Stella Artois Class Presentation - Harvard Case Review

1. Group 2 Consulting
Anton
Fahme
Kirill
Kareem
Sharon

2. Traces origins to 1366
brewery in Brussels
Bought out by master
brewer in 1717
Expansion in 1954 brought
Leffe and Dommelsch in
1968
1987 Merger with another
Belgian brewery to form
Interbrew

3. Momentum in local market
propelled Interbrew for
international acquisitions
Hungary, Croatia, Romania,
Bulgaria and Canada in
early 1990’s
Late 1990’s Ukraine,
Dominican republic, China,
Montenegro, Russia and
Korea

4. • Momentum in local market propelled Interbrew
for international acquisitions
• Hungary, Croatia, Romania, Bulgaria and
Canada in early 1990’s
• Late 1990’s Ukraine, Dominican republic,
China, Montenegro, Russia and Korea

5. 80 Countries
Top 10 markets account for 86% of
sales
61% of Volume production came from
Americas
World’s beer market in 1998
Americas Europe Asia Pacific Africa Middle East
5% 0%
27% 35%
33%

6. Interbrew’s vision is to be within top
3 beer producers in each of the key
markets
Deliver high quality beers.

7. Domestic markets are experiencing
contraction and declining sales
Health consciousness trend
Marketing functions of Interbrew are
not attuned for global beer brand
Uncertainty with developing markets
in China and Russia

8. • 4th Company globally
• Lessen dependence on Belgian and
Canadian markets
• Strengthen controlled brand’s
positions
• Local for local, decentralized
administration

9. Traditional and sophisticated beer
Flexibility of decentralization
Fierce customer loyalty
Intended strategy Global brand
unified campaign
Emergent strategy Global brand
through adaptable regional initial
branding

10. External environment
How do politics affect us
Alcohol tax, consumption restrictions
Opening of Eastern European markets in
early 2000’s
Potential trade sanctions and tariffs
Economic trends
Eastern European and Asian financial crisis
of early 2000’s
Rise of emerging economies

11. External environment
Social factors
Emergence of wine culture, especially in
Australia and NZ
Trend towards healthy life style: lite line of
products
Trend towards specialty products,
microbrew
Innovations
Emergence of internet

12. External considerations
Opportunities that the environment
presents
Opening of Asian and eastern European
markets
Reduction of trade barriers
Converging markets
Threats faced by the firms in the industry
Growth of substitutes
Declining sales in mature markets
Strong competition

13. Where do we excel?
Company’s performance is partially
attributed to its:
Strategic operations- cross fertilization
Strategic sourcing
Motivated employees
Successful capacity utilization
Diverse product line from premium to
light beers

14. Are there other pressures?
Suppliers power – medium
Interbrew works with a limited number of high
quality suppliers, increased power
Offer raw materials that could be easily
substituted, reduces power
Buyers power- moderate to high
Costs nothing to switch
A lot of close substitutes
Threat of substitutes – medium
Wine, cocktails, pilsner, lager

15. Threat of new entrants – high ratio of
fixed vs. variable costs
Rivalry- intense, Anheuser-Busch,
Heineken, Carlsberg, little
differentiation, high exit cost

16. Overall industry attractiveness
Fragmented, top four players account
for 22% of global volume
Attractive in growth markets as well
as mature markets
83 lpc in N. America, 79 in W.E., 29 in
E.E.
Growth of speciality and light beer
segments

17. Value Chain Analysis Primary
Inbound Logistics
Partnerships with suppliers
Outbound Logistics
Economies of scale in distribution
Handled differently according to
region, little standardization

18. Value Chain Analysis Primary
Operations, Interbrew strong point
Shifting production to more efficient
facilities
Cross fertilization of best practices
Capacity utilization
Marketing and Sales
Product quality and positioning
Specialty Belgian cafes

19. Value Chain Analysis
Secondary
General Administration
Benefits from economies of scale
Human Resource management
Employee suggestions
Motivated owner-operators
Procurement
Great relationships with limited
suppliers across the board

20. Firms Resources & Sustainable
advantage
Tangible Resources
Wide range of locations
Lean operations from efficient sites
Key strengths come from intangible
resources and organizational
capabilities

21. Intangible Resources
Wide Portfolio
Very different from its competitors
Key acquisitions
Presence in both developing and emerging
markets
Best practices from different sites can be
applied across the board
Decentralized approach
Allows flexibility despite portfolio size
Handles different tastes
Can shift and adjust product mix
Access to a vast supply network

22. Organizational Capabilities
Makes strategic acquisitions
Ability to leverage knowledge
Focus on growth markets with long
term volume growth potential
Cost savings gained by purchasing
and then rationalizing operations

23. Industry life cycle by region

24. Industry by product category
• holder

25. Intellectual Capital
Human Capital
Spread globally
Cultural, local and economy knowledge and expertise
Structural Capital
Breweries around the world
Brand equity
Relational Capital
Connected to customers around the world
Beer Cafe

26. Corporate Strategy
OPERATIONS
BRANDS MARKETS
INTERBREW TRIANGLE

27. Strategy Objective
Underlying Objectives
Consolidate the company position in mature markets
Improve margins through higher volumes of premium and specialty brands
Rationalize
Worlds major markets would each end with just 2 or 3 major players
Fundamental Objective
Increase shareholder value

28. Operational Strategy
Cross fertilization
Sharing of best practices between sites
Employee propositions
Improvement linked to employee motivation not
technical performance
Capacity Utilization
Close overproducing facilities and open under-
producing
Strategic Sourcing
Selecting small number of suppliers

29. Brand Strategy
Acquisition of existing brewers, in
growth mature markets
Identify brands, typically specialty
products and them a regional basis
across a group of markets

30. Market Strategy
Increase global volume of beer production and
reduce their dependence on Belgium and Canada
Establish and manage strong market platforms
Decentralization corporate structure
Mature markets – greater efficiencies in production,
distribution and marketing
Growth markets – build significant positions &
concentrate on long-term volume growth potential

31. Economies of scope
Core Competencies
MERGERS AND ACQUISITIONS
Sharing Activities
Decentralized Management Structure
Market Power
4TH Largest beer company in the world
Houses beers from 80 countries
Vertical Integration
Strategic sourcing

32. Portfolio Management on
Regional Level

33. Portfolio Management on Regional Level
Brewery : Manchester, England
Founded: 1853

34. Portfolio Management on
Regional Level

35. Portfolio Management on Regional Level
Brewery : Namur, Belgium
Founded: 1152

36. Portfolio Management on
Regional Level

37. Portfolio Management on Regional Level
Brewery : Prague, Czech
Republic
Founded: 1869

38. Portfolio Management on
Regional Level

39. Portfolio Management on Regional Level
Brewery : Hoegaarden,
Belgium
Founded: 1445

40. BCG MATRIX
STAR QUESTION MARK
Relative Growth Rate
South Asia
Central & Eastern Europe America
CASH COW DOGS
Relative Market Share

41. Motivation for Global
Expansion
Increase size of potential markets
Reduce costs of R&D and operation
Extend life of a product
Optimize physical location for every
activities in firm’s value chain
Risks:
Political & Economic
Currency Fluctuation
Management Issues

42. Motivations for Global
Expansion

43. Motivations for Global
Expansion

44. Entry Modes of Global
Expansion

45. Means to Achieve Diversification
Global Approach
Mergers & Acquisition
-Speed
-Valuable resources
-Consolidation and Scale
-Leverage
Potential Limitations:
Expensive
Manager’s ego and
creditability
Cultural issues

46. Joint Venture
Enter new markets
Reduce costs in the value chain
Develop and diffuse new technologies
Potential Limitations:
Partner issues
Control issues

47. Factors Affecting a Nation's
Competitiveness
Is the nation’s
business governing
favorable and what
are the nature of
domestic rivalry?
Does the nation have Is there Demand for
favorable Factors of beer?
Production that
supports the beer
industry?
Presence/Absence of
Suppliers & related
industry such as
wineries, and
Distilleries that are
globally competitive?

48. Alternatives
• Continue with Stella Artois
– Inadequate marketing experience
– Old fashioned image
– Alcohol level inconsistence in different
markets
• Shift emphasis on Labatt
– Little exposure outside North America
– 25% Decline in sales after Labatt Ice
peaked

49. Alternatives
• No global brand, differentiation of
local beers
– Leverage core competencies and
structure
– Consistent with acquisition strategy
– Cross cultural sharing and regional brand
development
– Embrace Belgian Beer cafes franchise

50. Alternatives
• Promote “Interbrew” as a global
brand
– Similar to no global brand, could be used
as a tool to achieve it
• Emphasize and develop light beer as
a category

51. Now we open the floor for
questions

52. Today
• Interbrew no longer exists after 2
major mergers with AmBev and later
with Anheuser Busch forming the
biggest beer company in the world
Anheuser-Busch InBev