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PESTEL Analysis: brewing industry Case Study

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Updated: Apr 12th, 2019

To discuss the particular features of the Western European brewing industry in relation to its macro-environment and determine the influential factors for the industry’s development, it is necessary to refer to PESTEL analysis.

Political Factors

It is possible to connect the decline in the beer consumption with the European governments’ campaigns against drunken driving which resulted in supporting the social orientation to health and fitness. Moreover, the governments’ restriction campaigns influenced ‘on-trade’ sales and contributed to ‘off-trade’ sales in supermarkets.

Economic Factors

The decline in the beer consumption affected the increase of prices within the industry which is associated with the high costs of packaging materials and raw materials. The impact of supermarkets grows, and the progress of new brands influences the changes in the economic aspect.

Social Factors

The consumers’ attitude to the excessive alcohol demands changes with references to the social campaigns in which the negative effect of alcohol on the people’s health is accentuated. The popularity of wine grows.

Technological Factors

The brewing industry is associated with a constant progress in producing and packaging the products with the help of innovative techniques based on technological advancements (products with new flavours and tastes). These innovations contribute to increasing the products’ quality and profitability.

Environmental Factors

The traditional European brewing industry suffers from the increased impact of Chinese, US, and Brazilian products. The situation in the market is influential for the development of the premium beer brands. Moreover, the necessity to respond to the issues of the environmental protection increases.

Legal Factors

Legal factors are connected with the programs against the excessive alcohol consumption, drinking in public places, and restrictions on the drinking age. The industry is also influenced by the increase of taxes which affects the products’ prices.

Five Forces Analysis

To analyse the threat of new entrants or substitutes and competition between the companies, it is necessary to pay attention to five forces which can affect the industry.

Threat of New Entrants

The threat of new entrants can be discussed as low because the development of the industry depends on large and famous companies which preserve their high competitive position.

Threat of Substitutes

The possible substitutes which can influence the demands in beer are wine, energy drinks, and the products of foreign companies. The way to overcome the threat is to introduce new products (beer with different flavours and tastes).

Competitive Rivalry

Competitive rivalry can be discussed as extremely high because of the variety of products proposed. Large companies are inclined to create alliances to regulate the situation within the market of the brewing industry.

Bargaining Power of Suppliers

Focusing on the high packaging costs, raw materials and energy costs which influence the company’s price strategies, it is possible to conclude that the power of suppliers is considerable.

Bargaining Power of Consumers

The changes in the brewing companies’ strategies depend on consumers’ demands. That is why, the bargaining power of consumers can be discussed as high with references to the consumers’ right to choose the product among the variety of brands according to the correlation between the price and quality.

The Impacts of Trends on Breweries

Anheuser-Busch InBev (Belgium)

Being one of the largest European producers, the company is oriented to increasing efficiency and providing innovations in order to compete within the market successfully. The company’s strengths are in a popular brand and experience. However, the problems are associated with the threat of the foreign companies’ impact.

Greene King (United Kingdom)

The strengths of the company are based on experience and profitability, but the company avoids the multiband strategy which can be successful.

Tsingtao (China)

The company’s success is based on the effective price strategy, but the brand identity is rather low.

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