Essay Preview: Ukbrewingindustry
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Today, the brewing industry is a huge global business, consisting of several dominant multinational companies and many thousands of smaller producers ranging from brewpubs to regional breweries. More than 133 billion liters (35 billion gallons) are sold per year Ð– producing total global revenues of $294.5 billion (ÐÐˆ147.7 billion) in 2006.
InBev is the largest beer producing company, followed by SABMiller which became the second largest brewing company when South African breweries acquired Miller Brewing in 2002. Anheuser-Busch holds the 3rd spot.
Today there is something of a revival in the small brewery (sometimes now referred to as the micro-brewery) producing traditional ales, or modern versions of them. Globalisation though, has seen the merging and takeover of some of the largest British breweries, and the diversification of the leisure and drinks sectors.
Brewing giants such as Heineken, Baltic Beverage Holdings (a conglomerate comprising the former Scottish & Newcastle brewery and Carlsberg) and Interbrew-Ambev (a merging of the largest Belgian and Brazilian brewers) are truly global players. Britain may consider itself one of the natural homes of beer, but todays brewing industry presents new and different challenges in the retention of British influence in the worlds beer market.
Following the demise of the `big six domestic brewers, multinationals took control of the UK market, although the two largest UK-based brewers Scottish & Newcastle (S&N) and Diageo (the brewer of Guinness) are, themselves, multinational forces in a globalised beer market. The other brewers making up a new `big six in the UK are: InBev of Belgium; Molson Coors and Anheuser-Busch (of Budweiser fame), both US-based; and Carlsberg of Denmark. InBev brews the top-selling UK brand, Stella Artois, and Molson Coors owns Carling, the leading standard-strength lager.
Foreign control of more than 50% of the market has deepened the long trend towards international lager brands, such as Kronenbourg and Carlsberg, and has decreased the previously diverse range of dark beers, which characterise indigenous brewing.
Now the evolution of a global beer market is auguring well for bigger brewers, promising a dramatic increase in their profit pool. Contenders for the big league include Heineken, Belgiums Interbrew, South African Breweries, Carlsberg, and Anheuser-Busch of the United States, currently the worlds largest brewer.
The maneuvers, coming about 2ÐÐ years after the most recent wave of beer-industry consolidation, are a reaction to shifts in beer-drinking habits across the globe. In Western Europe and the U.S., beer sales growth is sluggish amid increasing competition from wine and spirits.
In many emerging economies, however, including Eastern Europe and China, sales are booming. Another factor prompting consolidation is the rising cost of key commodities like grain, glass and aluminum, which is squeezing profit margins.
Beer is going global as the pressure mounts for consolidation among the worlds brewers. News from the brewing industry is gloomy: Profits are down, and competition is up. But as small brewers scout for regional partners and big brewers look for new markets, the maneuvering is rekindling interest in the sector.
Most beer is still bought in pubs and clubs, despite the high-profile and controversial nature of supermarket discounting of beer. Challenges have come from wines, spirits, `ready-to-drinks (RTDs) such as Smirnoff Ice and from a revival in drinking cider instead of beer. The ban on smoking inside pubs and clubs looks certain to depress the market even further, although beer plays a central role in British social life and any dramatic collapse of the market is difficult to envisage.
This is a strange time for the beer industry. Regional brewers dropped out, and craft brewers came in. The old and comfortable beer industry equation has now been turned on its ear due to factors largely beyond the control of brewers. Distillers and vintners are taking volume share from the brewers while in 2005, wine was up 4.8% and spirits up 2.9%.
“The nature of competition in the industry has changed radically in the last two years about distilled spirits picking up and malt beverages dropping down. Distilled spirits and wine have an advantage over beer in that they can build up huge inventories, and live off them.”
The past year was a tough one for the mainstream beer business, and distillers and vintners will be keeping the pressure on. Price war continues to lurk, but anecdotal evidence shows beer sales picking up and pricing conditions more favorable.
“Beer is not dead,”- “There is a slowdown in demand for malt beverages that is structural, and this has a demographic basis. The nature of the market has not changed, but there have been changes in the competitive structure, and this is worth examining. The brewing industry is abuzz with M&A activity.
The worlds beer giants are showing a growing thirst for consolidation as they try to gain leverage with suppliers, distributors and retailers amid slowing sales in the U.S. and Western Europe.
There are two distinct layers to the beer production industry in the U.K. There is the mass-market brewing industry, consisting of a few huge multi-national companies that cater for the majority of U.K. beer drinkers by producing fairly standardized and wide-appealing lager beers, and then there is the craft brewing industry, consisting of a large number of small breweries, or micro-breweries, who concentrate on brewing the more traditional ales and cater for the more sophisticated of the U.K. beer drinkers.
But the biggest sea change in the British brewing industry came with the introduction of lager beers.Lager caters for just under 70% of the total beer market in the U.K. and is produced by four major, mostly foreign associated, breweries; the Scottish and Newcastle who produces the Australian beer, Fosters, and the French beer, Kronenbourg, Coors which is U.S. owned, Inbev who produces the Belgian beer, Stella Artois, and Carlsberg which is Denmark owned. The beers are designed to appeal to the mass population and are marketed for their ease of sale in this respect. Excess brewing capacity