Global forces and the European brewing industry

Global forces and the European brewing industryMohamed zekriThis case is centred on the European brewing industry and examines how the increasingly competitive pressure of operating within global markets is causing consolidation through acquisitions, alliances and closures within the industry. This has resulted in the growth of the brewers reliance upon super brands.

In the mid 2000s the major centre for production of beer in the world was Europe; its production was twice that of the USA, which in 2003 was the worlds largest beer-producing country. In the alcoholic drinks sector beer sales are dominant: total sales across the world accounted for 74 percent of all alcoholic purchases (Euromonitor 2002). Although the European market as a whole is mature, with beer sales showing slight falls in most markets, Datamonitor 2003 reported that the alcoholic beverage sector grew at an annual rate in value terms by 2.6 per cent year between 1997 and 2002.

Table 1 European beer consumption by country and year (000 hectolitres )Country1980199719981999200020012002

Austria7651914587368810876286278734

Beigium129451024310011102031006499869901

Denmark6698616557075562545252825200

Finland2738417040844087402440854136

France23745216552266322833214202133120629

Germany#89820107679104550104629103105100904100385

Greece N/A394042114354428841814247

Ireland4174540655925699559456255536

Italy 9539145351550115675162891669416340

Luxembourg417466452474472445440

Netherlands12213134751322513309131291292211985

Norway*7651233022032305232722902420

Portugal3534631864946475645362765943

Spain 20065262382667727772291513112630715

Sweden 3935545950775258501149324999

Switzerland*4433424942774212419441414127

UK65490611145883558917570075823459384

Total#269358302587298295300574296742297081295121

*Non-EU countries, 1980 excludes GDR. Figures adjusted.

Table 2 Annual consumption per capital by country and year (litres)Country1980199719981999200020012002

Austria101.9113.3108.1108.9108.1107.0108.5

Beigium131.0101.098.0100.099.098.096.0

Denmark130.7116.7107.7104.6102.298.696.7

Finland56.684.080.080.177.980.279.5

France44.337.038.638.736.235.934.7

Germany#145.9131.2127.5127.5125.3122.4121.5

Greece N/A39.042.043.040.039.039.0

Ireland121.7123.7124.2126.0125.0125.0125.0

Italy 16.725.426.927.128.128.928.2

Luxembourg115.8112.0107.0110.0108.2100.998.5

Netherlands86.486.484.384.482.880.579.2

Norway*48.152.949.751.752.051.053.7

Portugal35.063.663.364.964661.358.6

Spain 53.766.766.969.172.075.773.4

Sweden 47.461.757.359.356.455.455.9

Switzerland*69.559.559.958.858.357.256.6

UK118.3103.699.399.097.299.0100.6

Total#82.578.677.277.675.975.976.8

*Non-EU countries

The Interbrew market trend report 2002 states that within Europe the on-trade market (sold through licensed premises) beer accounts for 59 per cent of all alcoholic beverage sales by volume , while in the take-home market this figure increase to 72 per cent.. Two key trends within Europe were the rapid growth in leisure spending and the consumers increased awareness of health and fitness. These factors had resulted in a drop in the volumes of beer consumed. Another current trend across Europe is towards drinking a wider range of alcoholic beverages. There has been a growth in demand for flavoured alcoholic beverages, with wine consumption having shown large increases. Within the UK alone wine sales had grown from 14 per cent of the market in 1980 to 26 per cent of the market in 2002. Meanwhile there has been a negative trend in the overall consumption of spirits. Acquisition, licensing and strategic alliances have all occurred as the leading brewers battle to control the market. There are global pressures for consolidation due to over capacity within the industry and this has resulted in a focus upon cost containment and brand reinforcement (see table 5). Interbrews market trend survey 2002 shows that the consolidated global share of the top 20 brewers increased from 51 per cent in 1990 to 65 per cent in the year 2000. The report suggests that consolidation will further increase and compares brewing with the cigarette industry. In 2002 the five largest global brewers accounted for 30 per cent of production volume, whereas in the cigarette industry the five leading players had a 60 per cent market share.Table3 European production by country and year (000 hectolitres)Country1990199719981999200020012002

Austria7606936688308869875085888731

Beigium14291140141410514575147341496615696

Denmark9145918180758024746072338534

Finland 2823480446974700461246314797

France 21684194831980719866189261886618117

Germany# 92342114800111700112800110000108500108400

Greece N/A394540224359450044544443

Ireland 6000815284788648832487128113

Italy 8569114551219312179125751278212592

Luxembourg 729481469469450438

Netherlands12213 247012398823988245022507225232

Norway* 2001229921692222222322162300

Portugal 3557662367846760645165547121

Spain 20027247732499125852264142774127860

Sweden 3759485845684673449544494376

Switzerland*4433 356335863586359936303551

UK 64830591395665257854552795680256672

Total# 276198321637315114319932313883315674316530

*Non-EU countries, 1980 excludes GDR. Figures adjusted.

Consolidation trends are indeed continuing: Interbrew had purchased in 2001 parts of the old Bass Empire, Becks and Whitbread and in 2004 announced a merger with Am Bev, the Brazilian brewery group. Meanwhile Scottish and Newcastle had acquired the Danone French brewing operations as well as Bulmer cider. In 2003 it targeted Eastern Europe and China, acquiring Finland's biggest brewery, Hartwall, for 1.2bn (1.8bn) together with a purchase in December 2003 of a 20 per cent shareholding in a leading Chinese brewing. It is interesting to note that Bass contradicted this trend prior to the sale of the company in 2001, when a disposal took place of its interests in Northern China and some of its operations in the Czech Republic. In 2003 Anheuser-Busch was the world's largest brewer ranked by sales volume but with limited overseas operations. It had invested in a Mainland Chinese brewery and had a significant shareholding in Modelo of Mexico. However, its European operations were limited to just one brewery in the UK at Mortlake. In 2004 its world no.1 position merger. This gave Interbrew 14 per cent global market share which made it no.1 (by volume but not by value). Coors, another large American brewer, had gained European market entry by purchase from Interbrew in 2002 of the Caring Brewing Company. This sale was forced upon Interbrew by the UK regulatory authorities as they felt the dominant position held by Interbrew within the UK's large market was against the consumers' interest. South African Breweries has also been extremely active. In early 2002 there were market rumours of a merger with Interbrew; these were unfounded, however 2002 resulted in two major acquisitions-the Miller Group(USA)and Pilsner Urquell in the Czech Republic. These large global brewers (Table 4) control a range of key brands with which they will start to achieve large cost savings with the premium lagers leading the way. Volume sales will help to contain costs and should lead to increased economies of scale. However , differences will occur in the various local country markets. Where there are significant taste and product differentials potential savings are limited. The large groups, however, hope to utilise increased knowledge management systems and linked technologies across these combined brands to improve performance. During 2003, due to the activity highlighted above, there were major changes to the world market shares of the leading brewers (Table 4) with an ever increasing domination of global brands (Table 5) .Trends within Western Europe (Table 6) reinforced the dominance of the key players and the importance of the lager market in branding terms.Table4 The worlds top 10 brewery companies by volume:2003PositionCompanyCountry of Origin

1Anheuser-BuschUSA

2South AfricanSouth Africa

Breweries/Miller

3HeinekenNetherlands

4InterbrewBeigium

5CarlsbergDenmark

6Am BevBrazil

7Scottish NewcastleUnited Kingdom

8CoorsUSA

9ModeloMexico

10KirinJapan

Source: Coors Brewers Limited UK

Table 5 Top exported lager brands (world), 2001Brand NameOwnershipExport salesPercentage of

(million hectolitres)global sales

HeinekenHeineken17.782

CarisbergCarisberg8.987.6

AmstelHeineken8.578.7

BudweiserAnheuser-Busch817.1

Corona ExtraGroupo Modelo7.732

Stella ArtoisInterbrew6.888.5

FostersFosters5.768.7

SkolCarisberg5.218

TuborgCarisberg5.363.3

BecksInterbrew2.762.5

Source: Impact/ Interbrew SA/ Industry Estimates/ Company reports

Table 6 European beer market: top companies, 2001, by market share by volumeCompanyHome CountryMarket ShareLeading Brand

HeinekenNetherlands11.70%Heineken

InterbrewBelgium10.40%Stella Artois

CarisbergDenmark6.90%Carlsberg

ScottishNewcastleUnited Kingdom6.90%Kronenbourg

Mahou SASpain2.90%San Miguel

Holsten BrauereiGermany2.60%Konig

Diageo PLGUnited Kingdom2.20%Guinness

Binding-BrauereiGermany2.10%Radeberger

SA DammSpain2.10%Super Bock

BrauBrunnenGermany1.90%Jever

Source: Euromonitor 2002

The two largest Western European marketsGermanyAt nearly twice the size of the UK market in consumption terms, the German beer market is very different to that of the UK. It is highly fragmented, having in excess of 1,200 breweries. However, acquisition has happened in this market with Becks going to Interbrew in 2002 and Holsten being acquired by Carlsberg in 2004. German beer drinkers are used to strict German purity laws and therefore generally trust and drink German beer as against imports. This has resulted in large numbers of regional breweries satisfying the home market. Exports from Germany are nearly double that of the UK in volume percentage terms(Table 7).

Table 7 imports and exports of beer by country (2001)Country Import (% of Consumption) Export(% of Consumption)

Austria5.34.8

Belgium1939

Denmark1.734.1

Finland1.96

France25.512.4

Germany3.210

Greece410

Holland6.151.9

Ireland11.928

Italy26.43.9

Luxemburg37.6-

Norway*4.10.8

Portugal4.711.2

Spain132.3

Sweden11.6-

Switzerland*14.80.6

United Kingdom8.65.6

Total9.314.1#

Note: Import figures do not include beers brewed under licence in home country ;export figures do not include licensed brews produced elsewhere.*excludes Sweden; #Non-EU countries.Source: www.brewersofeurope.org

Packaging in Germany differs form many major markets with 60 per cent of all beer produced being sold in bottles. Due to a deposit scheme being introduced on cans in 2003 the sales of bottled beers have grown significantly. Discount own-lable beers have increased the off-trade to 70 per cent of total beer volume. However, sales in Germany during 2002 dropped at their highest annual rate in the previous decade and sales since 1998 have declined overall by 7 per cent. The outlook for the later part of the decade is that there will be declining consumption and a gradual drop in the number of breweries, with increases in merger and acquisition as the market consolidates to contain costs. This follows the trends being experienced already in the majority of European markets. The fastest growing niche in 2003 was within the youth market. Sales of flavoured beer mixed with either lemon-lime soda or cola, available in draught and bottles, had an increasing market share, up 30 per cent in 2002. These accounted for 3 per cent of the total annual beer consumption. Pilsner-type beers in 2002 still dominated the market holding a 67 per cent market share.United KingdomBeer sales were fairly mature and although there was a steady decline in the 1990s the market has begun to stabilise at around 55 million hectolitres per year. However, there are some definite market trends. The major change in the UK industry has been the disposal of the tied pub chains by the national breweries. Scottish and Newcastle became the last of the large companies to dispose of their chains in 2003. These public house chains are now independently managed separate companies and this has increased the distribution chain access to a much wider variety of brewers. These large independent chains of public houses exert high buyer power on the brewing industry. Meanwhile ownership of breweries within the UK had rapidly changed. Foreign multinationals have targeted and entered the industry. The Keynote Report 2003 shows three foreign multinationals, Interbrew, Coors and Carlsberg, control 53 per cent of the market. The leading brewer is Scottish and Newcastle with 27 per cent of the market. There are a number of large regional brewers with well-known speciality brands but the trend by the majors in the market has been to consolidate production, closing down plants and containing costs. Lagers and premium lagers dominate the home market and many are brewed under licence arrangements. Consumption of large has grown from just over 50 per cent in 2002. In 2003 60 per cent of UK beer was packaged in draught from. As the UK market switches more towards production of large the trend will be for incteasing sales through supermarkets resulting in a reduction of draught beer demand. There is limited export of traditional UK beers as demand is relatively limited and therefore the reliance is on the internal market. As supermarkets within the UK sell high volumes of beer, they exert high buyer power over the supplying breweries and are in a position to dictate terms for the supply of product. As a result there is heavy discounting and brand value destruction as the brewers find themselves operating in an over capacity market with low profit margins. The market is moving more and more towards increased sales in the off-trade. BBPA data 2003 reported that the wholesale price of beer had declined by 16 per cent from the level that was obtained in 1992. However, home sales are additionally hindered by the booze cruise. Excise duties on alcoholic beverages are much lower in France and importation of alcoholic beverages for personal use is legal. These cruises have almost become a feature of daily life with large quantities of beer carrying low excise duties being imported both legally for personal use and illegally for onward sale. Four brewing companies Heineken (The Netherlands) In 2004 Heineken was by far the biggest and most global of the European brewery businesses. It remains a family business and its brands are available in more than 170 countries. It owns more than 110 breweries in over 50 countries and exports all over the world. In the UK its licence agreement with Whitbread ceased in 2003 and this was followed by the introduction of its full-strength range, Heineken is now sold as a premium beer in all markets except its home market. Heineken has become Europes favourite brand of beer and the most international beer in the world, with sales increasing annually, Founded in Amsterdam in 1963, the companys other brands include Amstel and Murphys. Heineken had been acquiring other brewing groups since 1991 and in 2003 announced its biggest acquisition to date, the Austrian brewery BBAG. Of Heinekens turnover,76.5 per cent is European based. The four major strategic objectives for Heineken were to: remain one of the top global brewers; be more profitable per cent than other international brewers; build the most valuable brand portfolio with Heineken as the international flagship brand; remain independent.By the utilization of its key brands the company aims for a broad leadership position with a target of being NO.1 or NO.2 in its local markets. Achieving this in production ,marketing and distribution brings economies of scale. The local breweries give it market access from which they can sell their high-premium Heineken and Amstel beers.Groisch (the Netherlands )In 2001 Groisch NV is a medium size international brewing group, less than one-tenth the size of Heineken, with overall sales in 2002 of 3.27 million hectolitres. The groups strategy calls for this to increase to 4.6 million hectolitres by the end of 2006. Its key products include Groisch premium lager and new flavoured beers(Groisch lemon and Groisch pink grapefruit). In the Netherlands Groisch holds the right for the sales and distribution of the valued US Miller brand. The Groisch Brewery has been established since 1615 and has been exporting since 1946. The brand is available in over 50 countries; however in certain territories, including the UK and Poland, the brand is brewed under licence. In the five years to 2002 the group turnover had increased by 20 per cent with net profits increasing by more than 30 per cent. Although the home market for beer is declining, The Netherlands is still the companys most important market and accounts for over 50 per cent of its sales volume. Export sales are increasing, with the UK, USA and Canada being the most important overseas territories. Groisch has two main breweries that are situated in Enschede and Groenio. From 2005 production is situated within a single new site at Bokelo. Efficiency is the key driver behind this relocation: by concentrating brewing on one site, Groisch will again ultimate cost control and will also increase volume capacity significantly. Groischs drive to optimize costs has included the outsourcing of its distribution and a move within The Netherlands to use inland shipping rather road. Interbrew (Belgium) Interbrew is one of the oldest beer companies in the world. It has operations in 21 countries and Interbrews beers are sold in more than 120 countries. The company strategy is to build strong local brand reputation as well as to market its international labels. These include Becks, Stella Artois, Bass, Hoegaarden and Labatts. Interbrew has been on the acquisition and organic growth trail as a determined strategy since 1993. In the five years to 2003 the company had made over 20 acquisitions and 35 per cent of the operating income during 2002 was derived from this acquisition programme. 2004 saw the merger between interbrew and Brazils largest brewer Am Bev. Interbrews philosophy is reinforced by its claim to be The Worlds Local Brewer. In 2001 the company acquired Bass (UK), Whitbreads (UK) and Becks (Germany). At the time of acquisition Bass brands accounted for 24 percent of the UK market. The acquisition from Bass was unconditional and when the UK regulatory authorities challenged the decision to acquire Bass, Interbrew was forced into a sale situation. Due to this forced sale the stock market at that time formed the view that Interbrew had overpaid for the company. On appeal to the High Court Interbrew managed to overturn the competition authority decision agreeing as a result to sell the Carling Brewing Company to Coors but retaining much of the Bass Empire. Between 2000 and 2002 net turnover for the Interbrew company increased in excess of 20 percent. In 2002 Interbrew invested heavily in the growth market of China and in 2004 Interbrew became the largest brewer in Germany, following a partnership with Spaten giving them an 11 percent market share.

Scottish and Newcastle (UK)Scottish and Newcastle is an international brewing group with leading positions in 13 European countries. These countries include the UK, France, Finland and Russia. Its strategy is to be a major force within the global brewing industry with a concentration of effort upon expanding a number of leading positions in the Western European market. In 2003 the company disposed of its retail and leisure businesses, which had been significant in the companys past. In the year 2000 this business alone had accounted for 1.1bn of turnover and 246m of profits.The companys expansion strategy is to enter high-growth emerging markets. This will be achieved by working through alliances with experienced local breweries that hold strong market positions. Its key brands include John Smith, Kronebourg, Kanterbrau and Baltika and it brews Fosters under licence for the UK market. In 2003 turnover had increased by 17 percent, with profits up 8 percent and overall volume up 2.4 percent. The brand of Kronebourg, Fosters and Newcastle Brown all showed substantial volume growth in the year 2003. Acquisitions in the early 2000s have included Hartwell, Kronebourg from Danone in France,Buliners Cider and investments in Mainland China and India. The Hartwell acquisition is particularly important as this gives the group a 50 percent investment in Baltic Beverages. This results in exposure to the high growth markets of Russia, Ukraine and the Baltic countries. The growth rate of the Russian market was such than in 2002 it was bigger than any Western European countrys home market other than Germany.

Using PESTEL analysis can help to highlight the biggest influences on the strategy of the organization, both currently and in the future. These influences can be both positive and negative. In addition, influences often cross the divide between the six headings; the important point is that they appear somewhere in the analysis. The key is to identify and concentrate upon those factors or trends likely to have the biggest impact upon the future of the organization.PESTEL (Political; Economic; Social; Technological; Environmental; Legal) analysis provides a systematic technique for analyzing the business environment. It would enable us to:Summarize the most important influences of the business environment;Evaluate the potential impact of these influences on the organization.PoliticalFrom the case study we notice the political intervention of the government that made strict prosecutions against drunken driving and the alcohol abuse through sensitization campaigns to create awareness of the effects of alcohol on our health. Other measures such as the prohibition of the sales of alcoholic drinks in public places this initiative taken by the government were one of the reasons that transformed the buying behaviour of European market that is the fall in the sales of beer in these countries. Though would be classified under the head of social analysis the government has caused in the buying behaviour. In the late nineties many restrictions were put on the brewing industries such as the use of cans in Denmark. Also in Germany local production laws like the Reinheitsgebot were introduced to regulate the brewing industry in this country. At that time Europe is moving towards becoming a single market with a stable political environment.EconomicalThe effects that the economy has on the brewing industry are that there were different patterns of industry concentration across countries because of the different economic advantages that these industries were enjoying such as cheap labour and quality raw materials at a cheaper price. During these times acquisitions, licensing and strategic alliances have all occurred as the leading brewers battle to control the market. There were a growing trend towards cross-borders mergers and acquisitions. Finally there were low growth in the consumption of beers which made the sales fall drastically in certain European countries for example the beer consumption in Germany between 2002 and 2003. The EMU has lowered interest rates hence; Spanish companies can now access the same interest rates as German companies, compared to four years ago when they paid 4.5 percentage points more in interest than German companies. This creates a level playing field for all European companies seeking access to capital.

SocialThe sensitisation campaign made by the government has created growing concerns about health issues and drink-driving this is one of the main reasons why the sales of beers have fallen in the European countries. There was an increasing acceptance of low alcoholic drinks that is why people switched from beer to wine to reduce the excessive alcohol consumption in pubs and clubs. The off-trade German retailers such as the Aldi and the Lidi have emphasized on the importance of supermarkets in the distribution and the growth of their own-label brand beers rather than the brewery-branded beers and in other parts of the world there was an increasing acceptance of European brands. Poland, Hungary and the Czech Republic have young populations with a desire for all things Western.TechnologicalFrom the case we are able to understand that technology had brought in efficiency and improved production. Technology had definitely helped in receiving information and had helped in various departments. However as a result of incessant research and development the manufacturing units not only were able to obtaining the economies of scale but also over produced. This actually encouraged players to search for the market. The internet has redefined the concept of commerce, and has forced every organisation to look at the way it operates. Also increased efficiency in production from new technologies has brought down unit costs, giving larger manufacturers huge economies of scale. Successful companies will now have to strike a balance between the forces of globalisation and the need to maintain a local focus on each market.EnvironmentalThe environmental impact on the European brewery industry is that the current pressure on Europe from America and Australia to reduce agriculture subsidies could result in a change in the industrys raw material supply base would increase the costs of raw materials. Also the drought has affected the raw materials that come from Australia which has created a fall in the supply of the raw materials.

LegalThe legal aspect is that lot of Mergers and Actuations are happening which displays that there are low restrictions with regard to consolidation of European brewery. For example in the United Kingdom the government established competition legislation such as the 1989 Monopolies and Mergers Commission (MMC) to have a control over the mergers and the take-overs taking place in the United Kingdom.

According to Porter, whether an industry produces a commodity or a service, or whether it is global or domestic in scope, competition depends on five forces. These forces, which go beyond the immediate competitors in the industry, are:the threat of new entrants;the existence of substitute products or services;the bargaining power of suppliers;the bargaining power of customers or buyers;existing rivalry within the industry;These five forces determine the ultimate profit potential of an industry as a whole. Within an industry, individual firms who develop particular strengths may be able to gain competitive advantage whatever the profit position of the industry as a whole is:The ultimate strength of competition in an industry depends on the collective strength of these forces: sometimes one will dominate; often it's a collection of two or three.To understand which of these forces is likely to be most significant means investigating the underlying structural conditions that underpin them.Assessing each of the competitive forces in turn, by identifying the structural factors which are significant in each case will allow an understanding of the dynamics of the industry (its underlying economics). As well as providing an insight into dynamics of the industry, this approach also allows individual companies to understand the directions from which they face the greatest competitive pressures - and tailor their strategies to meet these pressures.Threat to new entrants;New entrants in an industry can raise the level of competition, thereby reducing its attractiveness. The threats to new entrants largely depend on the barriers to entry. High entry barriers exist in some industries whereas in other industries are very easy to enter. This strategy would prevent competitors from countries like Japan and the USA to come in the industry and compete with firms from the region. Profitable markets that yield high returns will draw firms. This results in many new entrants, which eventually will decrease profitability. Unless the entry of new firms can be blocked by incumbents, the profit rate will fall towards a competitive level (perfect competition).The existence of barriers to entry (patents , rights, etc.)The most attractive segment is one in which entry barriers are high and exit barriers are low. Few new firms can enter and non-performing firms can exit easily.Economies of product differencesBrand equitySwitching costs or sunk costsCapital requirementsAccess to distributionCustomer loyalty to established brandsAbsolute cost advantagesLearning curve advantagesExpected retaliation by incumbentsGovernment policiesIndustry profitability; the more profitable the industry the more attractive it will be to new competitorThreat of substitutesThe presence of the substitute products can lower industry attractiveness and profitability as they limit price levels. When the government passed regulations on drinking alcohol drinks in public many people switched from beer to wine and other drinks like coca- cola which have become substitute of beer. Also when campaigns were made on the effects of alcohol on health many people have adopted other leisure activities like jogging. The existence of products outside of the realm of the common product boundaries increases the propensity of customers to switch to alternatives:Buyer propensity to substituteRelative price performance of substituteBuyer switching costsPerceived level of product differentiationNumber of substitute products available in the marketEase of substitution. Information-based products are more prone to substitution, as online product can easily replace material product.Substandard productQuality depreciationPower of suppliersSuppliers are the businesses that supply materials and other products to the industry. The items bought from the suppliers (raw materials, components) have a significant impact on a companys profitability. In this industry the suppliers have little power because they may be small farmers and packaging companies. The bargaining power of suppliers is also described as the market of inputs. Suppliers of raw materials, components, labor, and services (such as expertise) to the firm can be a source of power over the firm, when there are few substitutes. Suppliers may refuse to work with the firm, or, e.g., charge excessively high prices for unique resources.

Supplier switching costs relative to firm switching costsDegree of differentiation of inputsImpact of inputs on cost or differentiationPresence of substitute inputsSupplier concentration to firm concentration ratioEmployee solidarity (e.g. labor unions)Supplier competition - ability to forward vertically integrate and cut out the buyer4) Power of buyersThe bargaining power of customers is also described as the market of outputs: the ability of customers to put the firm under pressure, which also affects the customer's sensitivity to price changes.Buyer concentration to firm concentration ratioDegree of dependency upon existing channels of distributionBargaining leverage, particularly in industries with high fixed costsBuyer volumeBuyer switching costs relative to firm switching costsBuyer information availabilityAbility to backward integrateAvailability of existing substitute productsBuyer price sensitivityDifferential advantage (uniqueness) of industry productsRFM Analysis5) The intensity of competitive rivalryFor most industries, the intensity of competitive rivalry is the major determinant of the competitiveness of the industry.Sustainable competitive advantage through innovation.Competition between online and offline companies; click-and-mortar -v- brick-and-mortarLevel of advertising expense.Powerful competitive strategyThe visibility of proprietary items on the WebIt used by a company which can intensify competitive pressures on their rivals. How will competition react to a certain behavior by another firm? Competitive rivalry is likely to be based on dimensions such as price, quality, and innovation. Technological advances protect companies from competition. This applies to products and services. Companies that are successful with introducing new technology are able to charge higher prices and achieve higher profits, until competitors imitate them. Examples of recent technology advantage in have been the advent of new expertise in those industries. Vertical integration is a strategy to reduce a business' own cost and thereby intensify pressure on its rival.

Heineken (the Netherlands)Firstly Heineken from the Netherlands has most of its sales in the European region. That is why Heineken is the largest European brewery business and the worlds fourth largest brewery company. It can be seen from table 1 that the sales of beer in the Netherlands have fallen between 2001 and2002 because of the adoption of the different policies of the European government such as the regulations of alcohol drinking and the introduction of the monopolies and the mergers commission. On the other hand it can be seen that though this business is in the Netherlands, most of its products are sold in the European countries as the imports of beer has increased for the Netherlands (from3.2% to 14.4%). Also it can be seen that the business has been incurring more costs for its packaging which has risen by 11%. This is because the packaging and components such as cans and glass bottles. On the same wavelength, it can be said that most of Heineken sales is in the neighboring countries.Grolsch (the Netherlands)Secondly Grolsch from the Netherlands has half of its sales from abroad and the other half in the Netherlands with the introduction of its two differentiated products. Grolschs sales have been very much affected because the UKs market is one of its main markets and there the sales have fallen drastically between 1980 and2001. This has arrived because countries like the UK were turning off-beer with many European countries. In addition to that, the policies of the government against binge drinking in the UK to stop excessive alcohol consumption in pubs and clubs have made people switch from beer to wine. Also it can be seen that the sales of Grolsch may not have increased greatly as the UK has imported only with 2% increase from2002 to 2004.

The futureForecasts from Euromonitor 2002 conclude that the world market for beer between 2002 and 2007 will increase by 35 percent in Eastern Europe and the Asian Pacific region by 28 percent whilst Canadeans latest annual global beer report forecasts sales of 1.5bn hectoliters in 2005. The Interbrew market report 2002 concludes that most beer markets in Europe are now relatively mature with limited potential for growth resulting in the focus now moving towards Asia and Eastern Europe.