Inbev SWOT Company Analysis Report

Inbev SWOT Company Analysis Report

 

 

Inbev

Strategic Evaluation

Swot analysis

Strengths

·         Flagship Antarctica brand – InBev is a strong player in other non-cola carbonates in the large Brazilian market.

·         Key Pepsi bottler – subsidiary AmBev is PepsiCo's second largest bottler in the world and is the largest outside the US. AmBev benefits from PepsiCo's capability in new product development and the recent success of H2OH! suggests the potential for growth for flavoured water.

·         Global distribution network – as the world's largest brewer InBev has an extensive and well-established distribution network, with particular strengths in Latin America, Eastern Europe and Western Europe.

Weaknesses

·         Narrow geographic focus – InBev's soft drinks performance is largely reliant on the Latin American market, primarily Brazil despite its recent expansion in other Latin American countries.

·         Heavy reliance on carbonates – the company's two key brands are in slow-moving non-cola carbonates, and forecast demand in Brazil and the wider Latin American market offers little scope.

·         Limited presence in fast-growing categories – InBev has only negligible non-beer presence in faster-growing sectors such as bottled water, functional drinks and RTD tea. Nonetheless, PepsiCo's initiatives of going beyond carbonates increase the revenue streams for InBev.

Opportunities

·         Innovative new products – the strong performance of H2HO! has created a new category for InBev and should help the company to tap into demand that is expected to see off-trade volume sales of flavoured bottled water grow by a CAGR of 20% over the 2007-2012 period in Brazil.

·         Energy drinks – to extend guaraná-based carbonates such as Guaraná Antarctica beyond Brazilian borders by tapping into the strong global demand for stimulant-based energy drinks.

Threats

·         High input costs – the high costs of energy and raw materials will impact heavily on profit and the profit margin.

·         Competition from global carbonates giants – in Latin America, InBev's biggest threat in carbonates comes from The Coca-Cola Company and its Coca-Cola Zero brand launched in 2007 which diverted consumers' attention from other carbonates brands. InBev may need to work on developing similar products to win back consumers in the near term.

·         Bottling relationships – any souring of the relationship with PepsiCo could have a material impact on InBev's licensed distribution agreement.

Growth Strategies and Future Prospects

Core Businesses

Development of sales system the core of growth strategies

·         InBev has identified four key pillars to its "SuperVoyager" growth strategy: to focus on a winning portfolio of global and local brands; leverage sales, marketing and distribution knowledge to win over consumers at point of connection; employing Zero-based Budgeting to develop world-class efficiency; and targeting external growth through acquisition, particularly in emerging markets. Recent acquisitions include Cervejarias Cintra Industria e Comercio Ltda in Latin America North in March 2007.

·         The non-beer segment comprises InBev-owned non-beer products, such as the brands Antarctica and Sukita, and soft drinks produced and sold by the company under licensing agreements or sold under exclusive distribution agreements, such as the Pepsi and Gatorade brands. Sales are heavily skewed towards Latin America, particularly Brazil, and this narrow focus does not bode well for InBev's soft drinks portfolio. The company's press releases are overwhelmingly dominated by the activities taking place within the beer division, and the few initiatives for soft drinks show that relative interest.

·         Carbonates is InBev's core product within soft drinks underpinned by its Antarctica, Diet Antarctica and Sukita brands. Antarctica has maintained its third place (total volume) in carbonates in Brazil, but the brand under-performed many of its major rivals such as Fanta, Kuat and Pepsi in 2007. InBev's constant investment in beer brands may mean that the company has no great interest in developing the category as carbonates in general is set to record the lowest growth over the 2007-2012 period than other categories following the health and wellness consumption trend.

Growth Opportunities

·         In light of the sluggish growth predicted for carbonates, InBev needs to expand into other categories such as high-growth fruit juice, bottled water and functional drinks. Although contract manufacturing for PepsiCo of these non-carbonates has indeed gained InBev some revenues, the Brazilian subsidiary AmBev still needs to create and develop its own brands in these categories if it has the ambition to continue to maintain its position in the overall soft drinks market in the long term.

·         While venturing into more niche categories, InBev may want to consider aggressive expansion into other geographical areas. The company currently reports its soft drinks operations in Dominican Republic, Peru, Venezuela, Uruguay, Argentina and Germany and it has strengthened its operations in soft drinks production capacity in Latin America South and North recently. It has no noticeable presence in Asia-Pacific or North America. As the parent company has solid positions in some countries such as South Korea, Ukraine and Canada in beer, it may be a good opportunity to develop its soft drinks alongside beer in the medium term. The company can leverage its local sales network and logistics system in beer and develop its soft drinks business.

·         The strong performance of PepsiCo's flavoured water brand H2OH! has indicated that flavoured water offers considerable potential going forward. Despite the controversy over the definition and labelling of flavoured water triggered by H2OH!, this category will represent a growth area for InBev in the immediate future as consumers reduce the consumption of carbonates and look for alternative drinks.

·         The rapid success of low-calorie labelling changes in Brazil, from "diet"/"light" to "zero" sugar, has caused most brands to follow suit, including AmBev, which in 2007 adopted the "zero" concept in all of it low-calorie carbonated soft drinks products. Sales increases demonstrated by recently modified product labels confirm the benefits of delivering a clearer message to Brazilian consumers.

Limited Potential

·         The corporate strategies of global brewer InBev seem clear with a focus of its resources on its brewery business with soft drinks appearing to be a sideline. The future development and market positions of its soft drinks will largely depend on the company's vision and plans for the sector.

·         The copycat products which bear similar claims and packaging of the successful brand H2OH! may hinder further sales of the brand.