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Table of Contents

Introduction.....................................................................................................................................2
Employees...................................................................................................................................2
Positioning of company...............................................................................................................2
Diversification.............................................................................................................................2
Hotels and gaming.......................................................................................................................2
Environmental.............................................................................................................................2
Group strategy.............................................................................................................................2
Government.................................................................................................................................2
Porters Five Forces of Competition...............................................................................................2
Rivalry.........................................................................................................................................2
Threat of Substitutes......................................................................................................................
Buyer Power..................................................................................................................................
Supplier Power..............................................................................................................................
Barriers to Entry............................................................................................................................
Competitive assessment of Miller Brewing Company S.W.O.T. format.
Table 1.........................................................................................................................................2
Table 2.........................................................................................................................................2
Appendix A.......................................................................................................................................2
Bibliography....................................................................................................................................2

Introduction
We will report on a competitive Assessment of the Miller Brewing Company. This will
include a S.W.O.T. analysis, and using Porters Five Forces of Competition. A
graphical representation of this process is as depicted in Figure 1, on page 4.1 Use of
these analysis tools allow a company to evaluate its market position, and determine how
best to spend its resources on various efforts to maintain profitability, market share, and
customer loyalty.
The following sections were obtained from Miller Brewing Companys website at
http://www.millerbrewing.com/home.asp
Employees
Our company is a family of nearly 6,500 people worldwide, sharing a strong commitment to
responsibly brew, bottle and market the highest quality beer for you, our consumer.
Positioning of company
Graham Mackay, Chief Executive, commented:
"Our established businesses have delivered good results and improved margins across the board,
while we focus on integrating and positioning the strategically important new acquisitions in
North and Central America. The benefits of an increasingly balanced portfolio play an important
part in the groups overall results. We are working actively on numerous projects at Miller
Brewing Company to improve its performance and are confident that the potential identified at
acquisition will be realized over time."
Diversification
Brewers, bottlers, and distributors in six, world-wide locations (See Appendix A). Largest
bottler and distributor of the Coca-Cola range of carbonated products within the Southern and
Eastern African franchise territory
Products produced and bottled under long-term franchise agreements with The Coca-Cola
Company
Key brands: Carbonated soft drinks - Coca-Cola, Sprite, Fanta. Alternative beverages such as
fruit juice, energy drinks, iced teas - PowerAde, Bibo, Nestea, Milo, BonAqua
Hotels and gaming
SABMiller's hotels and licensed house interests were rationalised with the launch of the wholly
owned subsidiary, Southern Sun, in 1969. SABMiller's hotel interests were held through the
Southern Sun group, and through Southern Sun Gaming SABMiller held a 50% share in the
casino company Tsogo Sun. The remaining 50% of Tsogo Sun was held by Tsogo Investments, a
broad-based black empowerment group.
In December 2002, SABMiller & Tsogo Investments announced the most important
empowerment deal yet in South Africa, with an agreement that resulted in the transfer of both
companies' interests into a new company, Tsogo Sun Holdings (Limited), which is controlled by
Tsogo Investments.
Gaming was legalised in South Africa in 1996 and is a strong growth area.

Environmental
Miller Brewing Company is doing its best to keep the world clean, receiving
federal recognition for its work in reducing energy and greenhouse gas
emissions. Here are other works in environmental protection Miller Brewing
Company is proud of:
Miller Brewing was the first national brewer to begin recycling
aluminum.
Miller eliminated 50 percent of the aluminum in its cans, saving 50,000 tons of aluminum
every year.
In the year 2000, Miller Brewing recycled over 20,000 tons of paper, cardboard, plastic,
glass, aluminum and even the hard hats worn by employees.
Miller Brewing reduced the weight of its bottles, and now saves over 100,000 tons of
glass each year.
The byproducts of making beer, of which 700,000 tons were put to beneficial use in
2000, are marketed to commercial and agricultural industries:
Brewer's Grain is sold to farmers as cow feed
Brewer's Yeast is sold to food companies for use in canned soups, gravies and frozen
entrees and to pet food companies for use in pet foods
Excess carbon dioxide is captured during fermentation and sold for use in
refrigeration and freezing operations
FARM-ON is a nitrogen-rich soil conditioner and liming agent used to replenish
nutrients in soil.

Group strategy
Drive volume and productivity in our major markets
Optimize and expand established positions in developing markets
Seek value-adding opportunities to enhance our position as a global brewer with exposure
to both developed and developing markets
Grow our brands in the international premium beer segment
Actively participate in the ongoing industry consolidation
Government
SABMiller plc will engage constructively with the governments of the countries in which
it operates
SABMiller plc companies will comply with the laws and regulations of the countries in
which they operate
SABMiller plc believes in free market competition and will conduct its activities within
the framework of applicable competition laws.
The Group and its subsidiaries will not make political donations other than by exception,
and in an open and transparent manner.

Porters Five Forces of Competition


Rivalry - Firms strive for a competitive advantage over their rivals. The intensity of rivalry
among firms varies across industries, and strategic analysts are interested in these differences.1

Figure 1

For example, Miller Brewing


Company competes against
large, multinational
companies. Their most
direct rival is AnheuserBusch Brewery, the producer
of the Budweiser family of
beers. According to the
Miller Brewing website,
Miller Brewing has grown
from a small local brewer to
the second largest brewery in
the U.S., with seven major
breweries located across
America.2 Other, large,
U.S. breweries are Coors, of
Golden, Colorado, and Pabst
Brewery, San Antonio, TX.
These breweries make up the
Big-3 of macro-brews in the
U.S. Miller Brewing could
use a variety of options, to

gain an advantage over its rivals.


1.
Change prices
2.
Improve product differentiation
3.
Creative use of channels of distribution
4.
Exploiting relationships with suppliers
Any single factor, or combination of these factors, could help the company improve its market
share and/or profitability.
Buyer Power
Who is buying all this beer? While nearly 50% of the people in the United States
consume beer on a regular basis, the beer market is largely male dominated; Men account for
more than 80% of the volume consumed while women only account for the remaining 20% 1.
Within these market segments, beer companies accommodate four consumer groups. These
market segments are people from the age 21-27 years old, Latinos, African-Americans, and

people 50 years or older. According to US Census data these consumer groups are projected to
have significant growth by the year 20102. The projected growth is as follows in Table 1.
Market Segment
21-27 Years Old
Latino
African-American
50+ Years Old

Projected Growth
(2000-2010)
13%
32%
15%
25%

Table 1

Buyer Concentration
In the beer industry there are more buyers than there are firms in the market. Since more
than 50% of the US population buys and consumes beer on a regular basis, it would indicate that
there is significant buyer concentration. Thus, giving the buyer power; making this industry
unattractive.
Buyer Switching Costs
In the beer industry there are absolutely no switching costs to the buyer. The beer
industry is unable to put any switching costs due to the fact that it is impossible. This makes it
possible for the consumer to purchase witch ever brand they wish. This makes the industry
unattractive.
Buyer Information
Most consumers in the beer industry are not aware of what is happening in the industry.
Since the average consumer is not aware of what is happening in the beer industry it is possible
for the industry to make competitive moves to increase profit margins. The consumers lack of
knowledge in this industry makes this industry attractive.

Pull Through
The firms in this industry have been able to create pull through. Brand identity is crucial
in this industry. The top beer brands in the United States include Bud Light, Budweiser, Coors
Light, Miller Light, and Busch. For example, the success of the pull through has required that
major grocery chains have to carry these top beer brands. When pull through exists, it gives the
industry power over the consumer; thus, making the beer industry attractive.
Price Sensitivity
Buyers in the beer industry are inelastic. Because the buyers in this industry are inelastic,
small price increases do not result in reduced consumption or brand switching 3. With this in
mind however, large price increases will result in reduced consumption and brand switching and
or the use of substitute products. Since the buyers are price sensitive, this gives them power and
makes them powerful thus making the industry unattractive.
Conclusion
In the beer industry there is significant buyer concentration, no switching costs, and price
inelasticity. Overall, buyer power in the beer industry is very strong making it an unattractive
industry.1

http://www.beerbrewing.com/US-beer-maret/beer-demographics.htm
<http://www.census.gov>
3<http://www.dted.state.mn.us/PDFs/beer.pdf>
2

Barriers of Entry: The United States Beer Industry


In the United States Brewing industry barriers to entry for newcomers are extremely high.
In other words, in order for a new brewing company to enter the market there are many
hurdles that they must overcome, and often times these barriers make it almost impossible for
competition to enter the market.
One of the first factors that must be considered when researching whether or not one
should enter a certain market is cost: What will the cost of investment be? What will the
fixed costs be? This is a major barrier of entry in the United States beer industry: The high
initial cost of entrance, the equipment, materials, proper technology and experienced
personnel, needed in order to effectively produce a quality beer is very high, making it
difficult for others to enter the market.

For example, a modern brewing facility cost

approximately $250 million dollars, for capacity of four to five million barrels annually, and
the optimal quantity to achieve economies of scale is eight to eight and a half million barrels
per annum. In comparison, Coors Brewing Co., the third largest brewer in the United States,
produced over 31.8 million barrels of beer in 2002. Budweiser sold over 101 million barrels
in 2002, Miller Brewing Co. sold over 39.6 million barrels, 2001.
Another factor that one must examine is how to comply with government regulations
concerning the distribution, labeling, advertising, credit, container characteristics, alcoholic
content, tax rates, and litter assessments of their product.1 The Bureau of Alcohol, Tobacco,
and Firearms mandate these federal regulations. Then once the BATF is done, each state has
a complex set of laws and regulations governing its industry.

Marketing costs are also very high if you want to make a dent in the United States beer
industry. Marketing is one of the most important factors used to create brand recognition.
As an example, marketing, general costs, and administrative costs at Coors for 2003 were
$1,057,240. Miller Brewing has over 50 labels to market and to maintain. This significantly
increases the cost to the Miller Brewing Co.. These high costs of marketing make the
brewing industry very difficult to penetrate.
The degree to which customers are loyal to certain brands also create barriers to entry, as
the top three beer companies in the United States produce beer for over 80% of the industrys
consumption. Miller Brewing Company, and the other large, multi-national breweries create
such a barrier. This brand loyalty that customers have gained has been established through
extensive marketing, and decades of work in this industry.
Another factor that currently creates a large barrier to entry in the beer industry is that
industry beer consumption remains flat, and therefore newcomers must rely on creating
unique, niche markets. For example, last year, US Coors sales volume only went up by
0.1%. Miller Brewing Company was affected by industry softness in 2001, with shipping
volume down by 2.4 % in 2001.2

Increased vertical integration among top brewers is another cause for high barriers to
enter the beer industry.

Coors owns and is partners in operating the nations largest

aluminum-can manufacturing plants, and Coors malts their own barley.

http://www.altria.com/investors/annual_report/bus_review/bus_review04.asp?flash=true

Industry leaders, such as Coors, Budweiser, and Miller Brewing companies, have very
well established channels of distribution over the year, which makes it more difficult for
newcomers to enter the market. Due to the fact that these three breweries produce such a
high volume of the market share, have strong market presence in the U.S., and are now
working on expansion into international markets, they receive high volume discounts on their
shipping rates, and have established beneficial distribution partnerships.

Competitive Assessment of Miller Brewing Company S.W.O.T. format.

We have compared Miller Brewing Company in a S.W.O.T. format (Refer to Tables 1 and
2). Due to their diversification, environmental awareness, market share, stability in the market,
willingness to work with the government, we believe they compare favorably under the scrutiny
of a S.W.O.T. diagram, against their closest competitors, Anheuser-Busch and Coors.

We

processed some of the S.W.O.T. information on the S.W.O.T. tool available at


http://www.smartt.co.za/swot/, from the Interactive Smartt S.W.O.T. Analysis site.
This information has been classified into their Strengths, Weaknesses, Opportunities, and Threats
as is shown, below (Refer to Table 1).
Based on these results, it is our belief the Miller Brewing Company should focus its efforts on
improving its sales over Anheuser-Busch brewery. The other competitors do not have the global
reach of the top two breweries. Miller Brewing Company could also increase its sales revenue
by pushing its top selling brands into Europe and other parts of the world. This would result in
competition with their other lines, but would also improve customer awareness of their major
product line.

According to the S.W.O.T. analysis tool we used, company resources is a distinctive strength,
diversification is a distinctive strength, and name recognition is a distinctive strength. These are
areas where the company excels, in comparison to its competitors.

When people discuss beer

commercials, the Miller Lite commercials are easy to remember, and create a lasting impression.
Weak brand recognition in emerging markets, both ethnic markets and international markets, and
strong market competition, are the two areas of greatest weakness for the company. The
management at Miller Brewing Company should focus their efforts on improving the companys
position, with respect to its presence in foreign markets, and identifying methods to become the
number one major brewer in the U.S.
An internal weakness for Miller Brewing Company is the worsening image of two of its major
labels. Miller High Life and Miller Lite beer. The company has recently instituted a new ad
campaign, targeted at consumers of its Lite beer. As is identified in the S.W.O.T. chart, below,
changing consumer trends is a medium-term threat. The new ad campaign can help lessen this
threat.
In addition, the company has begun a series of Live Responsibly ad campaigns. According to
a press release from the companys web page, dated May 2, 2003, We are committed to helping
prevent drunk driving and share a commitment with local law enforcement and our festival
partners to help keep our community safer, said Bob Bailey, General Manager of the local Miller
distributor,

in

Atlanta

Georgia.

(http://www.millerbrewing.com/pressRoom/newReleasesDetails.asp?ideanumber=74)

This

effort could improve the companys strength in the eyes of consumers, and shareholders.
Promoting responsible drinking by its customers will improve the companys image.

The

companys reputation for concern with the ecology and recycling, and observing governmental
regulations and rules are two of its strong points.
Other indicators within the S.W.O.T. analysis are listed in the two tables, below. Even though
there are strengths, weaknesses, opportunities, and threats to and for the Miller Brewing
Company, they are not significantly different in their effect on the competitors.
Table 1
Strengths

Table 2

Opportunities

Strong brand image


Compete in volume compared to Coors
Lite Beer taste
Draft taste in cans and bottles
International presence
Cooperate with governmental rules and
regulations
Environmentally conscious
Strong marketing efforts for Lite Beer.
Weaknesses

Weak brand identity over time lack of


advertising focus and consistency
Not seen as high quality
Lack of dark beer line
Taste known as inferior to Budweiser
Seen as a mass producer
Preservatives make it seem inferior
Not associated with famous people
Products not significantly differentiated
from major competitors
Small advertising budget compared to
Anheuser-Busch
Loss of brand loyalty with Miller HighLife label
Undifferentiated products, as compared
to close competitors

Increased presence on the internet


Emerging markets in Europe
Emerging markets in Central Asia
Emerging market in U.S. with ethnic
groups
Ability to purchase smaller breweries
Foreign investment
Increased advertising budget
Threats

Government taxation increases


Government rules and regulations
added
Growth by closest competitors
Lower priced imports and local
products
Increase in competition from other
beverages (e.g. water, fruit juices, etc)
Changing consumer preferences
Price wars from competitors

Strengths.

Weaknesses.

Company Resources is a distinctive strength


Diversification is a distinctive strength
International Product Line seems not to be
a distinctive strength.
Name Recognition is a distinctive strength.

Weak Brand Recognition in Emerging


Markets is a symptomatic weakness.
Strong Competition is a structural weakness.

A distinctive strength can be interpreted as a core

competency i.e. something that makes the organization


competitive. Often a very successful organization may have
only one such strength, but it is significantly exploited and
yields success. A few distinctive strengths are quite
acceptable.

A structural weakness is evident. These are areas in which

the organization lacks a distinctive competency. This type of


weakness should raise the alarm in the organization. It points
to a lack of distinctive competency. These weaknesses are
serious, because the core on which survival depends is lacking.
This weakness alerts management to do something about
acquiring skills or developing the organizational capacity in this
area. Often competition will have the distinctive competency
and are thereby a serious threat to survival. Structural
weaknesses often indicate the direction in which the Business
Idea for the future (the strategic vision) needs to be developed.
This indicates areas of desirable development, in order to be
competitive.
You have symptomatic weaknesses and should therefore look
for its underlying cause and remedy the situation before this
cause becomes serious.

Opportunities.

Threats.

Emerging Markets is a current opportunity.


Increased presence on the internet is a
current opportunity.
Focus on ethnic target markets is a current
opportunity.
Increased advertising is a current
opportunity.

Increased Advertising from Competitors is


an immediate threat.
Governmental Regulations is an immediate
threat.
Governmental Taxation is an immediate
threat.
Changing Consumer Trends is an immediate
threat.
Lower Priced Imports is an immediate
threat.

Current opportunities are evident. These are opportunities


that the organization could seize without too much trouble
and should consider moving in this direction. This is often a
case of not being able to see the wood for the trees where one
becomes blind to very available options, mainly because of
habitual activities in familiar territory.

Short term (immediate) threats are indicated. These are

typically within the next 12 months. If these have been


identified it demands that management deal with the
implications. Sometimes the only way to deal with these types
of threats is by a significant strategic response. If this threat
cuts to the core of the business activity it could well be
evidenced as a structural weakness. Only by dealing with the
fundamentals of the business process can the situation be
remedied. The best advice is a constraint monitoring of the
horizon for any smoke signals. A unfortunate implication of a
short term threat is that it forces an organization into an
almost crisis response, this by implication can result in reactive
management. Too much of this kind of management reaction
can habituate into crisis management. The admonition here is
that management should rather engage in excellent planning to
foresee threats well ahead of time. Threats are often from the
external environment and are often ignored by the
preoccupations with operational matters.

Appendix A
International Locations and Brands for SABMiller
1. SABMiller plc is the second largest and most profitable brewer in China with 30
breweries and a combined capacity of more than 31 million hectoliters.
2. The worlds second largest brewer by volume.
a. The bottle produce beers in Central America
i. El Salvador
1. Pilsener
2. Golden Light
3. Suprema
4. Barrilito
5. Regia
6. Budweiser
7. Bud Ice
8. Heineken
9. Corona
ii. Honduras
1. Salvavida
2. Port Royal
3. Imperial
b. Asia
i. China
1. Zero Clock

2. Xibao
3. Shengquan
4. Huandan
5. Yate
6. Snow
7. Shenyang
8. He Shi
9. Yatai
10. Largo
11. Yingshi
12. Xibao
13. Tianjin
14. New Three Star
15. K-Lion
16. Sip
17. Xingyingge
18. Blue Sword
19. Green Leave
20. Lowen
ii. India
1. Continental
2. Castle Lager
3. Knock Out

c. Europe
i. Canary Islands
1. Dorada, Tropical, Pilsner Urquell, Carlsberg*, Volcan, Guinness,
Kilkenny
ii. Czech Republic
1. Pilsner Urquell, Gambrinus, Radegast, Velkopopovicky Kozel,
Primus
iii. Hungary
1. Dreher, Arany szok, Tuborg*, Hofbru*, Kbnyai Sr, Kanizsai
Vilgos, Kanizsai Korona, Pilsner Urquell*, Guinness, Kilkenny
iv. Poland
1. Tyskie, Lech, Redd's, Pilsner Urquell*, Debowe, Miller Genuine
Draft
v. Romania
1. Ursus, Timisoreana, Keller, Pilsner Urquell
vi. Russa
1. Zolotaya Bochka, Try Bogatyrya, Holsten*, Miller Genuine
Draft*, Pilsner Urquell, Velkopopovicky Kozel*
vii. Slovakia
1. ari, Smadny Mnich, Gambrinus*, Velkopopovicky Kozel*,
Radegast, Pilsner Urquell
d. Africa
i. Angola
1. N'gola
ii. Botswana

1. Castle Lager, St Louis, Hansa Pilsener, Chibuku (Sorghum),


Amstel, Carling Black Label, Castle Lite, Castle Milk Stout,
Ohlssons, Redd's, Dooleys
iii. Ghana
1. Club, Castle Milk Stout, Vitamalt
iv. Kenya
1. Ranger, Castle Lager, Trophy, Redd's (distribution only)
v. Lesotho
1. Castle Lager, Carling Black Label, Hansa Pilsener, Castle Milk
Stout, Lion Lager, Amstel, Redd's, Solantis, Maluti Premium Lager
vi. Malawi
1. Chibuku (Sorghum)
vii. Mozambique
1. 2M, Manica, Castle Lager, Castle Milk Stout, Redd's, Carling
Black Label, Raiz, Laurentina, Laurentina Preta
viii. Swaziland
1. Castle Lager, Hansa Pilsener, Castle Milk Stout, Amstel, Carling
Black Label, Castle Lite, Ohlssons
ix. Tanzania
1. Safari, Kilimanjaro, Castle Lager, Castle Milk Stout, Redd's,
Ndovu, 49er, Balimi, Bia Bingwa
x. Uganda
1. Nile Special, Chairman's ESB, Club Pilsener, Castle Lager, Nguvu,
BB Soda
xi. Zambia
1. Mosi, Castle Lager, Rhino, Chibuku (Sorghum), Shake Shake
xii. Zimbabwe

1. Castle Lager, Lion Lager, Golden Pilsener, Zambezi


e. South Africa
i. Castle Lager, Castle Lite, Castle Milk Stout, Lion Lager, Carling Black
Label, Hansa Pilsener, Amstel*, Heineken*, Sterling Light Lager, Redd's
Premium Dry, Redd's Premium Cold Fruit Ale, Brutal Fruit
f. North America
i. California, North Carolina, Ohio, Georgia, Texas, Washington, Wisconsin
1. Bleacher Blonde
2. Blitz Weinhard
3. Foster's Lager*
4. Foster's Special Bitter*
5. Get Down Brown
6. Hamm's
7. Hamm's Draft
8. Hamm's Special Light
9. Henry Weinhard's Amber Ale
10. Henry Weinhard's Blackberry Wheat
11. Henry Weinhard's Dark
12. Henry Weinhard's Hefeweizen
13. Henry Weinhard's Pale Ale
14. Henry Weinhard's Private Reserve
15. ICEHOUSE
16. Leinenkugel's Berry Weiss
17. Leinenkugel's Creamy Dark

18. Leinenkugel's Genuine Bock


19. Leinenkugel's Hefeweizen
20. Leinenkugel's Honey Weiss
21. Leinenkugel's Light
22. Leinenkugel's Northwoods Lager
23. Leinenkugel's Original Premium
24. Leinenkugel's Red Lager
25. Magnum Malt Liquor
26. Meister Bru
27. Meister Bru Light
28. Mickey's Malt Liquor
29. Miller Genuine Draft
30. Miller Genuine Draft Light
31. Miller High Life
32. Miller High Life Light
33. Miller Lite
34. Milwaukee's Best
35. Milwaukee's Best Ice
36. Milwaukee's Best Light
37. Olde English 800 Ice
38. Olde English 800 Malt Liquor
39. Olde English 800 Mixed Fruit
40. Presidente*

41. Rally Red


42. Red Dog
43. Shanghai*
44. Sharp's non-alcohol brew
45. Sheaf Stout*
46. Southpaw Light
47. Warning Track Wheat

Bibliography
1

http://www.quickmba.com/strategy/porter.shtml

http://www.millerbrewing.com/aboutMiller/aboutMain.asp

http://seattle.bizjournals.com/seattle/stories/2003/01/06/daily44.html