Drinks MarketWatch

SWOT analysis

Table 3:

SWOT analysis

Strengths Adherence to high quality standards makes APB stand-out in the competitive brewery industry Organization structure enhances scope to cater to local tastes and develop customer base Community and environment protection programs to build a longterm relationship with customers

Opportunities Rising disposable income and cultural shift toward alcoholic beverages makes Asia an attractive target market Brand extension strategy presents an opportunity to target a diverse consumer base with differing tastes

Weaknesses Weak presence in the top beer consuming countries

Threats High tax regime will erode margins or will indirectly erode the customer base Stringent advertising regulations to control the irresponsible portrayal of alcoholic drinks Negative health attributes associated with beer

Source: Datamonitor

DATAMONITOR

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Strengths
Adherence to high quality standards makes APB stand-out in the competitive brewery industry APB's brands of beers are known for their high quality. The group has benchmarked itself against international brewing standards and observes 250 quality checks before final dispatch. It has won several quality assurance certifications including the ISO 9002, ISO 9001:2000, and the Hazard Analysis and Critical Control Point. Besides the brewing facilities, the flagship brands of the group like Tiger, Heineken, Anchor, Baron's Strong Brew, and ABC Extra Stout have also won numerous accolades and awards. Tiger Beer, the flagship brand of APB, was the winner of the UK's Brewing Industry International Awards, the most prestigious award in the brewing industry (equivalent of the Oscars for the brewing industry) in 1998. It had also won the gold medal in the European Style Pilsner category at the 2004 World Beer Cup (considered as "the Olympics of Beer Competitions"). The brand won a gold medal in the International Style Lager category in the 2010 World Beer Cup; and a silver medal in the 2010 World Beer Championships. Anchor Beer was awarded a gold medal in Selection Mondiale in 2010, a gold medal by Australian International Beer Awards in 1998, in addition to winning several other accolades. ABC Extra Stout was the winner of the gold medal at the Asia Beer Awards and the silver medal at the World Beer Championships in 2010. It had won several other awards, including the Brewers' Exhibition award back in 1957. Baron's Strong Brew is another winner among APB's brands, receiving several gold and silver medals, including the silver at the World Beer Championships in 2010, 2009, and 2007. These awards summarize the quality of beer served by APB. The group has been able to maintain the quality of its beers owing to stringent brewing process. Since beer sales mostly depend upon quality and taste, the higher quality standards of APB's beer makes the company stand out in the competitive brewery industry.

Organization structure enhances scope to cater to local tastes and develop customer base APB operates 37 breweries in 13 countries and markets its beer brands in 60 countries. These subsidiaries are independent of each other and cater to their respective markets. They have the responsibility of managing the brewing facilities of their respective zone/country and marketing APB's flagship brands in addition to local brands. The Malaysian subsidiary offers brands like Guinness, Sol, Strongbow cider, and Paulaner German wheat beer, in addition to offering flagship brands like Tiger, Anchor, and Heineken. Thai Asia Pacific Brewery, the Thai subsidiary of the group, markets the Cheers brand exclusively in Thailand. Sengur and Jalam Khar are offered by the MCS-Asia Pacific Brewery in Mongolia. The independence of each subsidiary helps the group cater to the tastes and needs of individual markets. The group has exclusive tie-ups with big companies to market its flagship brands in other key markets. Tiger Export, one of the subsidiaries of the group, is responsible for the management of exports. Besides, the group has tied up for import, distribution, and marketing of Tiger with Scottish & Newcastle in the UK, US Beverages in the US, and Bruce Ashley Group in Canada. The division of APB into several subsidiaries makes it possible for it to reach a wider market and satisfy consumer needs as per the demand of the individual country, thus increasing chances of further growth.

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Community and environment protection programs to build a long-term relationship with customers APB, as a responsible corporate citizen, contributes to society through the Asia Pacific Breweries Foundation. The foundation has provided grants and other forms of support to over 200 initiatives, benefiting disadvantaged homes and charitable organizations, medical research bodies, theater and music groups, and scholarships programs, among others. The group also promotes responsible alcohol consumption and has organized concerts and competitions promoting this message among the younger generation. In FY2010, APB launched drink-savvy.com, an interactive website that advocates responsible drinking. APB's Thai subsidiary launched the "Water for Life" project, which harnesses plants and micro-organisms to treat wastewater, before releasing the effluent into the ecosystem. Two of the Vietnamese breweries upgraded their wastewater treatment plants. Moreover, the breweries are equipped to recycle used beer bottles. The group supported the annual "Ewaste Day," which encourages the proper disposal of old computer technology in New Zealand. Through its continuous efforts toward community and environment protection, APB is building a long-term relationship with its customers.

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Weaknesses
Weak presence in the top beer-consuming countries Although APB is well established in Asia Pacific, it has limited presence in the top beer-consuming countries. The group has 16 breweries in China, is the world's biggest beer market, while SABMiller, a close competitor of APB in Asian markets, owns 71 breweries in the country, and Tsingtao Brewery, the largest Chinese brewer, operates 53 breweries. Compared to its competitors, APB's presence is insignificant in the world's largest beer consuming nation. The US, the second largest beer market in the world, is dominated by three producers: Anheuser-Busch, Miller Brewing, and Molson Coors. Although the US market is growing at a slower rate compared with certain Eastern European and Asian markets, APB's lack of presence in this market puts the group at a disadvantage compared with some of the other large players in the industry. Since large beer consuming countries provide scope for volume and revenue expansion, a modest presence in these markets is a drawback for the group.

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Opportunities
Rising disposable income and cultural shift toward alcoholic beverages makes Asia an attractive target market As per Datamonitor estimates, the global beer industry generated total revenues of $470.8bn in 2009, representing a compound annual growth rate (CAGR) of 1.6% for the period spanning 200509. In 2014, the industry is forecast to have a value of $496.6bn, an increase of 5.5% since 2009. Asia Pacific, the main market in which APB operates, grew at a CAGR of 5%, to reach a value of $112.2bn in 2009. The rising disposable income and cultural shift towards alcoholic beverages makes Asia one of the attractive destinations for top brewers all over the world. To capitalize on the Asian opportunity, APB has extended its footprint into Indonesia and New Caledonia. In FY2010, the group acquired Heineken International's 65.1% interest in PT Multi Bintang, Indonesia and its 87.3% interest in Grande Brasserie de Nouvelle Caledonie, New Caledonia. The group also acquired popular beer brand Bintang, including its trademark rights. The acquisition gives APB an established consumer base in Indonesia and New Caledonia for the introduction of its other popular beer brands. Moreover, entry in these markets is an opportunity for APB to strengthen its leading position in the Asia Pacific region. These emerging markets with abundant growth potential will add to APB's top line growth.

Brand extension strategy presents an opportunity to target a diverse consumer base with differing tastes APB is growing its brand portfolio by adding more flavors and varieties. In FY2010, the group acquired two brands, Bintang and Number One, through its acquisition in Indonesia and New Caledonia. The group also launched several other new brands during the year. Local beer Namkhong was launched in Laos; Monteith's Crushed Pear Cider was unveiled in New Zealand; and Tiger Crystal was introduced to Malaysia (as a limited edition) and Vietnam. Earlier, five new brands were launched in Singapore: Bulmers Original, Newcastle Brown Ale, John Smith's, Archipelago Apsara Lager, and Archipelago Islander. Three new imported brands were introduced in Malaysia: Sol, Strongbow, and Paulaner. In addition, new varieties of ABC Stout were introduced in Laos and Sri Lanka; Jalam Khar, local beer brand, was launched in Mongolia; and Motheith's Crushed Apple Cider and new flavors in Tui brand were the new offers for New Zealand. A large variety as well as the introduction of new brands gives APB the opportunity to target a diverse consumer base with differing tastes.

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Threats
High tax regime will erode margins or will indirectly erode the customer base Beers are one of the most highly taxed commodities all over the world. It is specifically high in the countries in which APB operates. Singapore, the single largest market of APB, has imposed an excise duty of S$70 ($47.40) for every 1% strength per 100 liters. New Zealand, another major market of APB, raised excise duty on alcohol by 2.8%. As a consequence of this, DB Breweries, the New Zealand division of the group, increased its prices by 3%. The excise duty in other markets of APB is also high. The excise duty in the UK amounts to 17.30 ($26.8) for every 1% strength per 100 liters, while Thailand imposed a 60% excise duty on beer (as per value of the beer).The higher excise rates are translated into higher prices. APB, which projects itself as value beer brand and a cheaper and better alternative of premium brands, may lose its customer base, if higher duties results in higher prices of its products. This will have an unfavorable impact on the revenue growth of the group.

Stringent advertising regulations to control the irresponsible portrayal of alcoholic drinks Alcohol companies have been criticized for their irresponsible portrayal of alcoholic drinks in advertisements. Especially in Europe and many other countries, advertising watchdogs are coming down heavily on alcohol advertising, claiming that such advertisements fuel binge drinking. There are a variety of national restrictions, controls, and mixtures of statutory laws and self-regulation. In terms of EU-wide legislation, the Television without Frontiers Directive has been incorporated into national laws. The code complements and is consistent with the Advertising Standards Authority/Committee on Advertising Practice, Independent Television Commission, and Radio Authority advertising codes. All advertisements and sales promotions are required to comply fully with these codes. TV and radio commercials are cleared by the Broadcast Advertising Clearance Centre and the Radio Advertising Clearance Centre, respectively. Most EU countries impose a legal ban on the advertising of spirits on TV and radio; on broadcast advertisements linking alcohol with children, driving, or sport, or promoting alcohol abuse; and on sponsorship of TV and radio programs by companies primarily concerned in alcohol production. Such stringent rules on advertisements would limit the brand's future promotional campaigns and its awareness among the consumers.

Negative health attributes associated with beer Beer has always been associated with negative health attributes. There is a general negative perception about beer's effect on body fat and cholesterol. On the other hand, wine is perceived as a healthier alternative. As there is a general shift in consumer preferences toward healthier substitutes in matured markets like Western Europe and North America, beer is losing ground to wine. In addition, the easy availability of a wider variety of alcohol products and extensive marketing is also affecting beer sales. If the beer market continues to lose its share in the beverage category, APB will have to compete with other major competitors for dwindling market share. APB's efforts to enter these lucrative and matured markets can be hampered if this trend continues.

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