As the leading brewer globally, Anheuser-Busch InBev (AB-InBev) is one of the world’s top five companies for the manufacture of consumer products Howard (2014 p.155). Interbrew acquired Ambev, a Brazilian beer company in 2004. Inbev became the world’s second largest brewing company in 2004 and took over Anheuser Busch in 2008 where the name of the organization changed to Anheuser-Busch InBev. Through the Anheuser-Busch Packaging Group division and the organization’s family entertainment division, ten theme parks across the United States were included by the acquisition of non-alcoholic beverages, flavored alcohol and one hundred beers. Compared to the previous year, AB-InBev recorded a growth of 4.4% and revenues of $36.3 billion. Throughout the globe, the company provides direct employment to around 116,000 people (Vrellas & Tsiotras, 2015 p.44).
The company has a strong and wide brand portfolio. With Becks, Budweiser and Stella-Artois, they have three flagship brands globally that have enhanced brand recognition and recall among consumers globally. AB-InBev maintains a strong position in the global market due to its portfolio of more than 200 brands (Warner, 2010 p.39). AB-InBev has multi-country brands like Hoegaarden and Leffe in addition to their global flagship brands. The company also has local brands including Skol, Siberian, Sedrin, Quilmes, Michelob, Klinskoye, Jupiler, Harbin, Crown, Chernigivske, Brahma and Bud Light among other brands. Research by Hancock (2010 p.23) shows that AB-InBev prioritizes a minor group of the more than two hundred brands which have a higher potential for growth within each relevant segment of consumers. Therefore, the paper is aimed at strategically analyzing the Anheuser Busch-Inbev (AB-InBev) Company.
PESTEL
Political
Political factors affecting AB-Inbev include pricing regulation and taxation. Excise tax by governments has highly affected the beer industry resulting in large losses of funds through taxation. Companies in the beer industry are required to comply with the regulations in the countries in which they operate to legally advertise, distribute and produce their products (Decloedt, VanLandschoot and Vanhaecke, 2016 p.7736). On the other hand, the regulation in pricing whereby the government has set up minimum standards of pricing to minimize alcohol consumption.
Markets that are different have different environmental standards and norms that can have an impact on the company’s profitability in the markets. Nationally, different states can have different liability and environmental laws. For example, European countries offer breaks in tax to organizations operating in the renewable energy sector. Therefore, AB-InBev should carefully evaluate the required environmental standards for operation in different markets. Suppliers and companies in the beer industry have improved the packaging of beers which has greatly increased the rate of recycling of glass, paper, waste plastic, cardboard and aluminum used for the packaging of packs, cans and beer bottles. Recycling of glass ensures that there is accountability for more than 30% of materials used in the production of new beer bottles (Wells, 2016 p.39).
In addition, there is regulation of water pollution in beverages which has resulted to a reduction of water use for the growth of barley in South Africa by fifty percent over two years (Sturmet al., 2013 p.401). Furthermore, in major United State breweries, water used for the growth of barley has been reduced by forty-six percent in the last ten years. AB-InBev aims at cutting down the use of water including the restoration of watersheds in areas that mostly require water and the improvement of the quality and availability of water to the communities. Moreover, the company aims at ensuring that by the year 2025, all farmers have the required skills in using the least amount of water to grow barley.
According to Aquilani, Laureti, Poponi and Secondi (2015 p.217) brewers look at consumers’ buying habits, their behavior and emotional needs so as to establish a sustainable Corporate Social Responsibility (CSR). Further research by Hagemann, Schmidt-Cotta, Marchioni and Braun (2017 p.120) shows that consumers’ communication methods, emotional needs and buying habits have been considered whereby AB-Inbev offers a light alternative (low alcohol) to their selections that are most popular. The healthy alternative is aimed to capture the crowd which is high health conscious as compared to the regular beers which have been manufactured with high amounts of calories (Yoon and Lam, 2013 p.630). However, a large group of consumers believes that the existence of light beers is just a marketing ploy for organizations to sell more of their products and get higher revenue. Therefore, consumers have opted to avoid the light beers and shift to wines due to their lower amounts of calories and vast flavors.
Research by Datta (2017 p.541) shows that improved technologies in the beer industry have resulted in the development of techniques that are innovative for the packaging, manufacturing and maturation of beer products. The aspect has increased the industry’s production accuracy, which resulted in an effective reduction of wastes associated with distribution and production, prolonged expiry durations and increased product quality. Increased efficiency leads to an increase in profits and revenues of the company. In the beer industry, new improvements and innovations have resulted in the manufacture of new products, which has greatly assisted in product differentiation. Brewers introduced premium products like fruit flavored beers and nonalcoholic and extra cold lagers. The product differentiation due to improvements in technology has resulted in increased sales.
The economic factors affecting AB-Inbev include micro and macro-environmental factors such as the economic cycle, foreign exchange rate, interest rate, savings rate and inflation rate. The economic factors determine the aggregate investment and demand in the economy. In addition, microenvironmental factors like competition impact the firm’s competitive advantage. AB-InBev may opt to use the economic factors of a country such as inflation, growth rate and economic indicators such as consumer spending to forecast the trajectory of growth of the company and the beer industry (Rehm et al., 2016 p.80). The rate of unemployment or employment affects the patterns of consumer buying in various locations. High rates of unemployment results in low income thus people only buy items necessary for survival which affects the profits of companies in the beer industry. Therefore, the cash flow of businesses is affected by economic factors.
Legal factors like drinking campaigns have affected AB-InBev. It is a requirement for brewers/manufacturers to be part of drinking campaigns and campaigns for promoting responsible drinking. Governments impose heavy penalties for alcohol abuse like drunken driving with an aim to create awareness of alcohol effects to consumers through sensitization campaigns which affect the revenue in the beer sector (Xu and Chaloupka, 2011 p.236). Other measures imposed by the government to regulate drinking of alcohol include the prohibition of alcohol sale in public places and sometimes the restriction on the time in which alcohol should be sold. For example, European governments’ initiative of restricting alcohol sale resulted to lower sales of beer due to a transformation of the buying behavior of consumers.
The conceptual framework shows that at AB-InBev, there is a positive correlation between sustainable business model innovation and sustainable development of the company. In addition, the conceptual framework shows a correlation between sustainable business model innovation and organizational innovation at AB-InBev. The positive correlation between business model innovation and organizational innovation at AB-InBev is also evident. Therefore, to ensure sustainability in its operations, the company should ensure that it invests more in technological innovation. Flexible business strategies combined with technological innovation will improve AB-Inbev’s sustainability and longevity in the long run.
Strengths
AB-InBev has some of the most leading beer brands which include Becks, Heineken, Stella Artois and Boddington. In 2007, Becks recorded high sales increasing by 299% in the UK in 2007 from 2002. In 2007, volume sold in hectoliters is 10.8 million hectoliters. In addition, AB-InBev has a 16.9% market share in the United Kingdom, with Heineken leading in the market with a market share of 24.7% (Esser, Bao, Jernigan and Hyder, 2016 p.710). Furthermore, the company’s portfolio has more than two hundred brands. The company also has three beverage plants in the United Kingdom which include Wellpark, Samlesbury and Magor.
Further research by Stead et al. (2013 p.212) shows that AB-InBev faces a challenge of markets that are declining for its Central Eastern and Western Europe segment. In the financial year 2010, the revenue on sales in Western Europe was USD 3,937 which was a decline of 3.1%. Compared to the financial year 2009, the segment volume recorded a decline of 2.5%. In the financial year 2010, the Eastern and Central Europe recorded sales of $1,619 million which were a 0.5% decrease compared to the financial year 2009. The European market accounts for 15.3% of the total income thus posing a big threat to the company’s European market share and its profitability. In their ‘Beer in Europe’ report, data monitor estimated a negative growth in Europe averaging 0.6% yearly revenue until 2014. In addition, a yearly negative growth of 1.4% in volume was recorded. In 2014 and compared to 2008, the market volume will decrease by 9%.
AB-InBev has an opportunity of improving its liquidity position through restructuring initiatives. In the financial year 2009, AB-InBev undertook initiatives of restructuring its strategies in a bid to reduce its high ($56,660 as of 2008) financial debt (Morris, 2016 p.163). AB-InBev sold its Inbev US subsidiary to KPS Capital Partners Affiliate. In addition, the company also sold Tsingtao Brewery Group to Asahi Breweries.
AB-InBev faces threats from competitors including Kronenbourg 1664, Grolsch, Fosters and Carling. Government regulations have led to bans on drinking time and regulations of beer prices (Jernigan, 2012 p.84). In addition, binge drinking initiative has led to the reduction of promotions in supermarkets. Furthermore, consumer disposable income has become low which has resulted in people preferring to drink more at home where they drink less.
The McKinsey’s 7S Model has seven variables including shared values, staff, style, skills, system, strategy and structure. Research by Tracey and Blood (2012 p.102) shows that the McKinsey’s 7S Model factors justify and evaluate all the model’s seven components and the links applicable to them. The strategy taken by AB-InBev include the scope and direction over the long term plan of leading as the international beverage brand. AB-InBev has therefore used the ERP system so as to cope to the growing competition. The adopted hierarchical structure of AB-InBev’s team is adopted through changing the communication and adoption flow which was effected to ensure the project team’s success. AB-InBev has also adopted systems for the implementation of a new ERP system, while the skills affect the learning process and staffing issues in the company. The organization’s belief and shared values is to become the leading international beverage brand. In addition the training and staffing at AB-InBev lacks proper development. Furthermore, the company shows signs of leadership maturity which has been realized due to the team’s transformation of including non-alcoholic beers and introduction of cocktails.
The analysis shows that AB-InBev has made its mark on the European market as well as in the beer industry. The company has also effectively undertaken various strategic decisions such as the selling of its Inbev US subsidiary to KPS Capital Partners Affiliate. The strategies strengthened the company, although the company revenue was negatively affected. In regards to AB-InBev’s strategic decisions, the company is headed in the right direction. AB-InBev can invest in infrastructure and technology for the increment of product offerings such as non-alcoholic beer and cocktails. The diversification will appeal to more consumers with minimal financial investments. Such strategic moves will broaden their target scope and assist the current investments to recover fast after which the company will gain more profits.
AB-InBev should attempt to reduce their short term and long term debts since debts will affect the company’s strategies through the delay on opportunities available for increased success in the beer industry. In addition, the company should clearly evaluate the number of finances needed for reorganizing the new strategies. Furthermore, AB-InBev should evaluate and possibly reduce inventory which will assist the company in its strategies. Moreover, the company should develop strategic missions that will assist in the marketing of the special beer being created. The company should also set goals and prioritize its objectives.
The company’s operational decisions must be followed by ensuring that the company has enough capacity for handling demand and supply. The company should also improve its plants. AB-InBev should improve its suitability by improving beer quality through more research on new options to focus on to ensure that its customers are satisfied by providing them with the world’s greatest beer. Introducing cocktails will improve acceptability since no more costs will be incurred in investment. Feasibility should also be improved through training and new recruitment of bartenders who have the expertise of making cocktails.
References
Aquilani, B., Laureti, T., Poponi, S. and Secondi, L., 2015. Beer choice and consumption determinants when craft beers are tasted: An exploratory study of consumer preferences. Food quality and preference, 41, pp.214-224.
Datta, Y., 2017. The US Beer market: A competitive profile. Journal of Economics and Public Finance, 3(4), p.541.
Decloedt, A.I., Van Landschoot, A. and Vanhaecke, L., 2016. Fractional factorial design-based optimisation and application of an extraction and UPLC-MS/MS detection method for the quantification of phytosterols in food, feed and beverages low in phytosterols. Analytical and bioanalytical chemistry, 408(27), pp.7731-7744.
Esser, M.B., Bao, J., Jernigan, D.H. and Hyder, A.A., 2016. Evaluation of the evidence base for the alcohol industry’s actions to reduce drink driving globally. American journal of public health, 106(4), pp.707-713.
Hagemann, M., Schmidt-Cotta, V., Marchioni, E. and Braun, S., 2017. Chance for dry hopped non-alcoholic beverages. Brewing Science, 70, pp.118-123.
Hancock, G.D., 2010. How much is too much? The case of the Anheuser-Busch secoINBEV takeover. International Review of Accounting, Banking, and Finance, 2(1), pp.22-30.
Howard, P.H., 2014. Too big to ale? Globalization and consolidation in the beer industry. In The Geography of Beer (pp. 155-165). Springer, Dordrecht.
Jernigan, D.H., 2012. Global alcohol producers, science, and policy: the case of the International Center for Alcohol Policies. American Journal of Public Health, 102(1), pp.80-89.
Morris, P.S., 2016. Trademarks as sources of market power: Drugs, beers and product differentiation. JL & Com., 35, p.163.
Rehm, J., Lachenmeier, D.W., Llopis, E.J., Imtiaz, S. and Anderson, P., 2016. Evidence of reducing ethanol content in beverages to reduce harmful use of alcohol. The Lancet Gastroenterology & Hepatology, 1(1), pp.78-83.
Stead, M., Bauld, L., Angus, K., MacDonald, L., Munafo, M., Attwood, A., Ataya, A., Fuller, E. and Pickering, K., 2013. Scoping and feasibility study to develop and apply a methodology for retrospective adjustment of alcohol consumption data. London: Public Health Research Consortium.
Sturm, B., Hugenschmidt, S., Joyce, S., Hofacker, W. and Roskilly, A.P., 2013. Opportunities and barriers for efficient energy use in a medium-sized brewery. Applied Thermal Engineering, 53(2), pp.397-404.
Tracey Ph D, J.B. and Blood, B., 2012. The Ithaca Beer Company: A Case Study of the Application of the McKinsey 7-S Framework. P.86-107
Vrellas, C.G. and Tsiotras, G., 2015. Quality management in the global brewing industry. International Journal of Quality & Reliability Management, 32(1), pp.42-52.
Warner, A.G., 2010. The evolution of the American brewing industry. Journal of Business Case Studies, 6(6), pp.31-46.
Wells, P., 2016. Economies of scale versus small is beautiful: A business model approach based on architecture, principles and components in the beer industry. Organization & Environment, 29(1), pp.36-52.
Xu, X. and Chaloupka, F.J., 2011. The effects of prices on alcohol use and its consequences. Alcohol Research & Health, 34(2), p.236.
Yoon, S. and Lam, T.H., 2013. The illusion of righteousness: corporate social responsibility practices of the alcohol industry. BMC Public Health, 13(1), p.630.
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