Battle For World Beer Dominance: SABMiller Enters Brazil
here are striking similarities between the colonial powers of past and contemporary beer conglomerates. For years, there has been an uneasy quiet in the world beer markets as brewers have carved out territories and regions for themselves, often finding themselves in close proximity with competitors.
Until now, they have appeared reluctant to disturb the status quo and encroach on competitors’ turf in pursuit of increased market share. Nevertheless, consolidation has accelerated in recent years, leading to high industry concentration. The growth in demand for beer in emerging markets, coupled with saturation and stagnation in developed markets, promises to unsettle this uneasy calm and force brewers to rethink their strategy. As these large conglomerates come under increasing pressure from restless investors looking for revenue and profit growth, any gentleman’s agreement that might exist is less likely to be honored in the future. Major players are poised to engage in full-blown competitive conflict in order to conquer new markets.
|
|
SABMiller
SABMiller is the world’s second largest brewer, with more than 200 beer brands and nearly 70,000 employees operating in over 75 countries. According to analysts, it currently generates 80 percent of its sales and profits from developing and emerging markets. That makes it the “most exposed brewer to faster-growing markets”[i]. It was recently hailed for its growth in these markets as its sales of lager and soft drinks grew by 5% in the quarter ending June 30. SABMiller is the leading brewer by sales volume in China, the world’s largest beer market. It also holds the top position in South Africa and second position in India. SABMiller is known for incorporating local customs, attitudes, and traditions into its promotion of local brands. This strategy appeals to the local psyche in developing brand awareness and loyalty. In contrast, its largest global competitor Anheuser-Busch InBev (AB-InBev) follows a strategy of introducing and promoting global flagship brands[ii]. Despite its success with this strategy in many markets, SABMiller lags AB-InBev in global market share with 11.8% compared to InBev’s 18.8%, according to Euromonitor International. AB-InBev’s recent acquisition of the tag “Largest beer producer by volume” through the Anheuser-Busch and Inbev merger in 2008 has sent SABMiller executives searching for ways to regain the top position. The Brazilian market may present the most promising avenue to that title.
Brazil
Brazil is the largest beer market in Latin America and the third largest beer market in the world by volume. Beer sales in Brazil have grown 7% annually in total volume, and as rapid economic growth has increased income and purchasing power, Brazil has emerged as one of the biggest global beer opportunities. Pilsner beers are the most popular in Brazil and account for about 98% of consumption, but the increased sophistication of beer drinkers in Brazil has opened doors to premium brands and other styles which accounted for the fastest growth in 2010. The landscape is currently dominated by AB-InBev, owing to AmBev’s long history in Brazil. The company boasts over 65% of the market share with popular brands such as Brahma, Antarctica, Bohemia and Skol. Other large global competitors in the Brazilian market include Heineken with 8.7% market share. The remaining market share belongs to several smaller competitors that focus on localized brands in small regions of the country. But Brazil’s attractiveness and growth potential are especially enticing to global competitors without a presence in this huge market.
SABMiller’s entry into Brazil
Currently, SABMiller has no local assets in the Brazilian market. In light of its global footprint and leading presence in other Latin American countries such as Columbia and Peru, its absence from the Brazilian market is perplexing. It is unlikely that SABMiller will continue to let Brazil be dominated by its largest competitor, but the window of opportunity is closing for SABMiller to gain a footing in the country. SABMiller usually expands its global reach through acquisitions and joint ventures, but attractive candidates are few and far in between.
This raises some interesting questions. How does SABMiller plan to challenge InBev in the third largest beer market? How will it close the gap and regain the top place in the global beer wars?
While SABMiller’s traditional method of entering a new market entails the acquisition of an established name in the market, the firm took a different tack for its first foray into Brazil. It set out to attract Brazilian consumers by importing its mainstay global brand Miller Genuine Draft. This was a surprising entry strategy since it went against the numerous successful past market entries using acquisitions and joint ventures. An example of its success is the venture in China with China Resources Snow Breweries that has resulted in the “Snow” brand becoming the leading beer in the biggest world market. The new strategy was unsuccessful, as MGD was met with a tepid response from consumers and sales were disappointing.
Single Page View
