Table of Contents
Introduction about Beer Manufacturing Industry
Like many industries, the beer industry in Singapore also had to suffer lot during the period of utter crisis triggered by the COVID-19 pandemic. This report aims to analyse the impact of the COVID-19 pandemic on the business of Carlsberg Singapore, one of the leading beer companies in the region. Step by step the report will strive to fathom how this company has adapted itself to the new challenges that it has come across. How the company is working on its digital retail strategies even after a slump of 42% in the annual sales in the COVID-19 lockdown will also be discussed in the report (Arthur, 2021). The report will, chronologically, analyse the impact of COVID-19 on the adoption and utilisation of digital technologies in the global beer industry; evaluate how Carlsberg Singapore has managed to cope and adapt during the pandemic and the implications for the company, including the impact on its supply chain, eCRM processes, etc; and the report will discuss and recommend how the use of social media or social commerce can assist the company in addressing issues such as customer behaviour in the post-pandemic era.
Carlsberg group has a rich legacy that goes back to its inception in the year 1847 when it was founded by Jacob Christian Jacobsen. Carlsberg Singapore Pte Ltd (Carlsberg SG) was founded in 2001 and the company has continued to operate in wholesale distribution of beer, ale, porter, and other malt beverages (Bloomberg, 2022). With a mission and vision of emerging as the best beer in the world in the pursuit of not only bettering the beer but also creating a better future for everyone, Carlsberg SG has a high market presence (of 62 percent) and a high corporate spending score (of 68 percent), making it a ACRA registered entity that has been operating sustainably for more than 20 years in the Singapore market since its incorporation in 2001 (The Grid, 2021). Headquartered in Balestier, Toyah Payoh, Serangoon, SG, the company primary operates in the sector of other holding companies with SSIC code 64202 (The Grid, 2021). Moreover, improving its B2B business structure and heading towards innovating its digital transformation for adding to its business’ profitability, Carlsberg SG, being a part of the global Carlsberg Group, has been able to sustain its profit run amid the COVID-19 disruptions and challenges. In this respect, it has to be noted that even during the COVID-19 crisis, Carlsberg Group was able to post a 4.3 percent profit increase, specifically with the support of its Singapore operations (Business Today Editor, 2021). Overall, Carlsberg SG has continued to aspire for becoming a successful, professional and attractive beer-based company through successful application of a strong balance between market share and gross profit margin after calculating logistics and operating profit (Carlsberg Singapore Pte Ltd., 2022). Besides, it has to be noted that from Porter’s generic strategy perspectives, Carlsberg SG, following the footsteps of the Carlsberg Group has concentrated on the focus strategy for emerging markets, and it has also focused on the differentiated targeting strategy in its established markets (Bhasin, 2018). Since being in the beverage industry, Carlsberg SG uses a mix of psychographic strategies in the form of differentiated strategy for its offerings due to the fact that most of the company’s offerings are meant for meeting the needs of different customer groups (Bhasin, 2018). Furthermore, to excel in the emerging market, the company has continued to resort to the focus strategy in terms of low cost and offering the best value to the target customers. Moreover, the company strives for delivering the best-in-class services to its customers both through conventional and digitalized methods so that value proposition for both the customers and the investors can be increased (Carlsberg Singapore Pte Ltd., 2022). Besides, the company engages employees for better performing its corporate social responsibilities (CSRs) for ushering positive difference in the communities the company operates in (Carlsberg Singapore Pte Ltd., 2022). Furthermore, embarking on the SAIL’22 Group strategy, Carlsberg SG and its parent company, Carlsberg Group, have been on its way to strengthen its digital presence so that strong business operations can be propelled, assisting the company in overcoming the losses incurred by the COVID-19 pandemic (Carlsberg Singapore Pte Ltd., 2022).
Implications of COVID on the Industry
The global beer manufacturing industry is involved primarily in the manufacturing of alcoholic beverages, using malted barley and hops, including ale, lager, malt liquor and non-alcoholic beer (IBISWorld, 2021). The industry excludes wine, brandy, cider, and distilled beverages, including vodka and rum and the industry also excludes bottling purchased malt beverages and manufacturing purchased malt (IBISWorld, 2021). The global beer manufacturing industry produces premium beer, sub-premium beer, super-premium beer, craft and other beers and the industry is involved in the activities, including draught beer manufacturing, bottled beer manufacturing, canned beer manufacturing, non-alcoholic beer manufacturing, malt liquor, barley wine, and mead manufacturing (IBISWorld, 2021). Moreover, the key external drivers of the industry entail global consumer spending, global demography, world price of wheat, and GDP of the BRIC nations (IBISWorld, 2021). In 2020, amid the COVID-19 pandemic, the global beer market size was valued at $605,246.1 million and it has been projected that the industry’s value with reach around $816,847.7 million by 2030, with a CAGR of 2.7 percent from 2021 to 2030 (Chouhan, Vig and Deshmukh, 2021). Besides, the key players within the beer manufacturing industry include Anheuser-Busch InBev, Beijing Enterprises Holdings Limited, Carlsberg Group, Diageo PLC, Dogfish Head Craft Brewery, Inc., Heineken Holding NV., Squatters Pubs and Craft Beers, Sierra Nevada Brewing Co., The Boston Beer Company, Inc., and United Breweries Limited (Chouhan, Vig and Deshmukh, 2021). In 2015, the average consumption per capita in value terms of the industry reached 112.45 USD per capita in retail prices and by 2020 the industry grew at a CAGR of 2.96 percent per annum (BUSINESS WIRE, 2021). Moreover, in the medium term, by 2025, it is forecasted that the global beer manufacturing industry is going to slow down in terms of growth with an increase in CAGR with 2.78 percent per annum (BUSINESS WIRE, 2020).
The global beer manufacturing industry has witnessed major shifts during the period between 2016 and 2021, owing to turbulent economic conditions and the recently cropping pandemic restrictions imposed and propelled due to the outbreak of the COVID-19 pandemic. The industry has witnessed a major shift in structure over the five years to 2021 and its revenue has struggled in the middle of major setbacks, including unfavorable trends in consumption of beer habits of major markets, which have weakened the global demand for beer over the last couple of years (primarily due to the health and logistics restrictions imposed by majority of governments as COVID control measures) (IBISWorld, 2021). Due to such unfavorable conditions and situations, majority of beer manufacturers have started resorting the strategy of expansion into emerging markets and they have also embarked on consolidation activities as such strategies have now become the major sources of new sales growth for the global beer manufacturing industry and most of its key players (IBISWorld, 2021). Moreover, with the influx of craft beer segment into the global industry, the beer manufacturing industry has increased its consolidation activities that have driven a higher market share concentration. Also, stagnation of beer consumption in major markets like China has also contributed to the fall of overall revenue of the beer manufacturing industry (IBISWorld, 2021). Besides, it has to be noted that in the past, prior to the advent of the COVID-19 pandemic, the global beer manufacturing industry used to operate smoothly through an effective supply chain, constituting ample number of suppliers and distributors, but the entire supply chain management and logistics have been affected by the COVID-19 restrictions explicitly, driving more digitalized operations, especially in sales of beer, via online platforms powered by e-commerce. The COVID-19 pandemic has affected the industry by restricting the operations of exporters of beer products through imposition of governmental import and export regulations and embargoes (Chouhan, Vig and Deshmukh, 2021). Moreover, the pandemic has also compelled the industry to experience a shift from offline to online sale of beer for the purpose of recovering from the losses and increase the customer reach and the customer base (Chouhan, Vig and Deshmukh, 2021). Furthermore, it has to be noted that the COVID-19 pandemic has affected the European beer market more devastatingly. In this respect, it has to be noted that in Europe, beer sale dropped by 42 percent from 126 million hectolitres in 2019 to 73 million hectolitres in 2020 (Arthur, 2021). Even though the off-trade beer sales slightly increased by 8 percent, the net effect fall by 9 percent (accounting for 34 million hectolitres) that have been triggered by COVID-19 trade embargoes and lockdowns across Europe has impacted the European beer production industry especially (Arthur, 2021). The locking down of pubs and bars across the globe and the restrictions in important and export of items, including beer, triggered by the COVID-19 pandemic also contributed largely to the fall in revenue of the global beer manufacturing industry.
Moreover, it has to be noted that the pandemic has also triggered massive digitalization of the global beer manufacturing industry. In this respect, it has to be noted that large breweries across the globe have already implemented the use of sensors and digitalization and technologies like Internet of Beer (IoB) are becoming more accessible for breweries of different scales, making digitalization a positive phenomenon for the global beer manufacturing industry (Violino, Figorilli, Costa and Pallottino, 2020). Low cost IoB smart technologies have also impacted positively on the sales of beer manufacturing companies because such technologies have facilitated online beer sales more prominently. Besides, it must be noted that innovations like IoB and explicit digitalization of beer sales have triggered the rise in the demand for beers across the globe with the lowering of COVID-19 restrictions (Globe Newswire, 2021). Moreover, being a normal good, the demand for beer increases with the increase in income, and as gradually with the decline in the virulence of the COVID-19 pandemic the global economy is recovering, triggering stability in individual income, the demand for beer is rising (Radcliffe, 2021).
Besides, to analyze the overall condition of the global beer manufacturing industry from the perspective of growth opportunities and confinements, it is essential to conduct a political, economic, social, technological, legal, and environmental (PESTLE) analysis of the industry.
From the political perspectives, it has to be noted that the success of the brewing companies in terms of revenue earning and profitability relies largely on the brewing process regulations and mandates imposed by different governments. Moreover, the imposition of occupation tax for the brewers that vary from one country to another also impacts largely on the key players within the global beer manufacturing industry. But stringent brewing laws and regulations, as political factors, also increase the chances of market expansion and profitability of established market players as such rules and regulations act as potential barriers to new entrants.
The market size of the beer industry is expansive with future forecast of more growth and expansion. Moreover, the emerging markets in South East Asia also provides economic advantages for the leading beer manufacturers, making its plausible for them to invest more in product differentiation and market expansion. Besides, reduction in the economic barriers emerging government subsidies in many countries to rejuvenate export and import during the waning of the menace of the COVID-19 pandemic will also provide opportunities to beer manufacturers to enter new and emerging markets in the long run, registering more benefits and profitability.
Shift in the social trend of consumption of light alcohol due to increase in work-related stress can be considered an important factor impacting positive on the sale of beer across the globe. Moreover, continuation of traditional beer consumption culture in countries like Australia, United Kingdom, etc. will continue to boos beer sale in those countries. Moreover, the change in the drinking habit triggered by the gradual increase in age of the millennials will also ensure that the sale and production of beer will continue to rise in the long run.
Innovation in technology will also pave the way for the beer manufacturers to enhance their customer reach. Cost-effective technologies like Internet of beer (IoB) will help beer manufacturing companies to digitalize their marketing and sales approaches unprecedentedly, paving the way for the increase in the levels of profitability for the global beer manufacturing industry manifold in the long run. Moreover, innovation and wider usage of technologies like e-commerce and social media will also proliferate the customer reach of beer manufacturers globally.
Stringent drinking laws across the globe in majority of countries have gradually been alleviating the risk of accidents caused by drinking and this means that the global legislations pertaining to restriction of the use of alcohol will continue to promote safer drinking, making it possible for beer manufacturers to promote their alcoholic products that are comparatively less potential than other alcoholic drinks. This will also boost the sale of beer in the long run.
The beer industry’s reputation of effectively recycling beer bottles will continue to impact positive on the environment, making it possible for majority of beer manufacturers worldwide to comply with specific environmental laws of specific countries of operation. Moreover, as many beer manufacturers are now establishing their own recycle product units, the negative impact of beer processing and production on the environment will be alleviated, leading more sales and revenue earning.
Porter’s Five Forces Analysis of the Beer Manufacturing Industry
|Intensity of rivalry||Low to Moderate||Price-based rivalry is almost nil as the rise in the cost of beer is largely due to inflation or other market reasons (Boeing et al., 2008).|
|Availability of substitutes||High||The rise in the consumption rate of wine and the rise in the purchasing power of the customers, making it easier for them to switch to other alcoholic drink of preference for feeling high, acts as a threat to the beer industry (Boeing et al., 2008).|
|Bargaining power of suppliers||Low||Large number of manufacturers and suppliers of brewing equipment catering to the needs of all scales of breweries makes the bargaining power of suppliers low (Boeing et al., 2008).|
|Bargaining power of buyers||Low||The primary buyers are the distributors whose numbers are gradually increasing, making it difficult for the buyers to have more power (Boeing et al., 2008).|
|Threat of new entrants||Low||Barriers for new entrants, ranging from stringent government regulation to cost of setting up a manufacturing unit, make new entries in the industry quite difficult (Boeing et al., 2008).|
Implications of COVID-19 on Carlsberg Singapore
Carlsberg SG, by the dint of having a high spending power, has been capable of effectively taking into account its revenue, growth, profitability, headcount, funding, technology procurement apart from taking into consideration other key signals and indicators of success (The Grid, 2021). Even though the business of the company has been highly affected by the COVID-19 pandemic, it is recovering steadily due to its pre-COVID-19 performance record that indicates how the company established a strong business presence in the Singapore market, revamping and enhancing its digital footprints, company size, and its revenue continuation (The Grid, 2021). The COVID-19 pandemic has changed the way Carlsberg SG had used to perform its business in the past with a smooth and expansive supply chain. Prior to the advent of the COVID-19 pandemic, Carlsberg SG used to rely largely on its conventional supply chain and logistics systems, including offline distributions that constituted a mammoth share of the company’s effective distribution system. But the COVID-19 pandemic thoroughly affected the direct distribution system of the company. In this respect, it has to be noted that infecting more than 20,000 people in the direct distribution system of the company, the COVID-19 pandemic compelled Carlsberg SG to resort to the process of digital transformation, looking for newer scopes for B2C through established e-commerce platforms. Moreover, the company has also embarked on the process of enhancing and restructuring its own website to propel more direct sales via online, eliminating the greater need of conventional intermediaries that complemented its direct distribution system in the past. Moreover, the conventional direct and intermediary distribution system of the company have been affected by the COVID-19 pandemic, owing to the fact that the pandemic has compelled the need for beer manufactures mostly in the ASEAN market to gain a foothold via local distributors, stepping up their game while pitching pricing and localizing strategies because Carlsberg SG has realized that the interest of launching newer products is gradually waning across the Carlsberg Group due to market stagnancy (Scattergood, 2021).Besides, the COVID-19 pandemic has also impacted on the virtual integration of the company to a large extent. In this respect, it has to be noted that during the pandemic the leaders and employees of Carlsberg SG were provided with virtual training and tools, thereby, making it possible for the company to embark on the process of virtual integration (complementing effective digital transformation) successfully (Carlsberg Group, 2021). It has to be taken into account that driven by a stronger performance in Singapore due to the capacity of Carlsberg SG to usher innovation in its digitalization and cost measures, the company has been gradually recovering from the financial fiascoes that the pandemic triggered globally (Business Today Editor, 2021). Along with a joint performance improvement in its Singapore and Malaysia operation, the Carlsberg Group, in 2021, experienced a 31 percent rise in volume of production, 29 percent rise in the revenue, and 40 percent rise in operating profit (Business Today Editor, 2021). Moreover, despite being hard-hit by the COVID-19 restrictions in the Malaysian market, resulting in lowering of profit and revenue, the Carlsberg Group was able to recover its strong market presence in Asia through its immaculate performance in the Singapore market. In this respect, Carlsberg Singapore performed well due to its strong growth in the off-trade and digitalization (Carlsberg Singapore Pte Ltd., 2022). But it has to be noted that the pandemic has affected largely the company’s vertical integration as it has limited the scope for the entire Carlsberg group to invest more/heavily in purchase and acquisition of local breweries (as the group used to do in the early 2000) due to the shutting down of majority of local breweries during the COVID-19 pandemic (Swinnen and Van Herck, 2010).
Considering the emergence of the “new normal” triggered by the COVID-19 pandemic, in the post-COVID era, it is recommended that Carlsberg SG should invest more in digitalization. It is also recommended that Carlsberg SG should invest more in online product promotion than investing much in conventional marketing and promotion measures. The company should strive to transform from a beer supplier to a collaborative partner, indulging in partner relationship with e-commerce and social media platforms to increase and enhance its customer reach in the long run (SQLI GROUP, 2022). In this respect, Carlsberg SG can resort to the RACE model. The company needs to increase its customer reach (R) online and for the same it needs to build on its brand awareness by driving in traffic to its main site via microsites and social media pages (Chaffey, 2022). Moreover, the company needs to interact (A) online explicitly by engaging in social media to generate leads through persuasion and immersion of attractive promotional contents and offers (Chaffey, 2022). For this purpose, for B2B, Carlsberg SG needs to generate leads and for B2C selling and promotion it needs to improve on its social media contents like product promotion blogs. Besides, the aforesaid steps should be followed by the step of conversion (C) of promotion to sale by involving the target audience in a way that they get convinced for online transactions via the company’s own e-commerce platform or its partner e-commerce platforms, like Amazon.com (Chaffey, 2022). Finally, Carlsberg SG needs to embark on the process of establishing long term engagement (E) with its online customers via engaging them in product development suggestions and feedback online, primarily on social media and social networking platforms (Chaffey, 2022). Sending direct emails demonstrating customer value proposition can also help the company in engaging its customers for long term.Moreover, complementing the process of effective and successful digital transformation, Carlsberg SG should strive for implementing the differentiation strategy so that the digital platforms can be optimally used as platforms for generating more diversified sales and perennial profit. Finally, Carlsberg SG, utilizing the power of social media should improve its electronic customer relationship management (eCRM) by enhancing its direct customer management systems online.
The report analyzed the impact of COVID-19 on the adoption and utilisation of digital technologies in the global beer industry, evaluating how Carlsberg Singapore has managed to cope and adapt during the pandemic and the implications for the company, including the impact on its supply chain, eCRM processes, etc; and the report discussed and recommended how the use of social media or social commerce can assist the company in addressing issues such as customer behaviour in the post-pandemic era.