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5 Porter Force in the Beer Industry


Submitted By jabarrera
Words 4049
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Five Force Analysis:

Supplier Power
The beer market’s prime suppliers are farmers. Most breweries buy their supplies on the relevant countries’ futures exchange. Hence the branch has an opportunity to diversify its risk by trading futures contracts as well as hedging other risks.
Various farmers supply the hops, barley, corn and rice used to produce beer. In 2008, there were 2,053 companies that purchased these ingredients. The overall beer industry sold nearly 206 million barrels of beer in 2009.
For major brewers, the volume of ingredients purchased, the large number of farmers available to purchase the ingredients from, low switching costs on the part of the brewer, and inability of the farmers to forward integrate, supplier power in considered low in regard to the major brewers.
Craft brewers who purchase fewer ingredients and sometimes more specialized ingredients may cause supplier power for this segment of the industry to be somewhat higher; yet, overall, suppliers have put limited pressure on price and supplier power is LOW.
There are only a few large suppliers of aluminium cans, plastic and glass bottles, which increase the supplier’s bargaining power. However, taken into consideration largest brewery companies existing we can assume that the suppliers of those goods have a incentive in taking care those as a customer and will therefore provide them with the best possible price, in order to keep them as a customer.
Competitive pressure from supplier bargaining power is considered to be generally low with respect to the industry as a whole. However, due to the high commodity raw material exposure—around 58% of industry cost of goods sold—which include packaging (glass/aluminum/cardboard), barley, sugar, malt, corn, rice, wheat, hops and preservatives, so the uncertainty regarding cost swings is high.
Suppliers of these materials would include hops and

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