THE BEER INDUSTRY

Direccion Estrategica
Claudia de las Heras, Patricia Serra, Xavier Ballart

INDEX

The beer industry

Based on Moritz, Estrella Damm and Cervesera del

Montseny 2
Collaboration agreement between Azti and Salve-Bilbao
3
Business model canvas of Mortiz 4
Growth and development strategies 5
Internationalization strategies

1. According to the socioeconomic report of beer industry in Spain, what type

of sector is the beer industry?
Identify the industry life cycle by describing the main characteristics and the
best- suited strategies.
We can determine that the beer industry is a mature industry that has managed to
overcome the critical stage that separates growth and maturity.
The growth in the domestic market keeps rising, the beer sales in Spain in 2014
recorded an increase of 2.3%, the biggest rise since 2006. In addition, this drink
consumption has increased by 3% compared to 2013, as revealed by the
Socioeconomic Report Beer 2014 of the Brewers Association of Spain.
Besides their good report at the nacional market nowadays the companies are
increasingly more committed to move forward with their plans for
internationalization, seeking new markets to expand their brand and keep growing.
Product quality is an important sign that the sector is in the maturity phase, and we
can choose between a great variety of beers.
The introduction in recent years of innovative beers, such as those that are suitable
for celiacs, or non alcoholic beers show the interest of companies to approach new
market segments, attracting new consumers. And finally, it is remarkable the
customer high loyalty.

Regarding the concentration degree, which type of industry is it? Justify your
answer.
Within the beverage industry, the brewing industry is one that higher degree of
concentration presents.
We are facing a sector characterized by the use of development strategies as
mergers, acquisitions and cooperation agreements which has led the industry
present a high degree of concentration.
The analysis of the degree of concentration in a sector is essential to analyze their
behavior. The calculation is performed by the Herfindahl index, a measure of
economic concentration market.

Market shares of the brewing industry

3

PRODUCTION( miles hl) MARKET SHARE

CRn

S2

SAN MIGUEL

12.589

37,52

37,52

0,14076

HEINEKEN

10.028

29,89

67,40

0,08931

ESTRELLA DAMM

8.369

24,94

92,34

0,00116

The result of the calculation of the Herfindahl index relative to 2011 industry data
reveal that we have a highly concentrated market, since it is above 0.25:

H= 0294

The Spanish brewing industry is an oligopoly, specifically in an asymmetric oligopoly

structure since we are dealing with a sector with a number of small companies,
among which there is a great difference in size. The three largest companies exceed
80% of market share

Can you say that the life cycle stage in beer consumption is the same for the
different distribution channels ( Hotel and home ) ?
We could say that during the crisis there was a sales differentiation between the
different distribution channels as the economic situation caused the purchasing
power of the spanish people came down and one of the most affected sectors were
the hotelier (decreased consumption of beer in bars , restaurants or terraces).
The Spaniards reduced the consumption of products that were not of first necessity.
Even so the beer sector remained almost constant, with little downs of consumption.
Period affected by the changing habits, increasing consumption at home and
cheaper brands.
Nowadays (2014/2015) beer consumption in hotels reflects a positive trend reported
for the first time since 2007 an estimated growth of 3.6%. Thus, hotel establishments
remain as the major channel of consumption, with 64% of the total compared to 36%
of household.

2. Based on Moritz, Estrella Damm and Companyia Cervesera del Montseny

Identify the generic strategy of each firm.
We can distinguish between three different types of generic strategies: Low Price
oriented, differentiation, or hybrid strategies (oriented to Quality-Price Relation).
After anylizing the three brands we can afirm the following:
Moritz:
Hybrid
strategy

Oriented
to
Quality-Price
Estrella Damm: Hybrid strategy Oriented to Quality-Price
Companyia Cervesera del Montseny: Differentiation in the whole industry

Relation.
Relation.

Identify the value proposition, resources and capabilities that sustain their
competitive advantage.
Moritz:
All made with water from Manantial Font d'Or del Montseny, a fact that unlike
other beers on the market. This beer is flavored with an infusion of flowers of
aromatic Saaz hops (Czech Republic), giving it a distinctive aroma. In conclusion,
Moritz is a beer with a special flavor that reflects the inherited experience of the
founder and successive brewers.
Estrella Damm:
Unlike many other breweries , they have their own malt structure, which allows them
to control through first hand the whole process.
Yeast is an ingredient that makes them unique , and since many generations ago
they use the same strain . If it is lost or damaged, the taste of Estrella could be
changed and it is for this reason they have three reserves of this yeast kept under
maximum security in Barcelona , Valencia and London.
They have the beer three weeks in storage and this way they can guarantee a
perfect result.
They use the most up-dated technology in the process of packaging so it cant
become rusty or contaminated.
Both, Moritz and Estrella Damm, provide customers products with high/medium
perceived added value while maintaining low or medium prices, with good qualityprice relation. It requires double skills: in one way, to capture and meet customer
needs and in another way, to have a low cost structure.
Companyia Cervesera del Montseny:

Contains ingredients referred to the German law in 1516 of

purity
(Reinheitsgebot): water (of the Montseny), malt (barley and wheat), hops and yeast.
Their microbrewery specialises in beers of the family of the Ales or high
fermentation, unlike the majority of the national productions.
They bottle natural beers and unpasteurise, carbonic gas is generated naturally by
the yeast that is contained in the bottle. We can say that they are living beers that
evolve over time. Moreover, they use unique features of elaboration: through the
system of English traditional elaboration (with maceration by the method of simple
infusion), the production process is virtually manual.
In conclusion, Companyia Cervesera del Montseny seeks to create high added
customer value while maintaining similar prices, or somewhat higher. The product is
improved and perception differentiation is achieved without sacrificing market share
gains or sales volumen (microbrewery with a production capacity of 3,000 liters each
production).
Are they direct competitors? Justify your answer.
In Barcelona we have two main beer brands fighting for its market share: Estrella
Damm and Moritz. For long time, Estrella was the leader of the market and still is.
But Moritz, with its yellow colour and its agressive marketing, is gaining market
share non-stop. We could also say that Moritz and Estrella Damm are direct
competitors due to the fact that they both use the Barcelona brand to promote its
business.
Moreover, CCM among other crafted beers, are continuously growing and bigger
industrial beer brands such as damm do not take away an eye off it. Some of them
have even started defensive strategies.

What kind of innovations have been produced with the collaboration

agreement between AZTI and Salve-Bilbao?

Innovation
La Salve Bilbao Km 0

Type of innovation

Justification

To bring to market in 2016 a

beer in which 40% of the
ingredients are locally
sourced with producers
unless 100 kilometres away.
(Process and Sustainable
Innovation)

It is important for the brand to

be standard of local and
commitment to the
conservation of the
environment and slowing
climate change.

Create a Beer Institute with

the aim of providing regular

About creating an observatory

Beer Institute

and helpful information to

customers.( Open source

of trends in the world of beer.

innovation
orCrowdsourcing)

Gluten free

Alcohol free

Sensory Decalogue

Innovation Plan

New factory

To develop and launch the

first real European gluten
free beer. (Incremental
Innovation)

Intolerances to certain
products have opened the door
to an approach that seeks to
provide a suitable product for
celiac people.

La Salve-Bilbao will also

design the first real alcohol
free beer. (Incremental
Innovation)

La Salve-Bilbao will pioneer this

product and will be available in
the market in 2017.

To define a Sensory Beer

Decalogue, which will have
two lines of work. On the
one hand, focusing on the
end customer it will provide
consumption patterns that
enable to have a beer
culture in order to
appreciate quality products.
On the other hand, focusing
on the producer, will provide
elements and indicators to
parameterize and
homogenize the final
products. (Service
Innovation)

The aim is to create a plan to

teach enjoying beer though
active tasting.

Along with the development

of this new product range,
AZTI will be in charge of
drafting and elaboration of
the Innovation Plan La Salve
Bilbao 2018- 2022.
(Business Model
Innovation)

To maintain leadership in
issues related to innovation.

AZTI draw up and

accompany both the design
of the space, as production
processes for the new La
Salve Bilbao factory.
(Supply chain
innovation)

It is expected to be active by
the end of 2015.

Approach to
restoration

Merging the restoration and

the beer by creating
agreements with prestigious
restaurateurs. (Disruptive
innovation)

In order to incorporate beer,

both for cooking and to
accompany the food.

4. Describe the business model canvas of Mortiz

Customer segment: basically made by
NOSTALGICOS old brand consumers and then BOBOS (bohemians bourgeois)
social group up in the era of new technologies, characterized by its functional
belonging to capitalism, and have a thought of countercultural values and
bohemians.
Value Proposition:
The goal is to become the beer cosmopolitan of Barcelona of the century, without
forgetting their history. Moritz impacts for his tradition, modernity and authenticity.
They want tourists remember "Beer of Barcelona" in their summers here.
Channels:
Its own distribution network (horeca distribution)
Customer relationships:
Places where you can enjoy of cultural events and their beer; La Fbrica Moritz
Barcelona and Bar veldromo
Another key success of Moritz is theirpresence on social networks. "They have
helped us a lot, but we must be very attentive to what happens every day," "We are
reluctant to spend money on advertising. We prefer to be online, because it is free, it
allows you to better measure your level of impact and is a channel more
instantaneous "
Revenue:
The firm is present especially in bars and restaurants in Barcelona, where it has
been done with a market share of around 10%

Key Resources:
Raw materials (malt, hops, water and energy), equipment, packaging (bottles, cans,
barrels and packaging), transport and storage, marketing and media services.
Costs structure:
In 2014 achieved a turnover of 15.6 million euros, implying a rise of 17%.
It has higher sales volume in the hotelery channel (80%) and slightly lower in the
homes channel.

5. Regarding the growth and development strategies identify the directions

and methods used by Damm and CCM.
Strategic decisions affect directly the firms future, it may survive in long term or it
may extinct depending on its strategy. Both growth and development reflect a firms
evolution. They can be complements but not substitutes.
While growth refers to sales volume, production volume and number of employees,
development might be focused on value creation. As a result, development
strategies can generate value without growing for exapmle by restructuring the
business portfolio.
Damm:
The direction that this group is taking is the increase of the number of customers. To
achieve their target they are focusing on social media and television with the slogan
Mediterrneamente. By investing in Online Marketing they want to reach all the
spanish area but especially Catalonia.
This method is not only relatively cheap but also fast and effective.
CCM:
The direction that they are taking is the specialization and the development of a high
quality beer. This craft beer is positioned as a premium product that has found a
niche as to a quality product that works very well together with the haute cuisine.
Its aim is to produce a revolution (internal development), as it happened with the
wine in the twentieth century, they believe that when the technical and
manufacturing processes are improved the succes guaranteed.
6. Regarding the internationalization strategies of Group San Miguel and CCM:
Which factors might condition the country selection for these firms?
This two companies are very different from each other. San Miguel is the major
player in the Spanish market producing 11.8 million hectolitres in 2014 and CCM is a

local brewer that produces only 200.000 annual litters. This means San Miguel and
CCM will search for different elements when the are trying to find the ideal country
or countries to expand their business.
Speaking in general terms any company that wants to follow an internationalization
strategy should consider this 5 points:
1.

According to studies, countries have different levels of consumption which are

independent of the countrys beer production level. This means there is an existent
opportunity to enter this markets and cover that demand. (eg. In the Czech Republic
the average of litters consumed is 144L per person (max level of consumption by far
Germany is second with 107L per person) and they are ranked as the 6 th in terms
of production- Spain in the 4th place. The Brewers of Europe, 2014)

2.

Different societies share different cultures, as well as beer cultures. This factor
can be related with the previous one, but is even more specific. It is not how people
consume it, but eh how do they consume it and if there is a beer tradition in that
country that will provide stability to the beer market.

3.

Obviously the regulations (and related to it the ethnical background). How will the
countrys government will tax beer, if any kind limitations in terms of production or
consumption will be imposed and many others questions the company should
consider. In addition, countries should investigate the ethnical background of society.
For example, muslims cannot consume alcohol, so expanding the market to oriental
countries or countries will a high concentration of muslims will not be really efficient.
In fact, muslims are allowed to drink alcohol with a maximum 0,5% degrees of
alcohol, which means that the product can be restructured and orientated to that
specific market.

4.

Another key point to bear in mind is the proximity to the production. The company
should consider if the revenues obtained by expanding the market are higher than
the cost of doing so.

5.

Last but not least, expanding to another countrys market requires high
investments and be ensure a profitability in a future, the company should take into
consideration general aspects such as: political stability (eg. Catalonia with
separatism process), economical projections (eg. Greece will not improve in
economical terms until 2045) or even environmental issues. In a nutshell, the
countrys long term risk factors.

What are the main differences in the internationalization process of the

aforementioned companies? Observe that one produces industrialized beer
and the other one craft beer.

10

As we said before, the two countries have different orientation due to the fact they
have different virtues. San Miguel produces a standard quality beer but in incredible
amounts (in 2014 the company produced 11.8 hectolitres, becoming the first beer
producer in Spain). With this information we can say that their internationalization
strategy will focus on expanding to other markets by providing a standard beer at the
established market price, trying to compete with the other existent firms. To be
competitive in this new market, they should control very precisely their costs by
locating the factories near the consumption areas, close effective deals with
suppliers in order to ensure the same costs, maximize the productivity inside the
factories In conclusion, San Miguel should pursuit the cost minimization and
production maximization to be able to compete with local brewers.
On the other hand, we have Companyia Cervesera del Montseny. This company is
characterized by producing small amounts of beer but ensuring a maximum quality,
in other words, they produce a craft beer. This beer is a really costly and requires
more time to be produce. The benefit of this kind of beer is that represents a quality
product and consequently, price can be increased to cover such expensive costs.
CCM internationalization strategy should focus on expanding to other countries
where a beer culture exists. Only places with beer tradition will be able to
understand and enjoy such an exquisite taste, which means that their market is
reduced but inside a smaller market which are craft beers they can become the
most popular brand.

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SYNTHESIS

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REFERENCES

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