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Grolsch Growing Globally Case Solution & Answer

Grolsch Growing Globally Case Solution  

Introduction

SABMiller, the world’s second largest brewer, which acquired the world’s 51st largest brewer: Royal Grolsch in November 2007 for €816 million. After its acquisition, the company was looking for future global strategies in order to strengthen its beers’ sales and widen its global market. The Marketing Director at SABMiller believed that the acquisition of Grolsch would help the company in its global expansion, especially in Latin America and Africa, where beer was infant and the market had-potential. Grolsch focus was to become the world’s top beer brand, but it remained focused to the developed markets, including: the USA, UK, Canada, Australia, France and New Zealand. But the markets had become stagnant and the churns of distribution systems raised the SABMiller’s management’s concern regarding the globalization strategy and its execution. The case analysis will be based on determining the global strategy (i.e. developed or developing markets) for Grolsche, in order to maintain its market position and to help it in becoming a top global brand.

Problem Statement

In year 2007, SABMillerhad a friendly acquisition of Grolsch,based in Netherlands. The company’s financial performance improved in 2007, as its total volumes increased by 3.1%, its revenues increased by 4.8% and its net profit increased from€19.2 million to €20 million. But in the same, the total brand volume declined from 3.2 million to 2.8 million.

The key issues being faced by Grolsch is the shrinking of developed markets as the volumes have declined and the markets have become stagnant. Its two largest markets are becoming smaller, including: Netherlands and the Dutch market, and the markets are still predicted to have decline in export, because of the strong positioning of competitors in the foreign market as the premium producers of beer. The company is not having sufficient capacity to increase its supply in accordance with the rising demand. Furthermore, Grolsch has focused only on the developed western market as its 88% profits are from such developed markets. As the western market is more penetrated now, Grolsch is faced with the challenge of maintaining its profitability and market position.High competition, new entrants, less brand recognition, focused western markets, no focus on developing markets with great opportunities etc.,these are all factors that are significantly contributing to the decline of Grolsch’s  financial and competitive position.

Now after the acquisition; the management needs to decide the global strategy for Grolsch i.e. whether to continue its operations in developed markets or knock the doors of developing markets, also as there are potential profitable opportunities in the developing markets.

Company Background

Grolsch was founded in 1615 by William Groenlo. In late 1800s, it was under the control of Theo J.  In 1897, the company launched a beer in a ceramic swing top bottle, which had the specialty for beer to be consumed and it was easy to use. The company offered its initial public offering on the Amsterdam Stock Exchange in 1982, right after the death of De Groen family. Till 1980s, there were no member of the family in the company, but they still had one-third ownership in the company shares.

In 1995, it was given the “Royal” title by the Dutch government, due to its reputation in Netherlands, and in 1997 it was renamed as “Royal Grolsch”. In the same year, the company celebrated 100th anniversary of its key product i.e. swing top bottle – a key differentiation from other competitors. Grolsch had its incorporation as a two-tier company, i.e. two different subsidiaries with full control. Grolsche Bierbrouwerij Netherlands, which was mainly responsible for the production within Netherlands but also provided support to foreign partners in their logistics, production or marketing etc. Secondly, Grolsch International was responsible for the worldwide sales excluding Netherlands, UK and Ireland. In 1999, the company built a modern brewery in order to expand its production facility in Netherlands, which started operations in 2004.

Grolsch Products

Grolsch product line is divided into two main brand families

  1. Grolsch

  2. Grolsch brand has been the key and a premium brand of the company. The Grolsch Premium Lager only accounts for 90% of the domestic sales volume and two-third of the exports volume, even though there were other nine variations being sold in Netherland. In addition to lager, the green swing top bottle played the vital role of a door opener in entering new markets, as the company launched this bottle while entering into a new market and afterwards started offering its other products too. Apart from bottles, the company also had cans, which accounted for almost 30% of the total volume. Despite being a premium brand and focus of the company, Grolsch’stotal volume decreased from 3.2 million to 2.8 million during the period 2003- 2007, as the Dutch and Nether-land market including the exports, stagnated.

  1. Amsterdam

  2. Amsterdam had its positioning as a non-premium brand, which was sold in small packaging of about 500 ml cans, and were mostly sold at small retail stores or at the supermarkets. Amsterdam beer had 5 beer varieties with a strong but smooth taste. Amsterdam total volume during the same period from 2003- 2007, improved a little, which covered up the decline in Grolsch brand’s total volume, despite of it being a premium brand.

Grolsche Competitive Strategy

Grolsche’s competitive strategy is based on maintaining a premium and adifferentiated position in the competing markets. For instance, in Netherlands, Grolsch charges a premium price for its premium products as compared to the competitors offering the products at lower price. Further it adopted adaptation strategy as its key strategy in maintaining a sound international growth.

Grolsche Adaptation Strategy

The adaptation strategy (Valdez, 2017) had its key elements included in price, promotion, operations and distribution channels of Grolsch. In Netherlands, Grolsche differentiated itself from competitors by charging premium lager prices in comparison lower lager prices.  However in three of its largest foreign markets i.e. in the USA, Canada and Australia, Grolsch priced its products at a discounted rate, in order to grab market share in face of competing imports from other competitors. Also, adaptation strategy was followed to promote its brand. Grolsch used the swing top bottle in NFL football game in the USA, which made sense. Further to cut down its operation costs in Netherlands, it shut down two export and import breweries and developed a modern cost effective brewery, which was projected to save around 1 million Euros of the operating costs.

Drawbacks

The adaptation strategy is very effective to enter the new markets as from price, promotion, placement to the product itself, everything is kept in accordance to the environmental or cultural aspects of the entered market. However, in case of Grolsche, it doesn’t seem much effective, for instance, Grolsche positioned itself as premium brand by charging premium prices in Netherlands.Whereas, the standardized prices have been relatively lower, and to grab market share it charged discounted prices in 3 of its six largest foreign markets, whereby the premium products have been the key focus of the people, which is the reason behind its low brand recognition as compared to its competitors.

The company built modern production facility by shutting down old breweries to reduce the costs. However, having only plant is risky too as it may face a natural disaster or a setback so that the revenues get halted. The company needs to increase its capacity to keep itself in pace with the demand of the competing markets.Moreover, in foreign markets, Grolsch has to partner with distributors as part of its adaptation strategy, but again it lost its control over operations.

Grolsch Global Strategy

Grolsch global strategy is more focused on the developed markets especially the western European markets by following adaptation strategy in order to meet the local customer’s demands in the foreign markets. In 1970’s Grolsch had less demand in Netherlands whereby its main competitor Heineken was moving to the foreign markets. Similarly, Grolsch acquired a German brand i.e. Wickuler, in order to increase its production capacity. It also acquired Ruddels in the UK to expand its distribution network,but afterwards both of these options didn’t go profitable and viable, and got sold to other brands. Again in Poland, it acquired a brewery, which was then sold because of less profitability. Grolsch only focused on developed markets because there were Asian financial crisis going and the devalued rubble in Russia was a growing concern. From its international outreach, it generated 51% of the total volume. Its performance in global world is not the best as it has an expertise to expand just more than 6 countries and to provide beer with a local experience to the customers.

SWOT Analysis

An internal analysis for Grolsch has been performed using the SWOT analysis(Schooley, 2019), which is explained as below

Strengths

  • Grolsche has high quality ingredients and taste, which make it a premium product over the competitors.
  • The brand’s long history and a royal recognition are the main reason behind its competitive position.
  • As Grolsch is acquired by SABMiller, it has the advantage of using the strong distribution network of SABMiller…………………..
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