[Grolsch: Growing Globally]

Case analysis

MUSTAHID ALI MBA-3 ROLL NO. 1334

Grolsch: Growing Globally

Q.1 Why did Grolsch Globalize and how well has it performed internationally?

Reasons for Global Expansion:

Grolsch faced less demand in Netherland (Home) to its products in 1970’s. At the same time

its rivalry Heineken was moving impressive in an international market. Grolsch acquired

German brand called as Wickuler due to which the capacity of Grolsch was doubled. Grolsch

also bought Ruddles, UK brand to create distribution network for its own brands. In 1990,

Eastern Europe started opening up which resulted an investment in Poland & Russia.

Although Gorlsch acquired aforesaid brands Wickuler was sold to to another German brand

while Bass bought Ruddles for its distribution in UK. In Poland Gorlsch took over one

brewery which had to be sold due to less profitability. Asian financial crisis & devaluation of

Ruble in Russia forced Gorlsch to focus on developed markets. Gorlsch entered France by

setting up its own distributorship. Around 51% of the total volume of Gorlsch was from

international market. Overall Gorlsch did better internationally although not best.

Q.2 What are the Key Elements and Limitations on its emphasis on Adaptation?

The key elements of the Grolsch adaptation strategy were in:

Pricing

Promotion

Operations

Distribution channels

Grolsch wanted to position their brand as a premium lager and charged a higher price in

comparison to the Netherland standard lager cost. However, Grolsch priced its products at a

discount in 3 of its 6 largest foreign markets (US, Canada, and Australia) in comparison to

competing imports in order to build market share. In France and Russia, Grolsch premium

Lager was priced significantly higher because the Amsterdam was the key volume producer

in these areas.

Grolsch also adapted their advertising and promotion strategy to maximize their presence in

their host country. They relied on the attractive image of beer from Northern Europe for most

of their promotion but the company realized that a good portion of consumers from other

countries (like the US) may not relate to or understand this concept. For example, in the US,

Grolsch used the swing top bottle accessory in a “Got that swing” commercial during NFL

football games. This theme made more sense than using the edgier UK commercials. Grolsch

also consolidated their operational cost by closing down two old export and import breweries

in the Netherlands and built a new modern brewery. Grolsch estimated the new plant would

save 1 million euros annually in operational cost.

Limitation:

The limitation of having only one plant is the potential that the plant could suffer a setback or

disaster and production could be halted for period of time, resulting in lost revenue. The

company also set up distribution relationships in many countries with joint venture partners

including the fore mentioned Molson Coors in the UK. However, Grolsch had suffered

setbacks in distributor turnover in the US, Canada, Australia, and New Zealand. These

distribution relationships with foreign markets proved to be complex because Grolsch had to

embrace the concept of losing control over operations across country borders.

Q.3 Lessons and MABA Process?

According to Grolsch’s history the lessons learnt are

1) A company should expand in a market which has enough overlaps with the home

country in terms of culture, geography, economy and administration.

2) Ananlyze and assess before entering.

3) Establish Distribution Network and local help.

4) Companies think about growing globally on maturity in domestic market.

5) Communicating value is crucial.

MABA is a tool used by the employees to judge the ranking/standing of a country in

terms of investment priority after assessing various factors to judge the distance between

the new market and the home market. For eg: Language difference (Cultural), EU

Membership (Administration), cost of transport (Geography) and GDP (Economic) are

factors for Market Assessment and total volume growth, variable commercial contribution

Q.4 How to compete in the Markets Targeted, particularly in modes of entry?

According to Grolsch the best way to enter a market is in cooperation with importers,

distributors, brewers and retailers. A change suggested in Grolsch’s historic strategy is not to

adapt the market completely in this case because it is an industry that gives importance to the

country-of-origin.

Markets Targeted:

South Africa: Monopoly Market, No.1 SABMiller (Market Share: 98%)

Brazil: Occupied by major Brewery Groups.

China: Competitive Market.

How to Compete:

South

Africa

Additional Line with SABMiller Co-Promotion with SABMiller

Brazil License out to Local Companies Intensive Promotion Support

China Marketing Research Co-promotion with JV

Q.5 What other changes would you suggest to Grolsch’s historical Strategies?

I suggest that Grolsch use a global strategy in the future. They should continue to

offer the standard products of the Grolsch premium Lager and the non-premium

brand, Amsterdam. The premium lager accounts for 90% of the company’s domestic

volume and 2/3 of all exports. The unique green swing top bottle packaging and

unique taste separates the product from the rest of premium imports.

In addition, the Amsterdam is a quality, non-premium option to supplement the

premium lager brand and has gained traction in France, Russia, Australia, and Africa.

I think branching out to different products and making them popular in global markets

would be too costly and time consuming

. The global strategy has been hard for firms in the past because they have to adapt

their product to the local market and have to coordinate operating decisions and

strategies across country borders. However, the Grolsch premium lager brand is

globally recognizable for packaging and taste, standardized, and has a consolidated

corporate strategy. In addition, the company has adapted their pricing, promotion, and

distribution relatively well in foreign markets.

I also think they have to reengineer their MABA framework. For example, they need

to incorporate analyzing distributor relationships in future markets in order to lower

turnover and conflicts of interests.

Q.6 Will the merger with SABMiller add value?

Merger with SAB Miller will definitely add value to Grolsch. It will help in making their

distribution routes more strong. I also help in global production of Grolsch. SAB Miller is a

160 years old brand. It has developed good trust and has notable brands in market for bear.

Association for such brand will definitely add to Grolsch’s status. It has strong build up in

Latin America and hence will be easy for Grolsch to foray in this market.

Due to their own strong financials and the backing of SAB Miller, I think Grolsch should

consider building a large brewery in the United States or Hong Kong to help the company

take advantage of economies of scale, increase presence, reduce transport cost, and decrease

reliance on distributors. It will also give Grolsch more ability to attack markets in Asia and

Central/South America, where total consumption grew rapidly from 2000 to 2005.