By Alex Correa, Stephanie Lau, Jason Marder , Lindsay Rosenstein, and Jesse Torchetti

1. The Beer Industry By Alex Correa, Stephanie Lau, Jason Marder, Lindsay Rosenstein, and Jesse Torchetti

2. Agenda • Choice of Industry • Industry Structure • Competitive Landscape • Survey • Regulation • Pricing Strategies • Analysis and Recommendation

3. WHY THE BEER INDUSTRY? • Relevant topic for college students • Active purchasers and consumers • Undergoing major transformations • Mergers and Acquisitions • Perfect example for price examination

4. Industry Structure

5. Industry at a Glance Revenue: Growth 07-12 Growth 12-17 $156.5 BN 1.8% 3.64% Wages Employment Enterprises $9.7 BN 472,593 5,216 |Major Players| |Survey| |Pricing Strategies| |Analysis and Recommendation| |Industry Structure| |Competitive Landscape| |Regulation|

6. Supply Chain Raw Materials Brewing Distribution End User • Outsource non-core functions: logistics, warehousing |Major Players| |Survey| |Pricing Strategies| |Analysis and Recommendation| |Industry Structure| |Competitive Landscape| |Regulation|

7. Production |Major Players| |Survey| |Pricing Strategies| |Analysis and Recommendation| |Industry Structure| |Competitive Landscape| |Regulation|

8. Main products |Major Players| |Survey| |Pricing Strategies| |Analysis and Recommendation| |Industry Structure| |Competitive Landscape| |Regulation|

9. Sales via Market Segments- Globally |Major Players| |Survey| |Pricing Strategies| |Analysis and Recommendation| |Industry Structure| |Competitive Landscape| |Regulation|

10. International Trade • 6.3% of industry revenue in 2011 • Exports medium and increasing • Imports medium and increasing • Demand in developed and emerging markets for premium beers not produced in home country • Differences in taste preferences |Major Players| |Survey| |Pricing Strategies| |Analysis and Recommendation| |Industry Structure| |Competitive Landscape| |Regulation|

11. Cost Structure Profit = 11.4% of EBIT |Major Players| |Survey| |Pricing Strategies| |Analysis and Recommendation| |Industry Structure| |Competitive Landscape| |Regulation|

12. Looking at the Global Scale |Major Players| |Survey| |Pricing Strategies| |Analysis and Recommendation| |Industry Structure| |Competitive Landscape| |Regulation|

13. Revenue Performance Rev. ($MM) |Major Players| |Survey| |Pricing Strategies| |Analysis and Recommendation| |Industry Structure| |Competitive Landscape| |Regulation|

14. Industry – At a Closer Look Y-O-Y % change |Major Players| |Survey| |Pricing Strategies| |Analysis and Recommendation| |Industry Structure| |Competitive Landscape| |Regulation|

15. Industry – At a Closer Look Y-O-Y % change |Major Players| |Survey| |Pricing Strategies| |Analysis and Recommendation| |Industry Structure| |Competitive Landscape| |Regulation|

16. Industry – At a Closer Look Y-O-Y % change |Major Players| |Survey| |Pricing Strategies| |Analysis and Recommendation| |Industry Structure| |Competitive Landscape| |Regulation|

17. Industry – At a Closer Look Y-O-Y % change |Major Players| |Survey| |Pricing Strategies| |Analysis and Recommendation| |Industry Structure| |Competitive Landscape| |Regulation|

18. Industry – At a Closer Look Y-O-Y % change |Major Players| |Survey| |Pricing Strategies| |Analysis and Recommendation| |Industry Structure| |Competitive Landscape| |Regulation|

19. Drivers of the Market • Age Group (15-34) • Downstream Demand- Drinking Places • Taxes and Duties on Substitutes • Per Capita Disposable Income • World Price of Aluminum |Major Players| |Survey| |Pricing Strategies| |Analysis and Recommendation| |Industry Structure| |Competitive Landscape| |Regulation|

20. Competitive Landscape

21. Competition with other Industries |Major Players| |Survey| |Pricing Strategies| |Analysis and Recommendation| |Industry Structure| |Competitive Landscape| |Regulation|

22. Decline Stage of its Life Cycle • Value added growth is below global GDP growth • Enterprise numbers are declining • M&A • Only moderate technological advances • Static per capita consumption |Major Players| |Survey| |Pricing Strategies| |Analysis and Recommendation| |Industry Structure| |Competitive Landscape| |Regulation|

23. Operating Conditions- Global • HIGH level of capital intensity • MEDIUM level of technology change • MEDIUM volatility of industry revenue • MEDIUM level of regulation • Predicted to increase • MEDIUM level of industry assistance • No tariffs HIGH BARRIERS TO ENTRY |Major Players| |Survey| |Pricing Strategies| |Analysis and Recommendation| |Industry Structure| |Competitive Landscape| |Regulation|

24. Barriers to Entry • High sunk cost and capital requirements. • Tight control over distribution channels by existing players. • High levels of brand loyalty. HIGH and STEADY |Major Players| |Survey| |Pricing Strategies| |Analysis and Recommendation| |Industry Structure| |Competitive Landscape| |Regulation|

25. Major Players

26. Global Market Share |Major Players| |Survey| |Pricing Strategies| |Analysis and Recommendation| |Industry Structure| |Competitive Landscape| |Regulation|

27. Industry Concentration Global HHI = 839 US HHI = 3629 BUT |Major Players| |Survey| |Pricing Strategies| |Analysis and Recommendation| |Industry Structure| |Competitive Landscape| |Regulation|

28. Anheuser-Busch InBev • Brands: Beck’s, Brahma, Hoegaarden, Leffe, Skol, Stella Artois, Tennents, Budweiser • InBev acquired Anheuser-Busch in 2008 •  World’s largest brewer |Major Players| |Survey| |Pricing Strategies| |Analysis and Recommendation| |Industry Structure| |Competitive Landscape| |Regulation|

29. SABMiller plc • Brands: Amstel Lager, Castle, Miller Genuine Draft, Miller Lite, Pilsner Lite, NastroAzzurro, PilnerUrquell • South African Breweries acquired Miller Brewing Co. in 2002 |Major Players| |Survey| |Pricing Strategies| |Analysis and Recommendation| |Industry Structure| |Competitive Landscape| |Regulation|

30. Heineken N.V. • Brands: Heineken, Amstel, Murphy’s, Sagres, Maes, BirraMoretti, Cruzcampo, Ochota • Sells more than 200 international premium, regional, local, and specialty beers and ciders |Major Players| |Survey| |Pricing Strategies| |Analysis and Recommendation| |Industry Structure| |Competitive Landscape| |Regulation|

31. Carlsberg A/S • Brands: Carlsberg, Baltika, Elephant, Holsten, Okocim, Kronenbourg, Tuborg • Several smaller brands within limited geographic regions |Major Players| |Survey| |Pricing Strategies| |Analysis and Recommendation| |Industry Structure| |Competitive Landscape| |Regulation|

32. Survey

33. Sample Size • 145 Respondents • 42 % Male; 58% Female • Graduating year • 26% in 2012 • 24% in 2013 • 31% in 2014 • 19% in 2015 |Major Players| |Survey| |Pricing Strategies| |Analysis and Recommendation| |Industry Structure| |Competitive Landscape| |Regulation|

34. How often do you purchase beer? 47% |Major Players| |Survey| |Pricing Strategies| |Analysis and Recommendation| |Industry Structure| |Competitive Landscape| |Regulation|

35. How many people do you generally purchase beer for? |Major Players| |Survey| |Pricing Strategies| |Analysis and Recommendation| |Industry Structure| |Competitive Landscape| |Regulation|

36. Where do you buy beer? |Major Players| |Survey| |Pricing Strategies| |Analysis and Recommendation| |Industry Structure| |Competitive Landscape| |Regulation|

37. What brand of beer do you buy most often? |Major Players| |Survey| |Pricing Strategies| |Analysis and Recommendation| |Industry Structure| |Competitive Landscape| |Regulation|

38. Shopping for Beer in Ithaca |Major Players| |Survey| |Pricing Strategies| |Analysis and Recommendation| |Industry Structure| |Competitive Landscape| |Regulation|

39. How do you decide what type of beer to buy? 72% |Major Players| |Survey| |Pricing Strategies| |Analysis and Recommendation| |Industry Structure| |Competitive Landscape| |Regulation|

40. Other Reasons for Beer Choices • “Habit” • “Depends if I’m buying for a group or simple enjoyment. blue moon for just myself coors / keystone for parties.” • “COUPONS” • “Tradition” • “It’s what my friends get” |Major Players| |Survey| |Pricing Strategies| |Analysis and Recommendation| |Industry Structure| |Competitive Landscape| |Regulation|

41. Take a Look: Collegetown vs. Ithaca • Collegetown • Jason’s • Wilson Farms • Ithaca • Wegman’s • Tops |Major Players| |Survey| |Pricing Strategies| |Analysis and Recommendation| |Industry Structure| |Competitive Landscape| |Regulation|

42. Shopping for Beer in Ithaca Proximity Comparison- Wegmans and Tops |Major Players| |Survey| |Pricing Strategies| |Analysis and Recommendation| |Industry Structure| |Competitive Landscape| |Regulation|

43. Shopping for Beer in Collegetown Proximity Comparison- Jasons and Wilson Farms |Major Players| |Survey| |Pricing Strategies| |Analysis and Recommendation| |Industry Structure| |Competitive Landscape| |Regulation|

44. Regional Pricing • Prices vary between urban and rural areas and within broad US regions • Lower prices are found in neighborhoods with low to moderate income • In general:The larger the store, the lower the beer prices |Major Players| |Survey| |Pricing Strategies| |Analysis and Recommendation| |Industry Structure| |Competitive Landscape| |Regulation|

45. Regulatory Framework

46. Regulations - Distribution • 3 tier system mandated by government |Major Players| |Survey| |Pricing Strategies| |Analysis and Recommendation| |Industry Structure| |Competitive Landscape| |Regulation|

47. Regulations – U.S. HEAVY and STEADY • Vary from State to State • Bureau of Alcohol, Tobacco Firearms and Explosives (ATF) • Interstate movement of alcohol regulations • Tax and Trade Bureau (TTB) |Major Players| |Survey| |Pricing Strategies| |Analysis and Recommendation| |Industry Structure| |Competitive Landscape| |Regulation|

48. Regulations - Taxes • Federal excise tax • $18/barrel (31 gallons) • NY State excise tax • $3.72/barrel • NYC excise tax • $4.34/barrel • $26.06 per barrel • 84.1¢ per gallon • 8¢ per 12 oz. can or bottle |Major Players| |Survey| |Pricing Strategies| |Analysis and Recommendation| |Industry Structure| |Competitive Landscape| |Regulation|

50. Pricing Strategies