Craft Beer Market Expansion Analysis

This report analyzes the potential expansion of Cheers Company, a craft beer business from Australia, into Brazil and India. It evaluates the risks and opportunities in both markets, concluding that Brazil presents a more favorable environment for growth. The report discusses cultural aspects, government regulations, market size, and economic conditions, ultimately recommending Brazil as the preferred location for expansion.

Running head: CRAFT BEER
Global Business
[Craft Beer]
Name of the student:
Name of the university:
Author note:

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Executive summary
This paper presents a brief study on few nations India and Brazil. The context of discussion
was the expansion of a small brewing business led by Cheers Company in Australia. With
some recent drop in sales, the company has decided to expand to another potential market.
The paper has produced a comparative study on the two shortlisted nations to decide the best
destination to switch for the business. The paper has proved with some valid reason that
opening a new venture in Brazil would be more advantageous for the Cheers Company.

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Table of Contents
Introduction................................................................................................................................4
Analysis of risk and opportunities..............................................................................................5
Risks in Brazil........................................................................................................................5
Legal & cultural aspects.....................................................................................................5
Government regulations.....................................................................................................6
Financial/currency risks.....................................................................................................6
Opportunities in Brazil...........................................................................................................7
Market size.........................................................................................................................7
Economic growth...............................................................................................................7
Trade agreements between the two countries....................................................................8
Risks in India..........................................................................................................................8
Legal & culture..................................................................................................................8
Government policies..........................................................................................................8
Finance/currency related....................................................................................................9
Opportunities in India............................................................................................................9
Market size.........................................................................................................................9
Economic growth...............................................................................................................9
Trade between India and Australia..................................................................................10
Selection of one country...........................................................................................................10
Justification of the decision..................................................................................................10

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Recommended entry mode.......................................................................................................10
Justification for the recommendation...................................................................................11
Conclusion................................................................................................................................12
References................................................................................................................................13

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Introduction
Craft beer has potential market all across the globe specifically in few nations such as
the United States of America, Brazil, Canada and Australia etc. Craft brewers are mainly
responsible for large market expansion of Craft beers. They are independent and have
traditional style of making raft beers. They understand the needs of local consumers, which is
why they are different to large brewers. Interestingly, many large brewers are in hunt to
acquire small Craft brewers to redefine their position in the market. They have shown such
interest because the demand for craft beers is high in international market. The American
Craft brewers interestingly do not wish to export the beers to the international locations
because they know that they would not be able fulfil the high demands for Craft beers. It is
beyond their capability to meet with the demands (Murray and O'Neill 2012).
This particular assignment is on a small company Cheers based in Australia. Five
business graduates of the Southern Cross University started a small business in Australia after
identifying the potentiality for the concept in the country. They fetched up good success as
well. However, they have been tested in recent times as the profitability of the business has
been reduced considerably. They felt that it is better to switch some other potential countries
such as India and Brazil, so that, they could become global and enhance the profitability of
their business.
The main purpose of this assignment is to analyse the best possible selection for the
Craft beer for the Cheers Company. In doing so, this assignment would first analyse the
probable risks and opportunities in the target countries. Then it would recommend the best
entry mode for the company.

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Analysis of risk and opportunities
The expansion of the business in Brazil and India might bring some risks as well
along with the probable opportunities in both the countries. The following section would
cover the study on the risks and opportunities that might be available for the company in the
two selected locations India and Brazil.
Risks in Brazil
Legal & cultural aspects
Culturally, Brazilians are very sound lover of beers. They learning to drink and
understand the beer. They do not just drink it but they want to taste this with their different
dish. Microbrewers have created such scenario in the country, which has also forced large
brewers to think on their beer making philosophy. In the last two decades, Brazilians have
developed themselves not only as a drinker but as a learner as well. The availability of Craft
beer is limited, which has also produced an enormous prospect for the product in Brazil.
Furthermore, they are learning to understand what they drink, which is another positive
aspect that might produce a potential market for the Craft beers. One of the catchiest things
about the Brazilians is they use traditional way of manufacturing the Craft beers. It is
expensive to have some necessary imported ingredients required while manufacturing the
Craft beers. It gives lot of place to accommodate and operate locally. Additionally, Brazilians
are fond of beers, which they also reflect through beer festivals. Through this festival, they
show their cultural addiction with the beers. They also have a significant Craft beer festival
held in Blumenau on yearly basis (Piacentini et al. 2017).
The legal proceedings have also now become favourable for Craft beers in Brazil.
This can be easily understood from the fact that using alcohol while during a football match
as banned in Brazil. The ban had been lifted in the year 2012 by the local government of

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Brazil, which means that they have seen some prospects in the beer business. Nevertheless, it
is a potential business in many countries, which is hugely influencing the economy of that
particular country. This change just shows that this might be an approach towards economic
betterment. The ban was imposed after witnessing some cases of violence during the world
cup matches. It was just a move to put some limitation on such activities. However, with the
effect of FIFA, the local government of the country had lifted such a prolonged ban over the
use of alcohol while during the football matches. According to FIFA, world cup without beer
is unimaginable. Brazilians have high passion for Football matches, which is why the lifting
of ban would open up a huge space to numerous beer manufacturers (Caetano, Pinsky and
Laranjeira 2012).
Government regulations
The local government regulations have been in an unregulated form, which can be
challenging for a new business in this country. Brazil is the third largest market in the world
for beer. This simply tells the fact that beer is highly consumed in Brazil. However, it is also
interesting to analyse why the local government of Brazil is so strict with the consumption of
beer. Some of the reasons have forced the local government to thing that way. Those reasons
are rising accident cases because of drunk drivers, increased consumer’s aggressiveness etc.
This is because of such reason the local government of Brazil has always tried to discourage
the consumption of beer in the country. They have done so by imposing high taxes on the
products and restricting the advertisement of beer. Interestingly, this had occurred with a
country, which is one of the largest markets for advertising campaigns (Laranjeira and
Mitsuhiro 2012).
Financial/currency risks
Politics is a threat for potential investment in this country. Despite the facts that it is
largest exporter of orange juice, coffee, iron ore, sugar, beef and second largest exporter of

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soybean, the country has become a challenging place for a potential investment. The dirty
politics in the country has hampered the investments in big numbers. According to a survey,
the Brazilian government’s debt is set to increase, which would produce an uncontrollable
situation for the government. In such situation, the Brazil government would leave with very
few options to recover from the debts. One of such solutions would be to impose a high tax
on business and goods. This means the investments in such circumstances might hamper the
gross profitability. Nevertheless, this would be a point of concern for a new foreign business
in the country (Forbes.com 2017).
Opportunities in Brazil
Market size
Brazil is one of the biggest markets for beer. They are the third largest markets for
beer in the entire world. People living in the country are passionate about beer, which they
also show in few beer related cultural festivals in the country. The passion for beer in the
country and the lifting of bans on beer consumption has collectively produced a supportive
environment for a new beer venture in the country (Cabras, Higgins and Preece 2016).
Economic growth
Real GDP has declined in comparison to 2013 status; however, the inflation has
reduced, which would provide a better platform to recover the investment. Trade barriers are
still very high; however, some modifications in the government rules might welcome a
significant growth for the future business. They are also giving efforts to reduce the strictness
of the administrative power. They are also making huge investments in improving the
infrastructure, which is a good sign for the foreign investors. Additionally, they are trying to
develop the country as a more open economy (Oecd.org 2017).

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Trade agreements between the two countries
As of 2017, nothing less than eight treaties have been signed in between Australia and
Brazil for many things, which also include trade.
Risks in India
Legal & culture
Culturally, Indians are now getting used to beer consumption. They are now learning
the ways to understand the different taste of beers. One thing is very interesting in this
country, which is a creative bonding between the beer companies and the home brewers. This
is such a collaboration, which the local brewers have never imagined. This would provide an
exploring capability to the Craft brewers. People living in bigger cities in India have now put
demand on different taste of beer. They are ready to taste the different taste, which is a very
good sign for someone that has unique range of Craft beer flavours. Culturally, the country
has opened up its arms for the Craft beers (thehindu.com 2017).
Legally, India is one of the most unfavourable countries in the world. Some places
have permission for allowing the consumption of beers while some do not. The same issue
persist even with the metropolitan cities. A weird state government rule has made such thing
to happen in this country. Literally, the local government of the country has no open thoughts
on the consumption of beers. Most people still have beliefs that it should never be consumed.
This is one of such reasons, which has restricted the openness of the local government
(Roever 2016).
Government policies
The government policies in India can be divided into two sections such as central
policies and state policies. State politics have interestingly high control on every proceeding
in the state areas. One of such examples is of a ban, which was imposed on the alcohol

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consumption in one of its state Bihar. The entire activity does support a fact that central
government of India do not have a direct control on things, which have been initiated by the
state government. However, the central government of India literally support such businesses,
which are potential options for an improved economy (Grant 2013).
Finance/currency related
One of the challenging issues is the imposing of high taxes on beer and other
alcoholic items, which makes this much costlier than most other parts of world. Currency hit
the lowest ever mark in the year 2013 when it reached a record low. The value of one dollar
then reached to the lowest ever of 68.865. The risk of currency is of minimal degree, which is
good for the investors (Raj 2014).
Opportunities in India
Market size
It is still an expanding market for beer. People have thronged to the concept. The
Millennials have comparatively higher addiction to the beer. They search for reason to have a
mini party, which would include beer as a compulsory thing. Foreign investors would find
large areas to accommodate as it is still under developing zones.
Economic growth
India is one of the fastest growing economies in the world. In GDP growth, it is the
world’s sixth largest country. On the other hand, in purchasing power parity (PPP), it is the
world’s third largest country. The growing economy of the country has already attracted
many giants such as Walmart. The forecast has been even brighter for the country as it has
been assumed that by the end of 2050 both China and India would become bigger economic
power. Exchange behaviour in the country is quite stable. The inflation rate in India is on a
low side, which is good for the investors to regain their investments. An increased capital in

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banks is another good sign for the investors, as this would help them get debts. Foreign
investors can recover their investment at a comparatively easier rate (Siddique, Selvanathan
and Selvanathan 2012).
Trade between India and Australia
A free trade act (FTA) is already in progress in between India and Australia.
Australian government has shown their interest in having a free trade relationship with India.
The rising potentiality of the country has attracted many countries. Australia is not any
different country (Williams 2013).
Selection of one country
Brazil would be the most preferred locations for the Cheers Company in Australia.
Justification of the decision
Politically Brazil would be most feasible as India is politically very unstable.
Additionally, Craft brewing is still a growing concept for the country, which means it has no
established rules & policies of the local government in support of the business. One of the
best examples is of Bihar where alcoholism has been recently banned. Investment recovery is
in the favour of India. However, the recent GST imposed on alcoholic products might not
encourage people for Craft beers. Despite the second largest population in the world, people
in this country would majorly prefer to stick with the taste they had with the existing range of
beers (Majaro 2013).
Recommended entry mode
Working through local distributors

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Justification for the recommendation
For medium sized companies as such of Cheers, it is highly recommended that it work
with the local distributors in the country. Partnership working in Brazil is of high values to
the success. There are ample of benefits of working in collaboration of local distributors.
They are an intermediary link between the manufacturers and the end user. Nevertheless, they
have better understanding of the changing customer’s behaviour, which is very important for
the manufacturers as they would be able to respond in real time. This is also very necessary
for raising the customer service standard. Following are some advantages that a collaborative
work with distributors can produce (Gupta and Singh 2015):
 The primary function of a distributor is to reach the product to the right hand. This is
extremely important for Cheers, as their hired distributors would help them reach to
their target market.
 They can easily help in promoting the products by sending it to the targeted retailers
 They can also provide customer service support to the customers. Some distributors
do also opt to have customer service facility where they provide customers the line of
contact to solve their query. It depends entirely on the company whether it want to
keep the customer service support with it or it allows the distributors for the same.
 One of the most effective works, which the distributors do, is the market research.
They can have data on market behaviour even more than the company can. They are
closer to the customers. Their market research is helpful for the company.
 Some distributors do also finance for attracting the customers. Those who are
financially stronger can even pay for customers for offering them attractive rates for
the products. This is another important move, which would potentially improve the
sales performance. Moreover, this is very necessary for a new venture that it mints
huge sales.