Case Study – Stella Artois

Rahul Bhosale Matt Arbuckle David Bowles Eli Bradaric

Introduction

Company Overview and History

Interbrew is a privately held company headquartered in Belgium. It was started in that country as the Den Hoorn brewery 1366. Between 1954 and 1990 the company expanded via acquisitions and mergers, primarily in Belgium. It then grew rapidly as a result of a series of international acquisitions beginning in 1991. By 2000 the company was the world’s fourth largest brewer with business entities in 23 countries. 90% of its volume comes from outside of Belgium.

The international beer market, with volume of 1.3 million hectolitres in 1998, is split into segments for analysis: mature markets and growth markets. Mature markets are believed to have peaked-out and may see decline. These include North America, Western Europe, Australia, and New Zealand. Growth markets include Eastern Europe, Central and South America, and Asia. Asia is the most promising with high expectations for China. This excitement is tempered by the ongoing effects of Asia’s 1997 financial crisis. The international market is fragmented. The top four brewers only command a combined 22% of global volume. Consolidation to achieve economies of scale has been an industry trend. This is help in check by current cost structures, the prohibitive cost of capital upgrades, and deeply rooted local tastes preference that favour local historical brands. Recently the company has had good performance, growing volume faster than its best competitor by 13%. The greatest growth has been from China.

Corporate Strategy

The company is committed to focus only on beer. To maintain strength in mature markets the product mix will favour premium and specialty beers that have superior margins. The countries being emphasized are: U.S., U.K., France, Netherlands, and Belgium. The company is committed to continued success in the growth markets and sees consolidation as a prevailing feature in the beer industry going forward. The growth markets being focus in are: Central Europe, Eastern Europe, and Asia (especially S. Korea and China). Cross fertilization of ideas between operations is being emphasized. The cost structure is being improved by shifting volume to the most productive factories, and to the factories in the more active markets. It is also reducing its number of suppliers to form more lucrative partnerships.

To grow is brand Interbrew will continue to add to its portfolio through acquisitions in growth markets. They intend to identify specialty brands to develop regionally. Finally, it intends to identify a key corporate brand and to develop it as a global flagship product.

Case Situation

Stella Artois was identified as the international flagship brand. Compared to the company’s other premium beer Stella Artois was known in the most countries and it was produced in the largest volumes. The initial marketing efforts were fragmented and efforts at a coordinated effort were met by resistance, especially with regards to common international advertising. The centralized advertising plan was launched in 1999 in 15 markets, seeking to position the brand as a sophisticated European lager. The target was 21 to 45 year old males. After almost 2 years, Interbrew management was second guessing the price to earnings leverage of have a global brand. The shotgun approach was not productive enough. A series of filters were developed that potential markets most pass through. This screening favoured a more focused approach. Early successes had been seen when specific city markets were emphasized. This included concentrated targeting of the young adult population in urban areas. The new emphasis was to perpetuate the city specific efforts. They planned to continue their efforts in New York City, Boston, London, and Brussels. Interbrew would peruse potential markets such as Moscow, Los Angeles, and Hong Kong.

SWOT Analysis

Strengths ● Interbrew is spread across 23

countries, 4 continents ● Decentralized approach of

management by the regional teams ● Strong ventures and licensees in

various countries ● Local brand acquisition strategy ● Stella Artois, Global Flagship brand

Weaknesses ● Stella is considered to be old

fashioned ● The ratio of Fixed cost v/s variable

cost is high hence limited cost saving potential

Opportunities ● 22% of global economy dominated by

top 4 players, thus have good opportunity

● Overall operations and production cost can be reduced by motivating employees instead of technical improvements

● Capacity utilization and Strategic Sourcing

Threat: ● Local brand loyalty in various market

across world ● Decline of the Brand in home country

● Internationalization of beer business and consumer’s interest in Authentic international brand

Manager Problem Statement

Because of the large global expansion plans of Stella Artois, management would need to construct a new marketing budget. The marketing department is in charge of development of core programs and selective support of local markets, so the overall budget would have to increase to account for these important areas. Cooke will also have unanswered questions regarding maintaining growth in Belgium while pursuing Stella Artois towards a global brand status. It will be important for Interbrew to set specific goals and objectives within Belgium over the three years the company plans to expand globally.

In regards to Interbrew’s challenges with global expansion, they need a valid way to measure their performance. It will be difficult for them to create realistic expectations for their global brand market development, so the toughest challenge will be knowing how to measure their success. Marketing to a variety of markets will be another major challenge for the company. It will be difficult reaching every targeted market by just launching a single global marketing campaign. Finally, Interbrew will have to successfully launch an Internet based approach to marketing Stella Artois as a global brand. Alternative Solutions: - Interbrew can concentrate more on developing global market (Asia, Central Europe, Eastern Europe, South America) by targeting big cities and working from there. - The company can decide to put their efforts to stop the constant decline of Stella Artois in Belgium. They can make a specific ad campaign to penetrate their home country by promoting Stella Artois as a modern, sophisticated, yet accessible drinking experience with an emphasis on the very high quality of the beer supported by the noble tradition of European brewing. - The Company can focus on the top 10 beer markets in the world as they only have a significant share in one of them (Mexico 45%). There is a lot of potential in these markets. Evaluation of Alternatives: If Interbrew focuses its effort on the developing markets, they can help generate that global brand quicker. These markets have a lot of local brand loyalty, but if Interbrew can find a way to become a market leader in these developing markets by introducing Belgian Beer Cafés in the major cities it will help them reach their goal of being a global brand. Interbrew can put an effort to rebrand Stella’s image in Belgium to a more modern and sophisticated beer. If they are able to do this in Belgium, they should not have a problem in the countries where they are already having substantial gains. Interbrew can also focus on the top 10 beer markets in the world by targeting key cities and promoting that premier beer status. Pricing their beer higher

than Heineken is a way for Stella Artois to become a more successful premier global brand. Recommendation and conclusion We recommend that the Interbrew must concentrate developing the global market (Asia, Central Europe, Eastern Europe, South America), but also must put efforts to stop decline of Stella Artois in home country, Belgium. It will not be good for brand reputation globally to see decline in the home market. To raise the brand in Belgium, Interbrew must promote Stella Artois as modern, contemporary beer, but at the same time maintain the reputation of having history of many years.