Economic Trends in the Beer and Pub Sector a Wakeup for Westminster Case Study

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Economic trends in the beer and pub sector, a WAKE UP for WESTMINSTER

Economic trends in the beer and pub sector

A Wake up for Westminster

Setting the context

In 2008, the British Beer and Pub Association developed a report in which they presented the challenges faced by the industry. The aim of the report was that of alarming the authorities at Westminster and stimulating them to take action in supporting the industry. Some alarming elements contained in the report include the following:

The levels of beer sales are as low as they were during the Great Depression

The levels of pub closure are at the astonishing rate of five closures per day, compared to their 2000 levels of two closures per week

Job losses were also registered -- 44,000 throughout the past five years and 43,000 more expected to be lost throughout the following five years.

These problems are important within the British communities in light of numerous elements. For instance, the beer industry has become 50 times more profitable for the government. The pub culture in the United Kingdom is not only a national emblem, but also one of the few remaining places in which communities come together to interact. The pub and beer industry also creates jobs. For instance, the editors at the British Beer and Pub Association reveal that for every three jobs created by supermarkets, the sale of beer in pubs and clubs creates 18 new jobs.

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In the context of the importance played by the beer and pub sector in the United Kingdom, as well as in the context of the current challenges experienced by the sector, the editors at the BBPA solicit the government to reduce the fiscal and other burdens on the sector. Their demands specifically refer to the following:

The government's abandon of the of its plans to introduce a tax escalator in the beer industry

The government's abandon of the introduction of new regulations as to how and where beer can be sold

TOPIC: Case Study on Economic Trends in the Beer and Pub Sector a Wakeup for Westminster Assignment

The recommendation that the government focused on reinforcing the already existent laws, rather than creating new ones

The need for the government to "start to support the Great British Pub as a vital part of local community life in Britain" (British Beer and Pub Association, 2008).

In spite of the initially perceived validity of the concerns raised by the editors at the BBPA, fact remains that the data and information presented by them is biased and based on the industry specific interests to increase sales, rather than regulate them. In such a context then, the formulation of a solid and sound report is pegged to the need to consult various sources outside the BBPA in order to establish an objective and unbiased standpoint. The current project as such sets out to research the available sources and create findings of the situation within the beer and pub sector in the United Kingdom.

For purposes of clarity, the analysis would be structured onto three distinct stages, as follows:

The assessment of the key forces which influence the beer and pub sector from the macro environment

The analysis of the industry through the lenses of the Five Competitive Forces, and the analysis of the strategies employed by Adnams, a highly successful organization which defies the trends in the industry.

2. Key macro environmental factors affecting the industry

At a general level, it is widely accepted that the sales of beer have decreased throughout the past recent years. The British Beer and Pub Association argues that the main driver of the decrease is represented by the political field. In other words, the number one macro environmental force affecting the industry is represented by politics.

At this level, the government of the United Kingdom is implementing taxes which increase the financial pressures on the beer manufacturers and retailers. Subsequently, additional financial burdens introduced by the government are transferred to the buyer, through the incrementing of the retail price. This specifically means that the access of customers to beer is restricted as a result of higher retail prices.

Also, aside from leading to an increase in the retail price through the introduction of additional taxes, the political field is restricting the access to beer by supplementary regulations. The most relevant in this sense is represented by the restriction of the locations and conditions in which beer can be consumed. This once again means that the access of consumers to the beverage is restricted.

Aside from political forces nevertheless, the consumption of beer in the United Kingdom is also impacted by other trends in the macro environment. One of the most relevant of these forces is represented by the consumption patterns in the UK. With an average of 97 liters of beer per capita, the United Kingdom is ranked the sixth largest beer consumer on the globe, preceded by Belgium and Denmark with 98 liters, Austria with 106 liters, Germany with 119 liters and Ireland with 155 liters (Nation Master, 2011). The table below reveals the 18 largest beer consuming countries:

Source: Nation Master, 2011

At a general level, it is assumed that the trend in the United Kingdom is that of an increasing level of alcohol consumption. In spite of this perception nevertheless, the statistics completed by the British Beer and Pub Association indicate that the trend has actually been a downward one, in which both male and female British citizens have decreased their consumption of alcoholic beverages. "It is widely assumed that we have a national culture in which alcohol consumption is on the increase. In fact average consumption has been falling since 2004. For men it fell from 17.2 units to 14.9 units between 1998 and 2006. By women, it fell from 6.5 to 6.3 (having risen to 7.6 in 2002)" (British Beer and Pub Association, 2008).

Alexis Akwagyiram at BBC identified and presented five additional features in the macro environment which have led to the decrease in the consumption of beer, specifically:

Health concerns

Food

Women

Cultural changes, and Fashion.

At the level of health, the general belief is that beer is unhealthy when compared to other alternative drinks, such as wine for instance. The common referral is made to the "beer belly" and the fact that the sustained consumption of beer can lead to the fattening of the individual. The members of the BBPA nevertheless argue that beer is less caloric and healthier than not only wine or spirits, but even more so healthier than milk or fruit juice.

At the level of food, the decline in beer sales is associated with the fact that most pubs have also come to sell food products in the locations. This has in effect led to a decrease in the consumption of beer, the beverage having been replaced with other products, some of them most appealing with a certain meal. In other words, as the pubs came to also sell food, their primary activity of beer retailing has decreased.

In terms of the changes generated by women, these refer to the fact that women are now better paid than ever and as such targeted by pub owners. Historically, pubs were not places in which women would be allowed or in which they desired to spend time. Today nevertheless, pubs are attractions for both genders. And in an effort to make the pubs more female-friendly, owners have created new styles and new menus. But in this context, the women do not consume the beer, but prefer the wine. Akwagyiram points out that 36 per cent of female clients in pubs consumer wine, whereas only 14 per cent consume beer.

Probably the most important macro environmental forces are represented by the cultural changes. Traditionally, pubs were frequented by factory workers who ended their shifts and went to pubs to "replenish fluids and socialize" (Akwagyiram, 2007). Today, most Brits work in offices and the pubs have as such lost the customers drinking large amounts of beer each day. Also, another cultural impact has been generated by the campaigns against drinking and driving, which have also reduced the sale of beer.

Beer consumption in pubs was perceived as a pleasant means of socializing. But today, beer is cheaper in the supermarket and people prefer to drink it in front of the television, rather than go to the pub. Finally, another impact is represented by the greater access to drugs and the temptation to drugs, which once again decreases the interest in beer.

Ultimately, the fifth macro environmental force identified by Akwagyiram is represented by fashion in the sense that the pubs and other alcohol serving facilities have integrated fashionable drinks, into a wide diversity. This has also generated a decrease in the popularity of beer.

At an overall level, the forces described in this chapter are important, yet not exhaustive. Additionally, they have not only influenced the past and present of the beer and pub industry, but are expected to maintain their influence within the future as well.

3. Five Forces analysis

Porter's Five Forces analysis[END OF PREVIEW] . . . READ MORE

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