anheuser-Busch. The company is now an international company with operations in 40 countries and is the largest by far on the South African market with 98% of the market share. The reason for this high share is due to the high sales of Africa's beer with the highest sales, Castle Lager.

The company also has other important brands in Africa and that includes brands like Hansa Pilsener and Ohlssons. The company is not only a manufacturer of beer, but also has large interests in wines, spirits and fruit drinks. It is also a bottler for Coca-Cola and Schweppes. The Miller end of the business has come from the owners of Philip Morris Companies in the United States who were known as the Altria Group. These companies still own about 36% of the new company Called SAB Miller. The company had high sales of $8,295 million in 2003 and the growth in revenue was very high in a 1 year period of 160%. This was of course due to the take over of the Miller operations. The number of employees was relatively larger at 42,402 and the growth in the number of employees was also very high at 27.6%, and this may be in part due to the absorption that took place. (SABMiller plc Company Profile)

Though the number 1 company in the British market did well, the British market was not as good, and that was attributed to tough competition by the next good company called Scottish and Newcastle. The company has been claiming that the consumer confidence has remained weak in general. The chief executive Tony Froggatt is on record as having made a statement that has…

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