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Carlsberg in emerging markets

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Emánuel Kolta

on 22 May 2013

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Transcript of Carlsberg in emerging markets

Carlsberg in emerging markets Group 2A Framework of the presentation Porter's five forces analysis on the two investigated region

Identify and discuss the key drivers of change in the political, environmental, social and technological environment which are likely to impact the industry as a whole.

Discussing Carlsberg entry into Russia and China in the context of the theoretical model proposed by Meyer et al Porter's Five Force's Analysis on Easter European Beer Market Porster's Five Force's Analysis on Chinese Beer Market Porter five forces analysis on Chinese beer industry Threat of new entrants
Significant regional differences
Small interest to enter the market
First mover advantage
The industry is capital intensive and in term of production and distribution
Overall, entry barriers were considered to be very high Threat of substitute products or services:
few local beer companies
low cost to switch Bargaining power of customers, buyers: Largest market of the World in terms of production and consumption
Underdeveloped region without substantial beer drinking tradition
Porter five forces analysis on Russia and CEE Threats of new entrants
Profitability of market, prospects (Russia 16% growth in the beer industry)
Easy to enter, low barriers ( Common EU market)
Brand equity (local and premium brands)
Access to distribution (initial expenses are smaller)
anti-alcoholic government policies Threat of substitute products
several varieties of beers
tradition of alcohol consumption
narrowly defined substitute products: vodka, wine, other adult beverages
broadly defined substitute products: fizzy drinks Porter five forces analysis on Russia and CEE 2. Bargaining power of buyers: Huge variety of products, five main beer producers in competition
Price sensitivity, high elasticity of beer consumption
rapidly growing purchasing power Bargaining power of suppliers: underdeveloped labour unions
vertically integrated industries
substitutable components
not complicated production process Porter five forces analysis on Russia and CEE 3. Intensity of rivalry: Russia: banned advertising of alcohols (price competition)
Major beer producers present themselves
CEE: easy to enter, advertisement are avaiable Main market (Western China) underdeveloped labour unions
competitive production costs ( raw materials, labour cost) Bargaining power of suppliers: Western China highly fragmented, poor provinces
totally different environment then the rich
Great prospects in long term, but the current beer consumption is four liter per person
four liter per capita vs. 70-90 liter per capita

Menski, W. (2005). ‘’Comparative Law in a Global Context’’. London: Cambridge University Press. page 39
Peng; Wang; Jiang [2008]: An institution-based view of international business strategy: a focus on emerging economies
The Parliament.com: Martha Moss, 2010: Beer advertising self regulation in focus at EU parliament event
Meyer et al. (2009) Institutions, resources and entry strategies. Strategic Management Journal Vol. 30. pp. 61-80.
China Regional West Beer Market Insight 2012, New York, PRNewswire, Oct. 2, 2012
Consumer Trends Wine, Beer and Spirits in Russia, Market Indicator Report, International Markets Bureau, Canada, 2012
Kirin Institute of Food and Lifestyle Report Global Beer Consumption by Country, 2004, 2008, 2010
Doing Business Indicators of the World Bank


www.carlsberggroup.com Sources Technological
Brewing technique, automation
Economic (Source: World Bank Database, 2007-)
Purchasing power is in the lower-section of the world’s, but growing fast
Despite crisis there is growth
Liberalising market
Weaker power of contracts Emerging economies Political (Source: Peng, Wang, Jiang, 2008)
Rapid changes in the political system
Importnat informal institutions
Weak environmental regulations and standards
High inequality segments the market
Growing market for the industry (case-study) Emerging economies Technological
CAP gives incentives for farmers to upgrade to latest technology – but less significant than for EU-15
Purchasing power is in the middle-section of the world’s (Source: World Bank Database, 2007-)
Joining the Eurozone is either a target or recently achieved
Financial crisis hit it
Harmonisation of EU law (Menski, W. (2005).)
Presence of NGOs related to beer – lobbying (e.g. Brewers of Europe) Eastern Europe Political
Converging towards EU (members or applicants)
Main ingredients can be accessed easily
Close to both production and consumption area
High beer consumption rate and growing market (case-study) Eastern Europe Technological
CAP gives incentives for farmers to upgrade to latest technology
Economic (Source: World Bank Database, 2007)
Purchasing power is high
Financial crisis hit it later on
Harmonisation of EU law (Menski, W. (2005).)
Self-regulation of the industry is expected in marketing (Source: The Parliament.com)
Presence of NGOs related to beer – lobbying (e.g. Brewers of Europe) Western Europe Political
EU, strong market-supporting institutions (Meyer et al. 2009)
Main ingredients can be accessed easily
Close to both production and consumption area
Several beer-drinking cultures, stable source of income for beer industry (case-study)
Famous beer festivals Western Europe Legal Environmental Technological Social Economic Political PESTEL of beer industry New strategy in Western China Entry to Russia Case study – Carlsberg entry to Russia and China Integrating institutional and resource-based view Entry strategies
model by Meyer et al. (2009) Carlsberg entry into Russia and China in the context of the Meyer et al (2009) Love Denmark Institutions Local resources Ease of Doing Business Local brands,
distributional networks,
local market knowledge -> Intangible Rank of Russia - 108.
Rank of China - 91.
Rank of Denmark - 5. 2008 full ownership of BBH 2000
50 % ownership in
Baltic Beverages Holdings
(Via Orkla ASA) Best brands, distribution and management Breweries: 10
Employees:  8864
Market share: 38% Rising beer sales, domestic brands dominate Entry to China 2000 Strategy revised 2003 JV with Thai company
Southeastern region
fierce competition
disagreements with partner
Serious loss in time and money Focus on Western China:
Lower living standards expected to rise
First mover advantage Carlsberg in China www.carlsberggroup.com Greenfield investments in breweries with local partners

Mix of local brands and brand designed for China Breweries: 40 (Western China, incl. Chongqing) Employees: 6,625
Market position: 1 (Western China, incl. Chongqing)
Consumption per person: 39 litres - rising Considerable investments – long term goals The model predicts JV low concentration of competition
immensely fragmented, highly regionalized Intensity of rivalry: Porter five forces analysis on Chinese beer industry 2.
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