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Grolsch case study

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  • 1. Growing Globally 1
  • 2. Table of contents 1.Current business situation - Independent subsidiary of SAB Miller - Current global strategy : Key market, 4P, SWOT - TOP 10 Quantitative goal 2.Issues & Options - Target countries - Return on Investment 3. Recommendation - Go to new market strategy 4. Conclusion 2
  • 3. 1-1. Background SAB Miller (Second largest brewer) Acquired by SAB in 2007 SAB Miller Strategy  Capture growth in beer volume in the developing markets  Develop attractive portfolio  Keep good operation  Leverage global scale New CEO Rob Snel Royal Grolsch N. V. (51st largest brewer) Grolsche Bierbrouwerij Netherland Grolsch International Expect to sell Grolsch premium beer in Latin America and Africa where SAB Miller has got a strong route to market Grolsch(UK) Ltd.(JV with Coors) 3
  • 4. 1-2.Current Global Strategy Vision: The brewing industry has failed to keep pace with the changes in consumers’ preferences for drinks. This has created a mainstream category that is under pressure from other drinks. Grolsch believes in the strength of beer in the drinks market. Mission: Grolsch is going to break through the mainstream and restore beer’s premium status. Focus on cost structure and efficiency Focus on growth in full-grown beer market 1 Innovation department, R&D 1 Internal logistics 2 Marketing investment 2 Decrease in overhead expenses 3 Expansive on-trade policy 3 New facilities 4 Target Growth core market 4 Decrease in cost price 5 Vision and mission 6 Market position 7 Brand campaign 8 New Design/New concepts Reference: Exhibit 8 Strategy Goal Global Top 10 Brand 4
  • 5. 1-3.Current Marketing Strategy Marketing Strategy (4P) Netherland US Product -Grolsch: Premium beer(Swingtop) -Amsterdam: nonpremium beer -Grimbergen: Imported beer -Grolsch: Premium beer(Swingtop) -Amsterdam: nonpremium beer -Grimbergen: Imported beer -Grolsch: Premium beer(Swingtop) -Amsterdam: nonpremium beer -Grimbergen: Imported beer -Grolsch: Premium beer(Swingtop) -Amsterdam: nonpremium beer -Grimbergen: Imported beer Price Standard: Discount: Comparable: Higher: Placement/ Price promotion, Distribution PerfectDraft dispenser system, on-premise channels Distributed by Anheuser-Bush Grolsch UK Own local distribution Promotion Got that Swing Green Light District campaign Advertising UK France 5
  • 6. ‹#›
  • 7. 1-5.SWOT Analysis Strength -SAB Miller’s Strong route channel and global production -Grolsch 21st brand and its taste and quality Weakness -No approach to developing market -Lack of price elasticity Opportunity  Leverage SAB Miller -Increase Premium lager channel to promote consumption Premium beer -Expand beer consumption in developing market  Access to developing market Threat -Market shrinking in developed market -Price pressures -Non beer drinks  Target developing market  Cost reduction  Focus on Premium beer Propose to change the current strategy 7
  • 8. 2. Issue and options Issue  How to reach Global Top 10 (more than 4.9 M hl volume )in non-domestic market Option 1 Change current strategy Target MKT Growth Match with SAB Miller’s strategy Option 2 Keep current strategy Target Current and emerging market Growing Leverage SAB Miller asset and meet their expectations > Developed market MKT Growth Shrinking Match with SAB Miller’s strategy No planned 8
  • 9. 3-1. Recommendation 1) Which countries should our company enter into? 3) How do we create business strategy? 2) How do we enter local markets (JV, Acquisition, Start-up)? 4) How is business return? 9
  • 10. Market Selection Entry strategy 1) Market Selection Business Strategy Financial plan MABA Framework MA Potential Market Volume • Volume of Premium • Volume Growth of Premium • Price Differentiation • Language • EU Relation • Transport in EUROS • GDP per capita BA • Volume of Grolsch • Volume Growth of Grolsch • Variable Commercial Contribution • Grolsch Share Market Selection Imported Brands Growth Distance 10
  • 11. Market Selection Entry strategy 1) Market Selection Business Strategy Financial plan Potential Market Volume (000s hl) 300,000 Potential Market 250,000 Volume 200,000 Potential 150,000 Total Consump. = Major Co’s sales - 100,000 Imported Brands Growth 3.5 3.0 2.5 2.0 1.5 1.0 bil. litre 0.5 0.0 2000 2001 2002 2003 2004 2005 Western Europe Imported Share Eastern Europe Imported Share North America Imported Share Latin America Imported Share Asia Pacific Imported Share Australasia Imported Share Africa and Middle East Imported Share USA CANADA POLAND SOUTH… COLO… VENEZ… ITALY FRANCE UKRAINE MEXICO SOUTH… AUSTR… THAIL… BRAZIL SPAIN RUSSIA UK JAPAN CHINA - GERMA… 50,000 3% growth 7% growth 6% growth 15% growth 8% growth No growth 11% growth 11
  • 12. Market Selection Entry strategy 1) Market Selection Distance CHI A N U SA G ER M A N Y B R A ZI L RU SSI A JA P A N UK M EX I O C SPAI N P O LA N D S O U T H A FR I A C V EN EZU ELA C AN AD A U KRAI E N FR A N C E TH AI N D LA I A LY T C O LO M B I A A U S T R A LI A S O U T H K O R EA Go to … G D P per M em ber capia i 2005 t n of EU 1, 731 No 42, 516 No 33, 543 Y ES 4, 739 No 5, 337 No 35, 781 No 38, 122 Y ES 7, 667 No 26, 056 Y ES 7, 963 No 5, 234 No 5, 445 No 35, 088 No 1, 829 No 33, 819 Y ES 2, 690 No 30, 479 Y ES 3, 393 No 33, 948 No 17, 551 No Business Strategy Language ( ,G er an,D ut EN m ch) No Y ES ( ) EN Y ES ( R ) G No No No Y ES ( ) EN No No No Y ES ( ) EN No Y ES ( ) EN No No No No No Y ES ( ) EN No Financial plan Tr anspor t Expensi ve C heap C heap Expensi ve A ver age Expensi ve C heap Expensi ve A ver age A ver age C heap Expensi ve A ver age Expensi ve C heap Expensi ve A ver age Expensi ve Expensi ve Expensi ve 12
  • 13. Market Selection Entry strategy 2) Entry Strategy Business Strategy Financial plan South Africa Monopoly market No.1: SAB Miller (MS 98%) Brazil China Occupied by major brewery groups Competitive market Number of beer company: 800→300 (M&A) No.1: Anheuser-Busch InBev : MS 70% No.2 : Grupo Schincariol : MS11.6% Grope of Kirin No.3: Petrópolis brewery : MS9.8% No.1: Snow beer (華潤雪花) : MS17.8% JV with SAB Miller No.2 : Tsingtao(青島): MS13.2% No.3: Anheuser-Busch InBev (Belgium)MS11.9% Web Data 2009 BRICs経済研究所レポート2006 13
  • 14. Market Selection Entry strategy 2) Entry Strategy Business Strategy Financial plan Fully-owned subsidiaries Joint Venture Offshoring Licensing Exporting Investment High Middle Middle Low Low Local customer Access High High Middle Low Low Distribution Channel High Middle High Low Low Management Control High Middle Middle Middle Low Utilize SABMiller’s facility utilize channel of JV (SABMiller & Snow beer) License out to Petropolis 14
  • 15. Market Selection Entry strategy Business Strategy Financial plan 3) Business Strategy for S. Africa Utilize SABMiller’s facility by adding Grolsch’s brewery line, Grolsch bar for promotion 15
  • 16. Market Selection Entry strategy Business Strategy Financial plan 3) Business Strategy for S. Africa Utilize SABMiller’s facility with additional brewery construction  Homemade alcohol is common  More PPL like to drink beer at bar  Beer has cool & sophisticated image Grolsch’s original taste as imported product (dry and bitter, refreshing) Product Target: Middle-High class  Economic growth  More PPL love premium beer  Beer price (Domestic75-120JPY, Imported150JPY) Price Premium imported beer 120JPY / 350 mL can  SABMiller is No.1 in Africa  SAB has brewery & distribution channel Place Utilize SABMiller’s channel & brewery Grolsch bar  Need differentiation from SAB Miller’s brand Promotion Grolsch bar with premium atmosphere 16
  • 17. Market Selection Entry strategy Business Strategy 3) Business Strategy for Brazil Financial plan License out to a local company with strong promotional support
  • 18. Market Selection Entry strategy Business Strategy 3) Business Strategy for Brazil Financial plan License out to a local company with strong promotional support  Preference of strong alcohol  Female workers love beer Grolsch’s original taste Target: Guests imported product as of Events Product (dry and bitter, refreshing)  Economic growth  More PPL love premium  Beer Price (Domestic100-130JPY, Imported 260JPY) Price Premium imported beer 150JPY / 350 mL can  No related company of SABMiller  Maintain management power Place License out to a local company (Petroporis) Promotion Being an official sponsor of Samba carnival, Football events  Huge demand while events
  • 19. Market Selection Entry strategy Business Strategy 3) Business Strategy for China Financial plan Utilize channel of JV (SABMiller & Snow beer) Promotion at high quality place Collaboration with Snow Beer Promotion at supermarket & restaurant 19
  • 20. Market Selection Entry strategy Business Strategy 3) Business Strategy for China Financial plan Utilize channel of JV (SABMiller & Snow beer) Promotion at high quality place  Preference of light taste  Economic growth  More PPL love premium  SABMiller has JV  SABMiller has JV Product Localized light taste Premium range Price Premium imported beer 100JPY / 350 mL can Place Utilize SABMiller’s JV channel High quality supermarket Famous restaurant Promotion Differentiate SABMiller TV commercial, at site promotion (girls) Target: People love to share time
  • 21. Market Selection Entry strategy 3) Business Strategy Global Strategy Proposal Current Market 全社 (Europe) 2008 2010-2016 STEP 1 Business Strategy Financial plan 2017 Goal STEP 2 Maintain current positioning (Premium) South 電力・通信事業 Africa Additional line in SABMiller Co-promotion with SABMiller 建築・道路事業 Brazil License out to Local Co. Intensive promotion support 樹脂事業 China Marketing research World Top 10 Brand Co-promotion with JV 21
  • 22. Market Selection Entry strategy 4) Financial Plan Benefit Business Strategy Financial plan Investment Revenue assumption = (Marginal consumption) * (Premium Lager ratio 16.4%) * (Price 120yen/can) EBITA = Revenue * EBITA Margin 26% Revenue assumption = (Total consumption) * (Petropolis share 9.8%)* (Premium Lager ratio 16.4%) * (License fee 5euro/hl) EBITA = Revenue * EBITA Margin 21% Revenue assumption = (Marginal consumption) * (Snow beer share 18%) * (Premium Lager ratio 16.4%) * (Price 100yen/can) EBITA = Revenue * EBITA Margin 5% Investment is referred from an investment case, being estimated 5 billion yen for 0.4 million hl beer production Reference: Sapporo beer factory investment in Vietnam 22
  • 23. Market Selection Entry strategy 4) Financial Plan 2008 S outh Investm ent(m i. JP Y ) l -2, 660 A fri ca V ol e(m i. hl um l ) 0. 028 R evenue(m i. JP Y ) l 957 EB IT A (m i. JP Y ) l 249 B razi Investm ent(m i. JP Y ) l l 0 V ol e(m i. hl um l ) 0. 404 R evenue(m i. JP Y ) l 242 EB IT A (m i. JP Y ) l 51 C hi na Investm ent(m i. JP Y ) l -9, 952 V ol e(m i. hl um l ) 0 R evenue(m i. JP Y ) l 0 EB IT A (m i. JP Y ) l 0 CF -12, 313 IR R Financial plan 2009 2010 2011 2012 2013 2014 2015 2016 2017 0. 068 2, 343 609 0. 103 3, 514 914 0. 137 4, 686 1, 218 0. 146 5, 012 1, 303 0. 156 5, 361 1, 394 0. 167 5, 734 1, 491 0. 179 6, 133 1, 595 0. 191 6, 560 1, 706 0. 205 7, 016 1, 824 0. 830 1. 277 1. 747 1. 794 1. 842 1. 891 1. 941 1. 993 2. 046 498 766 1, 048 1, 076 1, 105 1, 135 1, 165 1, 196 1, 228 105 161 220 226 232 238 245 251 258 -100 0 0. 428 0. 571 0. 600 0. 630 0. 661 0. 694 0. 729 0. 766 0 12, 242 16, 322 17, 138 17, 995 18, 895 19, 839 20, 831 21, 873 0 612 816 857 900 945 992 1, 042 1, 094 614 1, 687 2, 255 2, 386 2, 526 2, 674 2, 831 2, 998 3, 176 10. 4% • IRR of the strategy implementation is 4,000 2,000 10.4%, which exceeds the average cost 0 -2,000 of capital (estimated to be 7.5%) -4,000 -6,000 • Total volume of Grolsch will reach 4.9 -8,000 -10,000 mil. hl (TOP 10 level) including current -12,000 -14,000 Investment SA EBITA SA Business Strategy Investment BR EBITA BR Investment CH EBITA CH market growth 1.9 mil. hl 23
  • 24. 4. Conclusion Propose to change the current global strategy to reach Global Top 10 brand ① Enter to developing market - South Africa - Brazil - China ② Focus on Premium beer with localization Achieve 4.9 M hl volume in 2017 South Africa, Brazil China → 3.0 M hl Western Europe →1.9M hl IRR 9.6%>7.5% 24
  • 25. Goshi FUJIMOTO Nobuya YOSHIZAWA Eiji KOIZUMI Natsuhi INOUE 25