Market Analysis of Craft Beer Industry in India and Brazil for Expansion of Cheers

India is a more attractive market for Cheers to expand into due to its high growth rate and profitability, and forming a strategic alliance with Bira is suggested as the entry mode.

Running head: MANAGEMENT
Management
Name of the student
Name of the university
Author note

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Executive Summary
This report had examined two countries, India and Brazil to analyse the market
attractiveness in terms of craft beer industry. Cheers, an Australian company wanted to make
an expansion in either of these countries. The situational analysis had identified threats and
risks that had clearly shown that India is more attractive and provides better opportunity of
success for cheers. The situational analysis of the both the countries had shown that the
market in India had been emerging but had experienced a growth rate of 40% which was
easily comparable to the growth rate of craft beer in Brazil. The majority of the demand in
Brazil was from normal beer and the competition in the industry is intense. This makes the
entry barrier quite high due to the high intensity of competition. The analysis of the data
clearly shown that India had matched up to every positive of the Brazilian craft beer industry,
even after being one of the emerging markets in terms of beer population. The report had
suggested that company should use market development strategy and strategic alliance as the
method of entering into India. The company should from alliance with Bira which is one of
the market leaders in craft beer segment in India. This would facilitate in competing with
multinational global companies in the Indian market.

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Table of Contents
Introduction................................................................................................................................3
Analysis of risks and opportunities............................................................................................3
Risk and opportunities in India..............................................................................................3
Pestle..................................................................................................................................3
Porter’s Five forces............................................................................................................5
Risks and threats in Indian market.....................................................................................6
Risk and opportunities in Brazil.............................................................................................8
Pestle..................................................................................................................................8
Porter’s Five forces............................................................................................................9
Risks and threats in Brazilian market...............................................................................11
The selected destination country..............................................................................................11
Proposed entry mode for India.................................................................................................13
Marketing strategy...................................................................................................................14
Human resource strategy..........................................................................................................15
Conclusion................................................................................................................................15
References................................................................................................................................17

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Introduction
This report will critically evaluate the potential risk and opportunities in two countries
India and Brazil. CHEERs is one of craft beer companies which has well established
themselves in the Australian beer industry. The company has not seen decrease in demand of
the product, even if the product prices have been increased. The company had increased their
growth significantly till 2015 but is experiencing stagnancy in the Australian market. The
company wants to expand and explore new markets. The report will provide a detail
explanation of the suitable market for expansion along with valid reasons for choosing the
market. The report will also decide on the marketing strategy to be implemented to
successfully penetrate into a foreign market. The amount of human capital required for
achieving the target will also be discussed in brief.
Analysis of risks and opportunities
Risk and opportunities in India
Pestle
Political The political stability of India is high and has a stable government. The
most important factor that affects the BEER industry is the regulatory
policies implemented by the government. The incorporation of GST
(good and service tax in India has increased the overall cost of raw
materials (IndiaFilings 2019). The taxation policies earlier included VAT
(value added tax) and Excise duty which was around 15% on the overall
cost. However, GST has increased the tax on cost of brewing to 18%
which means that there has been significant increase in the price of
finished products (Phadke 2018). Moreover, there is ban on advertising
alcoholic drinks along with restrictions of licensing. These factors may

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act as barriers to entry for CHEERS.
Economic The economy of the country is booming and there has been significant
growth in the market. The growth of the country is highest and moving at
a faster pace than China in the current market. The sales of Beer is
expected to increase by at least 7.5 in the next 5years. The Craft beer is
still emerging in the country and there has been 20 percent increase in
sales of craft beer (Aravind 2018). This can be very understand by the
emergence of more than 80 microbreweries in the Indian market.
Social There has been significant increase in the disposable income of the
population due to the high growth of the economy. This has positively
affected the beer drinking culture of the population and it is expected to
increase further in the upcoming years (The Beer Connoisseur 2018).
The overall beer drinking will still increase as majority of the population
belong to the millennial generation.
Technological Technological infrastructure in India is high where latest technological
infrastructure is available at smaller cost when compared to the other
developed nations (Aravind 2018). India has the capability of producing
beer and distributing it effectively and the overall cost is low when
compared to the other countries.
Ecological The environmental laws in the country are strict where water
consumption and wastewater disposal are major concerns for brewing
companies (Hps-pigging.com 2019). These laws will significant affect
the business of the company if they want to manufacture and sell their
products in the market.
Legal Indian government has passed a law which banned selling of liquor on

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restaurants, retail outlets and bars within 500m of the national highway
(Phadke 2018). This has highly impacted the business of many
organization and the taxation policies keep of changing which affects the
overall operation of any brewery in the country.
Table 1
(Source: Barik and Kumar 2018)
Porter’s Five forces
Competitive rivalry The market of beer is quite competitive in India and the
craft beer market is still emerging. However, many
mainstream companies are entering into the craft beer
market to compete with companies Bira91 brand. UBL
(United Breweries Limited) are entering into the craft
beer market (Govind 2018). However, the number of
microbreweries are increasing in the market but the
competition rivalry is still moderate as the market is still
emerging with high growth opportunities.
Buying power of the buyer The bargaining power of the buyers are still low in the
industry due to the availability of less popular brands in
the market (Vaz de Almeida Advogados 2017). The
market for craft beer is niche and there are minimum
companies providing craft beer to the consumers.
Buying power of the
suppliers
The bargaining power of the suppliers is low in the
industry due to the availability of large number of
suppliers and the companies tend to make purchase from

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numerous suppliers in the market.
Threat of new entrant The threat of new entrant in the market is low due to free
trade. The market is still emerging so the level of
competition is comparatively low. Even though there are
certain barriers regarding regulations and licensing, it is
significantly easier to penetrate into the Indian market.
Threat of substitution The threat of substitution in the market is high due to the
availability of the large number of alcoholic beverages.
The demand of other alcoholic products is still high when
compared to the other products such as beer and craft
beer. The majority of the population still prefers alcohol
drink that other drinks in the market. The soft drink
market is also highly popular which also acts as a
substitute for the products offered by craft beer
companies.
Table 2
(Source: Mathooko, F.M. and Ogutu 2015)
Risks and threats in Indian market
Opportunities Threats
 Emerging market for Craft beer
 Rapid increase in growth in the
market
 Political stability
 Strict regulations on promotion of
alcohol
 Increase in GST on the brewing to
18%

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 Increase in disposable income of
population
 Good technological infrastructure
 Ban on selling liquor on retail
outlets, hotels and restaurant within
500m of national highway.
Table 3
(Source: As created by author)

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Risk and opportunities in Brazil
Pestle
Political The political stability of the country is high at the current moment.
However, at times of elections, things get heated up which may cause
instability in future years. Corruption is an issue which has been
prevalent in the country and new companies face issues in starting up
new businesses. The tax on brewers have increased in the past few years.
The government has been strict and sensitive about the advertisements
the companies use to brand their products (Vaz de Almeida Advogados
2017). As per the Brazilian Government, regulations and safeguard
warnings are mandatory for alcoholic products.
Economic The economy of the country is developing and recently Brazil has picked
up the pace due to the inflow of FDI. The potential growth of the country
is very high and risk of currency devaluation has been reduced
considerably in the past few years. The inflation rate has not gone up
recently and it has been under control. The growth in the craft beer
market is also high and there has been 25% increase in registered
breweries in the country (Release 2017). The sales of craft beer has
increased by 40% and contributes around 1% beer sales nationally.
Social The social culture shows that Brazil is the third largest consumer of Beer
in the world behind China and United States (Release 2017). Brazil
consumed 14 billion litres of beer in the year of 2016, which shows that
market in brazil has been growing eight times faster than the
conventional markets. The craft beer industry in Brazil is expected to
enjoy exponential growth for some time due to the traditional passion

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towards beer and country aligned to warm weather conditions.
Technological In terms of technological advancement, Brazil has been lagging behind
most of the developing countries (Vaz de Almeida Advogados 2017).
They have a weaker technological infrastructure but they are growing
rapidly and making progress. The information technology sector has
shown exponential growth in Brazil but there is a huge margin of
improvement.
Ecological The government has a strict restriction on ecological regulations for
brewing. The companies go through stages of licensing such as
preliminary licensing, installation licensing and operation licensing
(Content.next.westlaw.com 2019). These permits have a specific time
and have to be renewed. Water contamination is one of the major
concerns of breweries and needs licenses for using water effectively.
Legal In terms, legal regulations, the government has strict policy of advertising
content regarding alcohol where they can only be aired between 9 pm to
6 am. The tax rate on brewing is as high as 18% which is quite high
when compared to that in other countries (Rocha and Rollo 2016).
Licensing is another concern for the breweries.
Table 4
(Source: Barik and Kumar 2018)
Porter’s Five forces
Competitive rivalry The competitive rivalry in the industry is high due to the
presence of more than 600 breweries in the country other

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than companies serving normal beer (Vaz de Almeida
Advogados 2017). Beer is exported from United States
and majority of the companies are focus on beer
manufacturing as it is the most consumed drink among
the population.
Buying power of the buyer The bargaining power of the buyers are high due to the
availability of huge number of options in the market. The
beer market in Brazil is large with the presence of all
multinational companies offering their products. The
growth in the craft beer industry is 40% but still it only
contributes to only 1% of the total beer consumption in
the country.
Buying power of the
suppliers
The bargaining power of the suppliers are low as there
are numerous suppliers available in the market.
Generally breweries deal with numerous suppliers to
purchase their raw materials which affects the bargaining
power of the suppliers.
Threat of new entrant The threat of new entrant in the market is moderate due
to the potential growth of the Brazilian market and inflow
of foreign direct investments. It is easier to open up
breweries due to the free trade and huge market for beer
in the country.
Threat of substitution The threat of substitution is low in the country as the
culture of country has defined beer as the most favoured
drink in the country. The majority of the population

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having beer more than any other drink due to the warm
weather conditions.
Table 5
(Source: Mathooko, F.M. and Ogutu 2015)
Risks and threats in Brazilian market
Opportunities Threats
 Rapid growth in the Craft beer
market
 Political stability
 Increase in disposable income of
population
 Population, culture and weather that
drives the nation towards Beer and is
the most consumed alcoholic
beverage
 High number of breweries and
companies in the market
 High taxation on brewing which will
consist of developing
 Corruption is high and there is lack
of transparency in the government
 Technological infrastructure is low
Table 6
(Source: As created by author)
The selected destination country
Criteria India Brazil
Market Size 1% of the total beer market 1% of the total beer market
Market Growth rate Growth of 40% per year Growing by 40% and
experiencing exponential

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growth
Market profitability High profitability in the
market
High profitability in the
market
Competitive rivalry Low Moderate
Table 7
(Source: As created by author)
The above matrix clearly shows that India and Brazil are quite similar in terms of
numbers but the numbers are not reflecting the actual situation in the market. India should be
chosen as the suitable market for entry. This is because of the fact that, India has still an
emerging market for craft beer where there are less number of players in the market. The
demand of the craft beer is growing exponentially but has only 80 registered breweries in the
country. Bira is the only company that has been able to develop a good brand and penetrate
the market. This shows that competition in the beer industry is quite low and the market is
still untapped. The craft beer industry in Brazil is also untapped when compared to the
normal beer industry in the country. However, the competition has increased in the past years
and the level of the competition in the market is quite high with at least 600 registered
breweries serving craft beer. Moreover, the majority of the population is more oriented
towards draft beer. Cheers would be able to capitalize to India in a better way due to
accessibility and trade relationship between the countries. It will be easier for the company to
grab the market where the competition is very low and the market is still emerging in nature.
The level of risk in the Indian market is comparatively lower for Cheers when compared to
Brazil as the competition is high.

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Proposed entry mode for India
There are mainly five modes of entry used by countries while entering a new market
and they are exporting, strategic alliance and partnership, Greenfield venture, acquisition and
licensing, and franchising (Murphy 2018). However, based on the current situation of the
company and the size of the company, it can be said that exporting and strategic alliance are
two most suitable modes of entry for the company. This is because of the fact that risk of
entering into the foreign market is low. Licensing and franchising can also be considered as
one of the suitable options in terms of risk factor. Licensing, franchising and exporting
provide fast entry into foreign markets but the company does not have any control on the
operation in the foreign market.
The ideal strategy to enter into the Indian market is Strategic alliance and partnership
with local companies (Greer 2018). The Australian company does not have any knowledge
regarding the products and current demands in the market so forming strategic alliance will
provide the opportunity of using the expertise of the local company to penetrate in the
market. The best option for the company would be to form an alliance with Bira which is one
of the most recognized craft beer brands in the country. The market for craft beer is still
limited in the country but there has been significant changes in the behaviour of the
consumers. The majority of the population are youth so the growth opportunity is very high.
Bira has already been successful in catering to the target consumers and have a strong market
share with expert knowledge regarding the needs and wants of the consumers. Cheers and
Bira are both smaller firms when compared to the major companies like UBL (United
Breweries limited). Therefore, in order to compete with the global players in the market, this
strategic alliance would be one of the most suitable mode of entry.

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Marketing strategy
Ansoff matrix has been used to develop a marketing strategy for entering into the
Indian market. The four main strategies used by companies while entering into a new market
are market penetration, product development, market development and diversification
(Gurcaylilar-Yenidogan and Aksoy 2018). However, the suitable strategy for entering into
the market is product development where firms introduce new product into the existing
market. There are limited number and amount of Craft beer products in Indian market and
market development will facilitate in catering to the new consumers in different countries
with the existing product lines. Cheers have been catering to their own market for
considerable amount and have the expertise and technological skills to enter new markets.
The disposable income of the population are increasing which means that the Indian market is
emerging in nature. The behaviour of the consumers in the new target market are quite
similar so this will facilitate in catering to the untapped market.
Companies evaluate few factors before entering into new market such as market
attractiveness, resource availability, adaptability to new market and competitive advantage.
The evaluation of the two markets show that India is very attractive in terms of economic
growth and craft beer industry. The market is still emerging and entering into the market as
this point of time would prove to be quite beneficial for the company. Cheers have the
adequate resources to enter in a new market and moreover, the strategic alliance would
provide them with additional resources which would help them in strengthening their base in
India. The company can adapt to the needs of the market in India by using the expertise and
knowledge of the partner company (Malysheva et al. 2016).

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Human resource strategy
The work culture of different countries are diverse due to the cultural environment
and social values (Brewster et al. 2016). The working culture in Australia is different from
the working culture in India. The employees in Australia do not work on weekends and they
start early and finish early. On the contrary, the employees in India start late and no problem
in working late. In order to reduce the overall cost of expansion, it is necessary to hire local
employees which will reduce the cost of human resources. The partner in India already has
considerable amount of workforce and infrastructure. Cheers only needs to make addition to
the existing workforce comprising of local employees. However, the organization needs to
send some of their managers and employees to the foreign countries as they want to make
sure they keep the basic elements of the products same and customization is only done
according to the needs of the foreign market. This will also facilitate in making the partner
organization understand the core values and practices of Cheers to the employees and the new
partners. This will facilitate in developing effective brand where co-branding can be used
successfully to address the target consumers. The company will hire 30 new employees in the
Indian market and will send 5 employees and 2 managers that will help in setting up the new
alliance in India.
Conclusion
The analysis of the two market has clearly shown that India as a market is more
attractive than Brazil, even though the beer drinking culture in Brazil is more prevalent. The
risk of entering the Indian market is quite less when compared to the Brazilian market. The
situational analysis of the both the countries have shown that the market in India is still
emerging but have experienced a growth rate of 40% which is easily comparable to the
growth rate of craft beer in Brazil. The majority of the demand in Brazil is from normal beer
and the competition in the industry is intense. This makes the entry barrier quite high due to

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the high intensity of competition. On the contrary, the Indian market is growing and almost
untapped and provides less competition. The growth in the craft beer industry is expected to
go even further due to the steady increase in disposable income of the population in India.
The company should use market development as the mode of entry and local employees to
develop sustainable competitive advantage in the Indian market.

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