Executive summary


This report is about the Belgium brewer InBev. The report is divided in 6 chapters, which are introduction, country analysis India, market analysis, InBev mode of entry in India, building sustainable competitive advantages, and implementation and control issues. In the next paragraphs we will briefly highlight each chapter.
The Introduction chapter provides a brief explanation of InBev Company. The introduction consists of the history of InBev, the vision and strategy of InBev in doing business, and how it is perceived in the world market.
In the second chapter, we will deal with the country analysis of India. The important PEST factors (political, economic, socio cultural, technological factors) in India will be examined.
Following up, it is necessary for InBev to know about the market in India. That is why in the third chapter will explain about the Indian beer market. This market analysis will be divided into three sub-chapters. The three sub-chapters are industry description, target markets, competitors.
Next chapter is chapter 4 where we will deal with the mode of entry that InBev chose for India. We will shortly explain the mode of entry and why this mode of entry is suitable given the current situation.
After knowing the mode of entry that is used for InBev in India, we can build sustainable competitive advantages in order to survive in the Indian market. These competitive advantages will be mentioned in chapter 5. This chapter 5 is divided into 2 dub-chapters, which are current competitive advantages, competitive advantages that need to be developed and the key success factors.
The last chapter, chapter 6, is implementation and control issues. This chapter will deal about implementation and control that can be done by InBev to sustain in the business and be present in India over a long period of time.



Contents
Executive summary. 1
1 Introduction. 2
2 Country analysis India. 3
3 Market analysis. 4
3.1 Industry description. 4
3.2 Target markets. 4
3.4 Competitors. 5
4 Benefit-cost-risk analysis. 6
5 InBev mode of entry in India. 7
5.1 Mode of entry criteria. 7
5.2 InBev’s entry mode. 8
6 Building sustainable competitive advantages. 9
6.1 Current competitive advantages. 9
6.2 Competitive advantages that needs to be developed. 10
6.3 Key success factors of InBev. 11
7 Implementation and control issues. 12







1 Introduction


Originally, InBev was a brewery named Den Hored, located in Leuven, Brussels. And then in 1717, Sebastian Artois changed the name into Artois. Interbrew (merger of the Brasseries Artois and Brasseries Piedboeuf) was formed in 1987. AmBev (merger of the brewers of Brahma and Antartica beer in Brazil) was born in 1885. Both Interbrew and AmBev merged and formed InBev in 2004. InBev announced in 2005 and confirmed in 206 that it would move the brewing of Hoegaarden to the Piedboeuf brewery in Jupille, which resulted in some protests. In September 2007, it was announced that brewing would continue at the Hoegaarden Brewery in Hoegaarden.
InBev’s vision is to become the world’s best and most profitable beer company, with three long-term goals (organic volume growth than the industry average, revenue growth ahead volumes, and ensuring cost increases stay below inflation). By having the best people in its companies, InBev has a strong confident that it can attract best customers in the whole world.
Seeing the sales figure, which has reached 13.3 billion euros in 2006, and holding the number one or two positions in over 20 key markets, InBev is on the right track to reach its vision. InBev companies have a strong and balanced portfolio. It has a key presence in both developed and developing markets, active in 7 out of 10 of the fastest growing markets worldwide.
A portfolio of around 200 local brands forms the bedrock of the business including in Latin America: Skol, the third largest beer brand in the world. In Western Europe: Jupiler, the number one selling beer in Belgium. In Central and Eastern Europe: Siberian Crown, a leading premium brand sold throughout Russia. In North America: Labatt Blue, the number one Canadian brand in the world; and in Asia Pacific: Cass from South Korea, and Sedrin, a 10 million hectoliter in China.
InBev’s headquarter is in Leuven, Belgium(the country origin of InBev). It has nearly 88,000 employees in all over the world. With sales in over 130 countries, the company works through six operational zones: North America, Western Europe, Central and Eastern Europe, Asia Pacific, Latin America North, and Latin America South.


2 Country analysis India

2.1 PEST analysis
2.2 OLI Model


3 Market analysis


3.1 Industry description


The alcohol industry is in India is state controlled. Since the ruling power in India is decentralized to state level, there are 27 States plus Union Territories with different laws and different price structures. In other words, states have the power to levy tax on alcohol at its own determined rates, excise duties, and controls distribution channels in its own way. Therefore foreign beer companies might face different problems in different states.
The Indian beer market is growing. Currently, around 72 million cases are sold every year but it expected to grow with an annual compound rate of 17.2% to 2011.[FONT='Calibri','sans-serif'][1][/FONT] In India per capita consumption is low, around half a litre, but predictions are that it will grow to eighteen litres per capita.[FONT='Calibri','sans-serif'][2][/FONT] According to Just-drinks,[FONT='Calibri','sans-serif'][3][/FONT] the Indian beer market shows a steady growth because of the strong economic growth during the last decade. People have a higher disposable income, thus an increase in beer sales in the upcoming years is expected.
Standard lagers are currently the most lucrative for the Indian beer market. It generates for around $760 million which is equivalent of 87% of the total value of the industry. To draw a comparison: premium lager only contributes for 6.2% of the total value (around $54 million)[FONT='Calibri','sans-serif'][4][/FONT].
At the moment the beer production currently accounts for 46.4% of the alcoholic drinks industry. The market is currently fragmented with Central and Southern States accounting for 68% of the market.[FONT='Calibri','sans-serif'][5][/FONT] This growth has been acknowledged by foreign brewers as they try to enter the Indian market. SAB (South African Breweries) has been in the Indian beer market for a few years and recently other big breweries, like Carlsberg, Heineken and Anheuscher-Busch entered the Indian beer market.
3.2 Target markets

InBev target market consists of people who like to drink beer. Basically, this involves everyone from the legal age of drinking beer and upwards. However, the main target group is the increasing population of young people with increasing disposable income. Standard lager beers are currently the most popular beers which have a share of 87% of all the beer sales.
3.4 Competitors


There are several competitors in the Indian beer market. Besides a local producer, InBev have to face the same competitors as they face in the world market. Below a table with the main competitors:


Competitor


Major brands

Market share

United Breweries

Kingfisher, Zingaro strong beer

48%, leading position in 9 states


SAB Miller


Fosters, Castle, Hayward 5000

33%, leading position in 3 states


Heineken (APB)


Heineken, Tiger, Anchor and Raffles


New entrant since 2006

Carlsberg (SAB)


Carlsberg

New entrant since 2006

Anheuser-Busch


Budweiser

New entrant since 2006





4 Benefit-cost-risk analysis


Benefit
Cost
Risk
India’s growing beer market
Inadequate infrastructure
Political situation in some Indian states
Low labour costs

Bureaucracy

Increasing global competition.
Low cost of production










5 InBev mode of entry in India


5.1 Mode of entry criteria

There are several modes of entry. There are six strategies;
Entry mode
Risk/cost
Control
Exporting
Lowest
No
Turnkey contracts
Low
No
Licensing
Moderate
Moderate
Franchising
Moderate
Moderate
Joint ventures
Shared
Depending on stakes
Wholly owned subsidiaries
Highest
Full


The mode of entry can be based on a few criteria:
  • Management expertise: by going to India, InBev needs a management which has expertise in foreign countries. Considering, InBev as a world player this should not be that difficult. However, there are hardly similarities between home and host countries so extensive local expertise might be a requirement.
  • Local expertise and learning curve requirements: this is related to previous point. InBev needs local knowledge. Combining our knowledge with local knowledge and expertise might provide us a competitive advantage. At the same time we do not posses all the knowledge. We believe we have to learn in order to grow in international markets.
  • Human Resource requirements: our products are of high quality and we would like to maintain this quality. As a result we need qualified and well trained personnel. India’s educational systems are rapidly developing and a lot of Indians got their education abroad. The country has a well educated, English speaking workforce.
  • Political and economical risks: after all India is still a developing country. Currently, they are stabilizing but political and economical risk is still there.
  • Control: the level of control over marketing mix decisions and distribution channels get varies greatly by mode of entry.

5.2 InBev’s entry mode

InBev chose to enter the Indian market by establishing means of joint venture with RKJ group which is a leading group in India. InBev took an initial 49% stake in the venture with the option to increase its participation at a later time. There are several reasons why InBev chose this mode of entry, below we highlight some important reasons:
· Access to local knowledge. India is country where norms and values differ per state and even within states. As a foreign brewer it is difficult to understand all those differences therefore local knowledge is required. Basically InBev can benefit from RKJ’s knowledge of the local culture, the language and political system.[FONT='Calibri','sans-serif'][6][/FONT]

· Furthermore, InBev can have access to the strong distribution network as developed by RKJ. Especially in a huge country like India, distribution of your products is not an easy task. Embarking on an existing distribution network is much easier. Having a distribution network it will enhance InBev efficiency.

· The cost/risk, as explained before, of establishing a wholly owned subsidiary was too high for InBev. Hence, InBev can gain by sharing costs and risks.


6 Building sustainable competitive advantages


This chapter will deal with the sustainable competitive advantages of InBev. Having decided the mode of entry, the company has to embark on existing sustainable competitive advantages. Moreover, in order to become successful in India, InBev has to exploit its current competitive advantages but besides that, InBev has to create new competitive advantages. Without these advantages it is hard to compete and survive in the Indian beer market because the rivalry in the industry is increasing.

6.1 Current competitive advantages

InBev has several sustainable competitive advantages which made them the largest beer brewer in the world. Below we highlight the most important aspects.
· Experienced management: the company was created as a merger between Interbrew (from Belgium) and Ambev (from Brazil). Both of these parties were formed out of a merger as well. Furthermore, during the years, both companies successfully engaged in acquisitions, licensing and exporting which lead to sales in 130 countries. The company had successfully identified the needs of different people in different countries. As a result, besides their global brands, each country, region, is targeted with country specific beers.

· Brand name: InBev holds a few very strong brand names in their portfolio. Brands as Stella Artois (5th best selling beer in the world) and Becks, aiming at customers all across the world, are well known brands. Furthermore, premium brand brands that cater at higher segments across continents include brands as Leffe, Brahma, Staropramen and Hoegaarden.

· High quality products: InBev can only deliver high quality beers because it has reliable suppliers. Ingredients such as water, barley and yeast are of the highest quality. Therefore InBev has developed good relationships with suppliers over the years.

· Product development: In terms of product development, to match the taste of consumers that are geographically, culturally and economically different from its home base, the company develops products specifically aiming at a specific country or region.

· Responsible brewer: InBev is not only aiming at the single bottom line. Besides creating a profit it also takes care of people and planet. They acknowledge that people are their most valuable assets in the company and thus they are ‘attracting and retaining the best people, developing them at the pace of their talents and compensating them accordingly.’[FONT='Calibri','sans-serif'][7][/FONT] Furthermore, they take environmental issues into account. They specifically focussing on water use, energy use and climate change, by products and waste and packaging.

6.2 Competitive advantages that needs to be developed

If InBev wants to sustain themselves in the Indian market some new sustainable competitive advantages needs to be developed.
· Upgrading its facilities: InBev needs to upgrade their facilities in India, especially when they entered into a joint venture. They must make sure that they the latest brewing technologies are available in India.

· Introduction of other beers: currently InBev is targeting India with their Lowenbrau beer. However in order gain a greater market share by capturing different market segments they have to introduce more brands to the Indian market.

· Building good relationships with (local) Indian governments; all facets of the industry are dominated by the different states. State governments define rules and regulations. As said before, states have the legitimacy to levy taxes on alcohol at its own determined rates, excise duties, and controls distribution channels in its own way. A strengthening of relationships with government will enable InBev to execute it business easier in terms of bureaucracy.

· Competitive price: the Indian market will become a highly competitive environment, hence InBev have to set a competitive price for their beers.
After identifying aspects where InBev has to develop itself to reach its competitiveness, the company must determine its key success factors. Key success factors are those aspects that most affect the ability of industry members to prosper in the marketplace; it is about the competences of a company in order to be competitively and financially successful (prerequisite for success).
6.3 Key success factors of InBev

There are many key success factors that InBev must realize and use it in order to be successful in the Indian market:
· Have a measure of global quality improvements to remain competitive. InBev must address its standards in all management levels and products. Therefore regularly quality checks in the host country, India, must be executed in the same as they are executed in the home country (Belgium).

· InBev should identify and understand the cultural and economic gaps between new markets and its home market. The question that has to be answered is how to meet the needs of consumers that are geographically, economically and culturally different from InBev’s home base? Success may depend on the nature of the product; those that satisfy needs shared across borders are considered to have the greatest potential to success. InBev must be ready to identify differences in consumer tastes, different responses to marketing activities and regulatory issues.

· Reliable and high quality suppliers; InBev uses high quality ingredients in order to produce their beers. In developed countries supply of clean water is guaranteed but in a developing country as India it might cause more problems.

· Finally, InBev must position their individual beer brands well in order to analyze and indentify their competitors. As a result they are more able to create a strategy to sustain in the market, not only as a company but also with several individual brands.



7 Implementation and control issues


In order to become successful in India, InBev has deal with implementation and control issues. This is needed to sustain them in the Indian market. We suggest the following;
  • InBev need to develop the brand awareness of their products. Increasing market awareness of individual beer brands can be achieved by improving marketing communications such as advertising, promotions and adopting various other marketing strategies. Therefore assessment of which experiences and impressions will have the greatest influence on Indian consumers is needed. This understanding will help to allocate communications cost more efficiently and hence build integrated and effective marketing communications strategy. This will result increase awareness and preference for the company’s product offerings.

· InBev has to tie up with local cafes, bars and disco’s especially in metropolitan cities. By doing this it will help them in understanding the Indian market. In other words, local partners can help them navigate the new terrain of the Indian market. All cafes and disco’s must be licensed to carry the brand logo’s and are supplied with specific glasses and trays other promotion material such as posters.
  • InBev should keep expanding its business in India. Once they are more familiar with doing business in India they can opt for more joint ventures or even wholly owned subsidiaries in other parts of the country. Eventually an own brewery can be considered.



[FONT='Calibri','sans-serif'][1][/FONT] Retrieved January, 15, from: The Beer Market in India - Forecasts to 2011 (2007 Edition): Industry Research Report

[FONT='Calibri','sans-serif'][2][/FONT] Retrieved January, 15, from: BBC News | BUSINESS | Boom predicted in Indian beer market

[FONT='Calibri','sans-serif'][3][/FONT] See 1

[FONT='Calibri','sans-serif'][4][/FONT] Datamonitor: Beer in India. Datamonitor - The home of business intelligence

[FONT='Calibri','sans-serif'][5][/FONT] Retrieved January, 15, from: InBev

[FONT='Calibri','sans-serif'][6][/FONT] C. W. Hill & A. K. Jain (2006). International business. Competing in the global marketplace. New Delhi: Tata McGraw-Hill Publishing company Ltd.

[FONT='Calibri','sans-serif'][7][/FONT] InBev