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Getting beer to the drinkers

Updated Tuesday 20th November 2007

Distribution can be a problem for companies that want to increase their market sales.

In Last Orders for Guinness we see a company grappling with declining sales. Guinness has chosen innovation, in the shape of Guinness Red, as a strategy to reverse its fortunes, but what other avenues could it explore?

One possible strategy is to look to new territories for salvation. Guinness is very popular in Europe, in the US and in parts of Africa, particularly Nigeria. That still leaves sizeable swathes of the world with potential for growth. But there’s a big stumbling block with this strategy: distribution.

If you brew beer centrally, in Dublin for instance, how do you actually get it to market? Well, tankers sail it across to Britain, and when the beer arrives it’s loaded into lorries and distributed across the country. Waiting for a beer delivery Creative commons image Icon Lars Ploughman under CC-BY-SA licence under Creative-Commons license Waiting for a beer delivery in the cellar of The King's Arms, south-east London

But what if this ‘distribution network’ didn’t exist? If Guinness wants to sell to a developing economy, and the infrastructure doesn’t exist in the way that it does in Europe, then they would have to think again about how to service the market. It’s relatively easy to build and operate a brewery, but getting the product to the consumer can be difficult.

Consider the South African market, for example. One reason why SABMiller have a virtual monopoly there is because they’ve got a well established distribution chain going into the townships. It’s difficult for other companies to replicate and therefore compete with them in this environment.

One way to obtain access to a distribution network is to join forces with a company that’s already built one. For example, in 2004 the Belgian company Interbrew and the Brazilian company AmBev merged, creating InBev. This hook-up allowed InterBrew to use Ambev’s distribution channel to sell beers such as Becks or Stella Artois to Brazil. Likewise, Ambev gained access to the European market for its Brazilian Beers.

There are other, more creative ways, to gain distribution capability. There’s one company in Denmark, for example, that uses a meat distributor in Italy to reach its target market: restaurants in Italy. Guinness may have to think outside the box in a similar fashion if it decides to expand overseas.

Take it further

  • Video extras - do things look black for Guinness?
  • Competitive advantage - how can companies ensure they've got a lead over their competitors?
  • Last orders for Guinness - after years of falling sales, Guinness fights back with new stouts and adverts
  • When there’s nowhere to go but each other’s arms - the global brewing business is going through another of its spasms of consolidation
  • 'Strategic alliances in international distribution channels' by Rajiv Mehta, Pia Polsa, Jolanta Mazur, Fan Xiucheng and Alan Dubinsky, published in the Journal of Business Research.
  • Transforming Your Go-to-Market Strategy: The Three Disciplines of Channel Management by V Kasturi Rangan and Marie Bell, published by Harvard Business School Press
  • Gaining and Sustaining Competitive Advantage by Jay Barney, published by Prentice Hall
 

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