Industry Analysis

BEER INDUSTRY ANALYSIS

Team3:

Sheri Chudow

John Clark

Xinyue Ge

Kevin Marvin

Jessica Porter

Agenda

Issue to analyze Overview of beer industry Threats to industry Overview of companies Recommendation

Issue to be Analyzed

Which beer company should you invest in?

Overview of Beer Industry

Porter’s Five Forces Rivalry- high Potential new entrants- moderate Power of suppliers- moderate Power of buyers- high Substitute products- high: Wine & liquor

Distribution

SABMiller, Anheuser Busch, Diageo & Boston Beer Retail grocers, restaurants, bars, and

sporting events Micro breweries

Growlers, local brew pubs, local retail stores

Threats to Industry

Other alcohols such as wine and liquor Effects of consumption to health

Beer is harmful to liver and other organs Causes dependency Glass of red wine is healthy

Regulations

SABMiller

Target market: rural middle class Sales trend:

Declined in 2009 due to recession Increased in following years Focused on emerging market such as

Africa, Latin America, and Asia

SABMiller (cont)

Demographic Area: Operates in six continents throughout the

world Main areas

Africa, Asia Pacific, Europe, Latin America, North America, and South Africa

2007 2008 2009 2010 2011$0.00

$5,000.00$10,000.00$15,000.00$20,000.00

Revenues

Revenue

Year

Revenue

Diageo

Result of merger of Guinness and Grand Metropolitan in 1997

Guinness to Diageo was one of the first high profile cases of rebranding and reflects a deliberate strategy of separating the corporate brand from its product brands

Main product: Guinness Draught

Products

Spirits Wine Beer

Guinness, Harp, Red Stripe, Smithwick’s Ale Guinness is a strategic brand Guinness is the only global stout License agreements to brew other

companies’ beers Other beers accounted for ~10% net sales

Diageo

Location

180 markets around the world

Present in developed and emerging countries

Developed markets comprises 66% of net sales

Emerging markets make up 33% of net sales Demographics

Young male population Middle class

Financial Analysis of Diageo

Trend of increasing net sales £156 million from 2010-11 £469 million from 2009-10

Beer sales contribute 21% of total net sales 2.8% increase from 2010 beer sales

Anheuser-Busch InBev

Acquisition with Belgian company InBev in 2008

The leading global brewer and one of the world’s top 5 consumer product companies

Best known beers include brands such as Budweiser, Busch, Bud Light

Listed on New York Stock Exchange

Global brewer

Operates 12 breweries in the U.S. and 18 in other countries

Hold the No. 1 or No. 2 position in U.S., Canada & Mexico

Revenue increased by 4.5% Declining sales in North America &Europe Strong sales growth in Asia Pacific

Anheuser-Busch in North America Total Volume decreased by3.1% while industry

declined by 1.8% In 2009, Bud Light is #1 beer bestseller in

America 800 wholesalers and distributors in the U.S.

Hensley &Co: John McClian’s wife as its chair

History of Boston Beer Comp. Established in the early 1980’s using a a

family recipe from the 1800's

Based out of Boston, Massachusetts

Best known for the Sam Adams Boston Lager beer  

Market Analysis

Boston Beer Comp. does not target the top beer consumption markets

Sells beer primarily in domestic U.S. markets. But sells on a smaller scale to the Canadian, European, Israeli, the Caribbean, and Mexican markets

Boston Beer Company is the leading craft beer, but most beer drinkers will drink a light domestic beer.

Financials

In 2009, generated a net income of $31.1 million from $453.4 million in revenue, a 284% increase from 2008

Reported $66 million of net income from $513 million in revenue in 2011

Demographics

Only brewer where its distributors can buy back its beer when it's past its peak freshness date

Distribution channel bases in Cincinnati and Boston

Have three breweries in Cincinnati, Boston, Breinigsville, Penn and maintain the ability to contract brew, if needed, at facilities in Rochester, N.Y. and La Crosse, Wis

Microbreweries

Prohibition Preferred by locals Score higher in Craft Beer competitions Growing industry

Microbreweries

Advantages New and seasonal flavors Local economies Growlers

Disadvantages Taxes No Economies of scale Distribution and Marketing

Recommendation

Risk adverse investor- Anheuser Busch Less risk, stable, established, profitable

sales, shareholder rights Risk seeking investor- Microbreweries/

regional High growth rate, privately owned, local

Questions?