[Grolsch: Growing Globally][Grolsch: Growing Globally] Case analysis MUSTAHID ALI MBA-3 ROLL NO. 1334 Grolsch: Growing GloballyQ.1 Why did Grolsch Globalize and how well has it...

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[Grolsch: Growing Globally] [Grolsch: Growing Globally] Case analysis MUSTAHID ALI MBA-3 ROLL NO. 1334 Grolsch: Growing Globally Q.1 Why did Grolsch Globalize and how well has it performed internationally? Reasons for Global Expansion: Grolsch faced less demand in Netherland (Home) to its products in 1970’s. At the same time its rivalry Heineken was moving impressive in an international market. Grolsch acquired German brand called as Wickuler due to which the capacity of Grolsch was doubled. Grolsch also bought Ruddles, UK brand to create distribution network for its own brands. In 1990, Eastern Europe started opening up which resulted an investment in Poland & Russia. Although Gorlsch acquired aforesaid brands Wickuler was sold to to another German brand while Bass bought Ruddles for its distribution in UK. In Poland Gorlsch took over one brewery which had to be sold due to less profitability. Asian financial crisis & devaluation of Ruble in Russia forced Gorlsch to focus on developed markets. Gorlsch entered France by setting up its own distributorship. Around 51% of the total volume of Gorlsch was from international market. Overall Gorlsch did better internationally although not best. Q.2 What are the Key Elements and Limitations on its emphasis on Adaptation? The key elements of the Grolsch adaptation strategy were in:  Pricing  Promotion  Operations  Distribution channels Grolsch wanted to position their brand as a premium lager and charged a higher price in comparison to the Netherland standard lager cost. However, Grolsch priced its products at a discount in 3 of its 6 largest foreign markets (US, Canada, and Australia) in comparison to competing imports in order to build market share. In France and Russia, Grolsch premium Lager was priced significantly higher because the Amsterdam was the key volume producer in these areas. Grolsch also adapted their advertising and promotion strategy to maximize their presence in their host country. They relied on the attractive image of beer from Northern Europe for most of their promotion but the company realized that a good portion of consumers from other countries (like the US) may not relate to or understand this concept. For example, in the US, Grolsch used the swing top bottle accessory in a “Got that swing” commercial during NFL football games. This theme made more sense than using the edgier UK commercials. Grolsch also consolidated their operational cost by closing down two old export and import breweries in the Netherlands and built a new modern brewery. Grolsch estimated the new plant would save 1 million euros annually in operational cost. Limitation: The limitation of having only one plant is the potential that the plant could suffer a setback or disaster and production could be halted for period of time, resulting in lost revenue. The company also set up distribution relationships in many countries with joint venture partners including the fore mentioned Molson Coors in the UK. However, Grolsch had suffered setbacks in distributor turnover in the US, Canada, Australia, and New Zealand. These distribution relationships with foreign markets proved to be complex because Grolsch had to embrace the concept of losing control over operations across country borders. Q.3 Lessons and MABA Process? According to Grolsch’s history the lessons learnt are 1) A company should expand in a market which has enough overlaps with the home country in terms of culture, geography, economy and administration. 2) Ananlyze and assess before entering. 3) Establish Distribution Network and local help. 4) Companies think about growing globally on maturity in domestic market. 5) Communicating value is crucial. MABA is a tool used by the employees to judge the ranking/standing of a country in terms of investment priority after assessing various factors to judge the distance between the new market and the home market. For eg: Language difference (Cultural), EU Membership (Administration), cost of transport (Geography) and GDP (Economic) are factors for Market Assessment and total volume growth, variable commercial contribution Q.4 How to compete in the Markets Targeted, particularly in modes of entry? According to Grolsch the best way to enter a market is in cooperation with importers, distributors, brewers and retailers. A change suggested in Grolsch’s historic strategy is not to adapt the market completely in this case because it is an industry that gives importance to the country-of-origin. Markets Targeted: South Africa: Monopoly Market, No.1 SABMiller (Market Share: 98%) Brazil: Occupied by major Brewery Groups. China: Competitive Market. How to Compete: South Africa Additional Line with SABMiller Co-Promotion with SABMiller Brazil License out to Local Companies Intensive Promotion Support China Marketing Research Co-promotion with JV Q.5 What other changes would you suggest to Grolsch’s historical Strategies?  I suggest that Grolsch use a global strategy in the future. They should continue to offer the standard products of the Grolsch premium Lager and the non-premium brand, Amsterdam. The premium lager accounts for 90% of the company’s domestic volume and 2/3 of all exports. The unique green swing top bottle packaging and unique taste separates the product from the rest of premium imports.  In addition, the Amsterdam is a quality, non-premium option to supplement the premium lager brand and has gained traction in France, Russia, Australia, and Africa. I think branching out to different products and making them popular in global markets would be too costly and time consuming  . The global strategy has been hard for firms in the past because they have to adapt their product to the local market and have to coordinate operating decisions and strategies across country borders. However, the Grolsch premium lager brand is globally recognizable for packaging and taste, standardized, and has a consolidated corporate strategy. In addition, the company has adapted their pricing, promotion, and distribution relatively well in foreign markets.  I also think they have to reengineer their MABA framework. For example, they need to incorporate analyzing distributor relationships in future markets in order to lower turnover and conflicts of interests. Q.6 Will the merger with SABMiller add value? Merger with SAB Miller will definitely add value to Grolsch. It will help in making their distribution routes more strong. I also help in global production of Grolsch. SAB Miller is a 160 years old brand. It has developed good trust and has notable brands in market for bear. Association for such brand will definitely add to Grolsch’s status. It has strong build up in Latin America and hence will be easy for Grolsch to foray in this market. Due to their own strong financials and the backing of SAB Miller, I think Grolsch should consider building a large brewery in the United States or Hong Kong to help the company take advantage of economies of scale, increase presence, reduce transport cost, and decrease reliance on distributors. It will also give Grolsch more ability to attack markets in Asia and Central/South America, where total consumption grew rapidly from 2000 to 2005. Mittal Steel in 2005: Changing the Global Steel Game P A N K A J G H E M A W A T J O R D A N M I T C H E L L SM – 1529 – E O – 308 - 029 ________________________________________________________________________________________________________________ This case was prepared by Professor Pankaj Ghemawat and Jordan Mitchell, Research Assistant, as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. August 2008. Copyright © 2008, IESE. To order copies or request permission to reproduce materials, contact IESE PUBLISHING via the website, www.iesep.com. Alternatively, call +34 932 534 200, send a fax to +34 932 534 343, or write IESEP, C/ Juan de Alós, 43 - 08034 Barcelona, Spain, or [email protected]. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means – electronic, mechanical, photocopying, recording, or otherwise – without the permission of IESE. Last edited: 10/10/08 1 Grolsch: Growing Globally In November 2007, SAB Miller, the world´s second largest brewer,1 announced the friendly takeover of the world’s 51st largest, Royal Grolsch N.V. of the Netherlands, for €816m in cash - 84% more than Grolsch’s value over the previous month. Nick Fell, SABMiller’s Marketing Director, explained the logic of the deal: “[Grolsch is] a fantastic brand. It’s North European, it’s a fantastic product, it’s got unimpeachable brewing credentials and authenticity and credibility. And it’s a damn good product. So for anybody interested in developing their premium beer business, this is an absolute peach of a brand to get hold of… we see huge potential for it in our global footprint, particularly in markets like Latin America and Africa where we’ve got a strong route to market but where the premium beer business is still in its infancy.”2 Grolsch had hitherto focused on developed markets, particularly the UK, US, Canada, Australia, New Zealand and France, in pursuit of its goal of becoming one of the world’s top 10 global beer brands. Groslch was already the world’s 21st largest global brand, measured by international (non- domestic) volume (see Exhibit 1). International volume had grown to account for slightly over one- half of total volume and, going forward, seemed to offer much more potential. Drinkers often rated Grolsch higher than larger brands, including Heineken, the top global brand as well as the leader in Grolsch’s home market (see Exhibit 2). And Grolsch had started up a state-of-the art brewery in 2004 that could be expanded at little incremental cost. The acquisition closed and in February 2008, Grolsch became an independent subsidiary of SABMiller. Rob Snel, head of Grolsch International since 1999 and an employee since 1984, was named Grolsch’s new CEO shortly thereafter. He had to decide what changes, if any, to recommend to its global strategy. 1 This compares the relative positions of SABMiller with the two other major breweries, InBev and Anheuser-Busch as of the end of 2006. SABMiller’s fiscal year ends in March. 2 “Q&A with Nick Fell, Marketing Director, SABMiller,” SABMiller, www.sabmiller.com. Accessed Nov. 30, 2007. http://www.sabmiller.com SM-1529-E Grolsch: Growing Globally Company Evolution Grolsch traced its history back to a brewery, in the Dutch town of Groenlo near the German border3 that was purchased by Willem Neerfeldt in 1615. By the late 1800s, the brewery had come under the control of Theo J. De Groen. In 1897, he introduced Grolsch’s iconic - and trademarked - ceramic swingtop bottle, which was advertised as easy to open and allowing storage of beer for later consumption. Marketing of the Grolsch brand began in 1918. In 1922, this operation merged with a brewery in nearby Enschede (see Exhibit 3 for a map of the Netherlands), but Grolsch was retained as the principal brand. By the 1960s, Grolsch had grown from a “regional” brand to become the country’s second most popular, behind Heineken. After the death of the head of the De Groen family in 1982, the next generation of family members agreed to an initial public offering (IPO) on the Amsterdam Stock Exchange in 1984.4 Subsequently, a non-family member was brought in to manage the company for the first time since the De Groens had assumed ownership. By the end of the 1980s, there were no De Groens on the company’s executive committee, but the family continued to own one-third of Grolsch’s shares and was represented on its supervisory committee. Due to its stature in the Netherlands, the Dutch government honored the company with the coveted “Royal” title in 1995, and the company was renamed Royal Grolsch N.V. In 1997, Grolsch celebrated the 100th anniversary of its swingtop bottle; a company representative said, “After 100 years, the swingtop is a great differentiator and still makes the Grolsch brand famous today.” In 1998, the company decided to build a modern brewery which, after disruptions and delays (see below under “Operations”), started up in 2004. Grolsch had been incorporated as a two-tier company under Dutch law and had two major, fully- owned subsidiaries: Grolsche Bierbrouwerij Nederland, which handled sales and marketing of Grolsch in the Netherlands and also housed most production, logistics and facilities support except operations with foreign partners; and, Grolsch International, which was responsible for the worldwide sales and marketing of Grolsch (and other brands) outside the Netherlands and the UK and Ireland. The UK and Ireland were handled by a 51:49 sales and marketing joint venture with Coors called Grolsch (UK) Ltd., which brewed Grolsch under license locally. Exhibit 4 summarizes Grolsch’s recent financial and operating history. In 2007, Grolsch’s total volumes (including beers sold under exclusive distribution rights) increased by 3.1% to 3