Direccin

Estratgica, CASE 2
Claudia de las Heras, Patricia Serra,
Xavier Ballart (Grupo A6)

INDEX

The beer industry .............................................................................. 3

Based on Moritz, Estrella Damm and Cervesera del Montseny ......... 5
Collaboration agreement between Azti and Salve-Bilbao ................. 6
Business model canvas of Mortiz ........................................................ 8
Growth and development strategies ................................................. 9
Internationalization strategies ......................................................... 10
Synthesis ............................................................................................ 12
References ......................................................................................... 13

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

of sector is the beer industry?
a. 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.

b. 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 analyse their
behaviour. The calculation is performed by the Herfindahl index, a measure of
economic concentration market.

Market shares of the brewing industry

SAN MIGUEL
HEINEKEN
ESTRELLA DAMM

PRODUCTION( miles hl)

12.589
10.028
8.369

MARKET SHARE
37,52
29,89
24,94

CRn
37,52
67,40
92,34

S2
0,14076
0,08931
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

c. 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 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

a. 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 analysing the three brands we can affirm 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.

b. 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 flavoured 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 flavour 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).
c. 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 aggressive 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.

3. 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
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)

Justification
It is important for the brand to be
standard of local and commitment to
the conservation of the environment
and slowing climate change.



Beer Institute

Create a Beer Institute with the

aim of providing regular and
helpful information to customers.(

About creating an observatory of

trends in the world of beer.

Open source
innovation orCrowdsourcing)

Gluten free

To develop and launch the first real Intolerances to certain products have
European gluten free beer.
opened the door to an approach that
(Incremental Innovation)
seeks to provide a suitable product for
celiac people.
La Salve-Bilbao will also design the La Salve-Bilbao will pioneer this
first real alcohol free beer.
product and will be available in the
(Incremental Innovation)
market in 2017.

Alcohol free

Sensory Decalogue

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.

Innovation Plan

New factory

Approach to restoration

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

To maintain leadership in issues

related to innovation.

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.

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

4. Describe the business model canvas of Mortiz

Customer segment: basically made by
NOSTLGICOS old brand consumers and then BOBOS (bohemian 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 their presence 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 hostelry 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 example 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 success is guaranteed.

6. Regarding the internationalization strategies of Group San Miguel and CCM:

a. 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 6th 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.
b. 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.
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.

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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
At first we have identified the sector in which the company operates, the brewer,
followed by an analysis. Moreover, we have identified the different top companies
that set up the industry, we have studied their market shares and finally the
degree of concentration of the industry. All these aspects have been essential to
discover how concentrated the sector is.
There is a huge rivalry among its competitors because of its high concentration
and barriers to entry such as economies of scale, the investment required to
settle within it, access to distribution channels or the administrative and legal
barriers. Customers have greater bargaining power than suppliers, since if they
are not satisfied can switch brands easily.
Although small crafted beer companies have a lower volume of production and
have less structure facilities, companies such as Damm and Moritz should not be
sub estimated them because as we have seen, they offer high quality products
which can be a strong threat. For this reason, the managers of the large brewing
groups must find ways to enable them to grow and maintain their competitive
advantage, ensuring its presence in the social media and betting on a good
image through corporate social responsibility networks.

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REFERENCES
http://www.estrelladamm.com/es/
http://www.ccm.cat/?lang=es
http://www.cerveceros.org/
http://www.libremercado.com/2015-05-24/quien-es-quien-en-el-mercado-de-lacerveza-en-espana-1276548266/
http://www.azti.es/es/azti-y-la-salve-bilbao-firman-un-acuerdo-de-colaboracion-ydefinen-ocho-proyectos-de-innovacion-y-desarrollo-para-liderar-el-sectorcervecero-2/
http://www.deia.com/2014/11/24/bizkaia/un-instituto-para-la-cerveza

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