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The Macro Environment of the Western European Brewing Industry Essay

The macro environment of the Western European brewing industry was analyse using the PESTEL framework to understand and assess the impact of the various external factors namely political, economic, social, technological, environmental, and legal.

Political

At the beginning of the 21st century the European governments forbear dynamic participation in the beer industry, which was considered as an important part of government revenues, moreover all this government started big campaigns against alcoholism, binge drinking and drunk driving. The campaigns against drunk driving have proven its effectiveness by a very large decline in beer sales in Western Europe, which was considered as best-selling items. For instant, WHO focuses on a combination of targeted measures aimed at limiting the availability of alcohol especially to young people and at reducing their exposure to commercial communications, drink-driving countermeasures as well as improving education and information.

Economic

As we have said, the Western European markets were the main beer market in the world. But in recent years, the industry faced a dramatic retraction in this market. The European governments’ campaigns that aim to help combat excessive alcohol consumption and drink driving, and higher taxes intended for the industry that led to increasing the price for that industry products. This procedure did not allow the cheapest offerings to access the market. However, because of the price inelasticity of demand of beer, the beer industry had the best performance compared to other industries in the European Union, especially in the face of the global financial crisis that hit the global economy.

Social

* The health risks associated with alcohol is now becoming a major concern among consumers. Binge drinking in pubs and clubs is also being discouraged. * Increasing in acceptance of low or alcohol free substitute drinks * Importance of supermarkets in distribution and growth of low-label products Technological

* Technological advancements in beer, spirit, and wine production have made the process of creating drinks more accurate and easy. Companies have acquired experience, excellence and technological know-how in beer, spirit and wine production. Alliances, joint ventures and partnerships have increased the capacity of the industry as a whole. * Economies of scale in brewing and distribution

Environmental

* With severe weather changes becoming more frequent, natural disasters could cause shortages of material such as barley. Therefore the industry needs to be prepared in difficult times. * One of the major environmental concerns is global warming. Inefficient processes that produce more wastes such as air pollution or water pollution would face severe pressure from both governmental and non-governmental organizations.

Legal

* The financial information and other information must be transparent and accuracte. * Human resource legislation need to be precise and practical for example; working hours should not be longer than the government stated and protection in working place such as hazardous material need to be carefully use. To set up union for workers in order for them to give an opinions in industry and work place.

Five Forces Analysis
Rivalry Among Existing Competitors (High)

Competition among existing firms is high that is why these firms are pushed to create acquisition, licensing and strategic alliances in their effort to control the market. There are high fixed costs in an industry and high exit barriers to keep competitive rivalry high which mean the competitors need to be in balance.

Threats of New Entrants (Low)

The threat of new entrants is very low, as old, family-owned, and established companies control the market and the industry. New and smaller breweries will suffer predation and they will not sustain growth in a highly competitive market.

Threat of Substitute Products or Services (Medium)

There is a growing demand for substitute and exotic products from abroad while the demand for local beers is declining. There is also high competition from indirect substitute such as wine and alcopop. However, European breweries cope with this by introducing innovative and premium products.

Bargaining Power of Suppliers (Medium to low)

The main purchasing costs of European brewers are packaging and raw materials. The packaging industry is highly concentrated and dominated by few companies, enabling them to have tremendous power over prices. However, a forward integration from the supplier is unlikely as barrier to entry is extremely high in all drinks industry across Europe, therefore the bargaining power of suppliers is relatively low.

Bargaining Power of Buyers (High)

There is a concentration of buyers and the consumers have a high bargaining power and the sudden changes in demands have caused companies to alter their strategies and to develop their products in order to attract the consumers. Many alternatives source of supply also create buyer power.


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