Beer is one of the most used beverages in the world next to coffee and tea. The beer industry therefore as we can imagine is one of the biggest industries in the world with many competitors inside of the industry. It is not surprising that many different kinds of beer and a variety of brands can be found in both Italy and Canadaï¼Œand both of the countries has a long history of development of brewery industry as well.
In this articleï¼Œwe are going to compare both of the countries’ marketsï¼Œindustry conditionï¼Œcultural differencesï¼Œpolitical background and so forthï¼Œall those information will be taken into considerationï¼Œand be processed to make the final decision on which county environment is more suitable and beneficial for us to invest into.
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Some theories are going to be applied to analyse the cultural dimensions of both countriesï¼Œsuch as Hofstede’s cultural dimensionsï¼Œand SWOT analysisï¼ŒPorter’s Five Forces Model.
The methods i use to compile my factbook is that i are going to apply some frameworks from respected authors that are most applicable to my chosen industry (beer industry) such as Hofstedeï¼ŒSWOT analysis and Porter’s five forces.
Hofstede measures the cultural dimensions differences in different countries. There are five dimensions in this frameworkï¼Œnamely the Power Distance Index (PDI)ï¼Œthe Individualism-Collectivismï¼ŒMasculinity-Femininity and Uncertainty Avoidance. Since Hofstede measures cultural dimensionsï¼Œtherefore it will be used in the cultural system page of the paper when the cultural aspects are discussed.
SWOT is the abbreviation for Strengthsï¼ŒWeaknessesï¼ŒOpportunities and Threats. It is an analytical framework to help summarize in a quick and concise way the risks and opportunities for a certain companyï¼Œfor my case the beer industry in two different countriesï¼ŒCanada and Italy. The SWOT analysis looks into internal factors within the company/industry/country (Strengths and Weaknesses) and external factors outside the company/industry/country (Opportunities and Threats). This method will eventually help us to look at the main positiveï¼Œ(strength and opportunities)ï¼Œand the negativeï¼Œ(weaknesses and threats)ï¼Œsides of both countries when comparing. Initially this should help us decide on which country would be most attractive to invest in the beer industry. For this reasonï¼Œthis method will be used at the end of the paperï¼Œwhich will give us an conclusive overview of the both countries.
Porter’s five forces model argues that there are five forces in an industry to determine the extent and scale of the competition. These five forces affect the industries’ attractiveness. It is an efficient tool to analyse competition in the industry. In this modelï¼Œfive forces are the threat of substitute products or servicesï¼Œthe threat of the entry of new competitorsï¼Œthe intensity of competitive rivalryï¼Œthe bargaining power of customersï¼Œand the bargaining power of suppliers. The industry’s attractiveness is the primary and fundamental factor to deciding the profitabilityï¼Œand in any industryï¼Œthe rule of competition will be reflected in any of the five competitive forces. The purpose of Porter’s five forces is to show the attractiveness of the beer industry in both Canada and Italy and to help investors decide in which country to enter in the beer industryï¼Œbesides it could help companies to develop a particular strategy in the industryï¼Œand this theory might be used in chapter which deals with market / industry conditions.
The methods i use to collect my data are searching my university’s library modules for useful academic articles and using a mix of articles from authors known through literature and the Theory Tutorials for my Comparative Country Studies course. Of courseï¼Œthe reliable information on Internet is also consulted as additional sourcesï¼Œand i have also analyzed the annual report of the company.
In this sectionï¼Œrelevant market conditions that apply to the Italian and Canadian beer sector will be explained. The market can be separated according to different factors like size and attractiveness as well. If we divide the market according the different market shares which individual brewery holdsï¼Œwe can see that there are several main player in the beer industry in both of the countries.
Italy is famous for its winesï¼Œhoweverï¼Œit is not well-known for its own beer. Generally speakingï¼ŒItaly doesn’t consume nearly as much beer as its European neighbourï¼Œhoweverï¼Œthere is a growing trend of consumption for beer in Italyï¼Œthe beer in Italy is not as widespread as in its European neighboursï¼Œmainly because there is a historical preference for wine in the country.
Italian breweries have undergone a "Renaissance" in recent years. In factï¼Œonly in the past few yearsï¼ŒItaly has started having beer drinking and tasting competitions and many related festivals. Normallyï¼Œthis sort of activity is reserved for wineï¼Œhoweverï¼Œnowadays beer is earning more and more respect from wine-preferred Italiansï¼Œand even many young Italians prefer to support their country’s beer industry rather than the wine industry nowï¼Œstillï¼Œthe Italian beer industry has much space to grow and be developed.
There are some brands of beer in Italyï¼Œone of the oldest and most recognized breweries is Birra Peroniï¼Œwhich was established in 1846 and the headquarter of Peroni is in Rome. Peroni’s most famous product is a pilsner-style beer. Nastro Azzuroï¼Œwhich is also one of the few Italian beers that marketed all over the worldï¼ŒNastro Azzuroï¼Œis a rather light style beerï¼Œmany breweries are crafting darkerï¼Œheavier beers that are rousing interest from new and experienced beer drinkers alike. In addition to those giant breweriesï¼Œthere are many microbreweries in Italyï¼Œand they play a important role and have a great portion of the market as well. A microbrewery particularly gains attention from young Italians is Birrificio Baladinï¼Œthe brewery appeals to young generation through quirky advertisements and sponsoring international music festivals and young Italians think there’s room in the global beer market for some of their most outstanding brews.
Traditionallyï¼ŒCanada’s largest brewing companies were Labatt’s and Molson. In 1995ï¼ŒLabatt’s was purchased by an Belgian company which is called Interbrew and it is now a part of Brazilian-Belgian Anheuser-Busch InBevï¼Œthe world’s largest brewing company and Molsonï¼Œthe other largest beer companyï¼Œwhich was merged with US company Coors in 2005 and created a new company called Molson Coorsï¼Œwhich is the world’s fifth largest brewing company now.
In 2006ï¼Œwith the purchase of Sleeman Breweriesï¼Œthe largest remaining Canadian brewery was purchased by the Japanese owned Sapporo Breweryï¼ŒCanada’s beer production has been mainly under the control of foreign multinationals. By the end of 2006ï¼Œnearly 90% of beer sales was of product brewed domestically under licence from non-domestic corporations. American beers brewed under licence dominate much of the market. For instanceï¼ŒBudweiser is brewed under licence in Canada by Labatt’s and Coors Light by Molson.
The market in Canada for domestic beer is dominated by Labattï¼ŒMolson and Sleemanï¼Œall foreign-owned companies. The largest Canadian-owned brewerï¼ŒMoosehead breweriesï¼Œonly controls about 5.5% of the Canadian market.
Canada population 33,487,208 (July 2009 est.).
Italy population 58,126,212 (July 2009 est.).
Economic freedom Canada world rank 6.
Economic freedom Italy world rank 87.
Financial freedom for Canada: 80.0.
Financial freedom in Italy 60.0
Canada investment freedom 75.0.
Italy investment freedom 75.0.
-GDP (Purchasing Power Parity)
$ 1.335 trillion (2010 est.). Country comparison to the world: 15.
$1.297 trillion (2009 est.)
$1.33 trillion (2008 est.)
-GDP Per capita (PPP)
$39,600 (2010 est.)
country comparison to the world: 22
$38,700 (2009 est.)
$40,000 (2008 est.)
-Inflation rate (consumer prices)
1.6% (2010 est.)
country comparison to the world: 41
0.3% (2009 est.)
$1.782 trillion (2010 est.)
country comparison to the world: 11
$1.763 trillion (2009 est.)
$1.857 trillion (2008 est.)
-GDP per capita (PPP)
$30,700 (2010 est.)
country comparison to the world: 43
$30,300 (2009 est.)
$31,900 (2008 est.)
-Inflation rate (consumer prices)
1.4% (2010 est.)
country comparison to the world: 32
0.8% (2009 est.)
Beer is known and drank in Italy very long time agoï¼ŒItalians brewed and consumed the blond drink. It said that Roman Emperor Agricola was a fan of beer when he was the governor of Britanniaï¼Œand in 83 AD Roman Emperor Agricola raised to the imperial throne and came back to Italyï¼Œhe took three master brewers with him from Glevum of which the ancient name Gloucester and opened the first real "pub" in Italy.
Nowadays beer is especially loved by young people in Italyï¼Œwhich has been seen as an informal drinkï¼Œcompared to the wine which is alway used in much more formal places. Aperitif and wine tasting have now gained back to wine many casual drinkersï¼Œhoweverï¼Œuntil a few years agoï¼Œyoung Italians actually drank more beer than wine.
Pub-styled bars are still very popular in Italy and they have spread the love for the more exotic brands of beer: many of them serve Japaneseï¼ŒGermanï¼ŒAustralian and East European beers along with the more known ones brewed in the UK and Belgium. At least one bottle of "Birra cinese" (Chinese beer) is served on every table of every Chinese restaurant.
Beer was first introduced to Canada by European settlers in the seventeenth centuryï¼Œas Canada had an ideal climate for making and storing beer before refrigeration was introduced. The first commercial brewery was built by Jean Talon in Quebec Cityï¼Œin the year 1668. Over a century later a number of commercial brewers thrivedï¼Œincluding some that became the staple of the Canadian industry: John Molson founded a brewery in Montreal in 1786ï¼ŒAlexander Keith inHalifax in 1820ï¼ŒThomas Carling in London in 1840ï¼ŒJohn Kinder Labatt in 1847ï¼Œalso in Londonï¼ŒSusannah Oland in Halifax in 1867ï¼Œand Eugene O’Keefe in Toronto in 1891. The very first patent to be issued by the Canadian government on July 6ï¼Œ1842ï¼Œwas to one G. Riley for "an improved method of brewing aleï¼Œbeerï¼Œporterï¼Œand other maltliquors."
Prohibition in Canada did not last as long as in the U.S. and was largely over by the mid 1920s (apart from Prince Edward Islandï¼Œwhere it ran from 1901 to 1948). Neverthelessï¼Œit had a similar effect of leaving very few brewersï¼Œand it was only in the late twentieth century that there has been a revival and microbreweries have started. Brewpubs are still illegal in some provinces.
Canada is lower on the Hofstede’s power distance index than Italyï¼ŒItaly falls in the middle on the index overall. Italian seems to expect differences in power between people. Canada’s Power Distance (PDI) is relatively lowï¼Œwith an index of 39ï¼Œcompared to a world average of 55. This is indicative of a greater equality between societal levelsï¼Œincluding governmentï¼Œorganizationsï¼Œand even within families. This orientation reinforces a cooperative interaction across power levels and creates a more stable cultural environment.
The more collective nature of Italy compared to Canada can be seen in many ways. It is not uncommon for grown children to live with their parents for years. Italian businesses are primarily owned by individuals and families. Business is preferably done with people with which one is familiar. Unacquainted guests will not be invited into an Italian home. Coffee or dinner will be taken with non-family members at a cafe or restaurant. Canada has Individualism (IDV) as the highest ranking (80) Hofstede Dimensionï¼Œand is indicative of a society with a more individualistic attitude and relatively loose bonds with others. The populace is more self-reliant and looks out for themselves and their close family members.
Italy is a fairly masculine society and ranks slightly higher on this index than Canada. Many Italian men still treat women with gallantry and value machismo. Although women have entered the workforceï¼Œtheir numbers are still small and few are in upper echelon positions. Italian household are the sole domain of women; Italian women for the most part cookï¼Œclean and care for the children. Italians place a prime importance on material possessions. It is very important to look good in Italy.
Howeverï¼Œlike a more feminine cultureï¼ŒItalians also know how to take time to appreciate the good things in life. Italians work in order to live rather than living to work. Ambition is not prevalent in Italian culture. Therefore i assume that beer as a informal beverageï¼Œit is more popular under this kind of cultural background rather than more formal cultural background countries.
Italy avoids uncertainly more strongly than Canada. By and large Italians prefer to do business with people they know. In additionï¼ŒItalians prefer to know something about an individual before they speak with him/her on the phone. Thusï¼Œin business one should send an introductory fax and follow-up with a phone call.
Beer or malt liquorï¼Œis defined as all fermented liquor brewed in whole or in part from malt for the purposes of the Excise Actï¼Œgrain or any saccharine matter without any process of distillationï¼Œbut does not include wine.
Beer (5% ABV or 12Ëš Plato)
0.12Â£ per pint
Wine (bottle 11.5% ABV)
0.00Â£ per 75 cl
As we can see in the table of different rates of duty applies to beer in Italyï¼Œwhich contains following level of duty. Italy is a member of the European Unionï¼Œtherefore it shares the Common External Tariff regime. EU duties are charged by the Italian Customs Agency on the CIF (costï¼Œinsurance and freight) value of the product imported into Italy.
The Alcohol Act (2001) bans TV and radio advertising of alcoholic products between 4PM and 9PM and prohibits alcohol advertisements from being shown on TV within 15 minutes before or after any children’s programs. The Act also requires a self-regulatory code to be provided jointly by media companiesï¼Œadvertising agencies and advertisers to govern alcohol advertising.
For the legal drinking ageï¼Œthere is no minimum age of legal drinking. And the legal purchasing age of alcohol is 16 and 18. South Tyrol prohibits both serving and purchase for people under the age of 18 and to everybody in a state of inebriation. Milan has enforced a ban on those under 16 purchasing alcohol. Heavy fines are given to proprieters and parents if a transaction is completed.
Up to 1.2% alcohol
1.2% to 2.5% alcohol
Over 2.5% alcohol
As we can see in the table of different rates of duty applies to beerï¼Œwhich contains following level of duty: (1) more than 2.5% absolute ethyl alcohol by volume; (2) more than 1.2% but not more than 2.5% absolute ethyl alcohol by volume; and (3) less than 1.2% absolute ethyl alcohol by volumeï¼Œand for all beer containing more than 2.5% absolute ethyl alcohol by volumeï¼Œthe rate of excise duty is currently $27.985 per hectolitre. Howeverï¼Œexcise duties are not imposed on beer provided it is brewed by a person for personal or family use or to be given away without charge and is not for sale commercially.
Canadian government showed how highly they value beer production and its breweries by lowering the taxes exercised on beer production. This is a benefit to the industry. As one of the leaders of the whole economy of Canadaï¼Œthe beer sector is likely to maintain these tax benefits and other benefits might be offered as well to the beer sector to develop the Canadian beer industry.
In Canada, alcohol was taxed pursuant to the Excise Act previously. Howeverï¼Œa new regime in Canada for the federal taxation of certain alcoholï¼Œincluding spirits and winesï¼Œwas introduced in the Excise Actï¼Œ2001ï¼Œwhich was implemented effective July 1ï¼Œ2003. Excise duties on beer (and malt liquor) continue to be imposed under the Excise Act. Generallyï¼Œdifferent excise duty treatment applies to alcohol for non-beverage use. A licence is required authorizing certain alcohol operations under both the Excise Actï¼Œ2001ï¼Œand the Excise Act. For beerï¼Œa licence is only required under the Excise Act for the commercial operation as a breweryï¼Œfor exampleï¼Œthe place where beer is manufactured. All brewery licensees are required to post and maintain security with the Canadian government. The amount of security is set at a minimum of $5,000. Generallyï¼Œbeer is subject to an excise duty that is imposed and becomes payable during the production process.
The legal drinking and purchasing age in Canada are both 19. Howeverï¼ŒIn some areas such as Ontarioï¼ŒSaskatchewanï¼ŒBritish Columbiaï¼ŒNewfoundland and Labradorï¼ŒNova Scotiaï¼ŒNorthwest Territoriesï¼ŒYukonï¼Œand Nunavutï¼Œunderage drinking under parental supervision is permittedï¼Œwith some restrictionsï¼Œon one’s own property in the provinces of New Brunswick andOntario and at home in the provinces of Prince Edward Islandï¼ŒBritish Columbia and Saskatchewan. InBritish Columbiaï¼Œonly children of the supervising parentsï¼Œnot any other minors such as guestsï¼Œare allowed underage drinking. Consumption of alcohol in another person’s home is subject to other laws.
The brewing industry had become extremely concentrated in Canada by the 1970sï¼Œbeing dominated by just three major companiesï¼Œwhich are Molsonï¼ŒLabattï¼Œand Carling-O’Keefe. Canada’s largest brewing companies were Labatt’s and Molson as we mentioned in the previous overview of industry condition of both countries. In 1995ï¼ŒLabatt’s was purchased by an Belgian company which is called Interbrew which is now part of Brazilian-Belgian Anheuser-Busch InBevï¼Œthe world’s largest brewing company and Molsonï¼Œthe other largest beer companyï¼Œwhich was merged with US company Coors in 2005 and created a new company called Molson Coorsï¼Œand it is the world’s fifth largest brewing company now. In 2006ï¼Œthe largest remaining Canadian brewery was purchased by the Japanese owned Sapporo Breweryï¼ŒCanada’s beer production has been mainly under the control of foreign multinationals.
By the end of 2006ï¼Œnearly 90% of beer sales was of product brewed domestically under licence from non-domestic corporations. American beers brewed under licence dominate much of the market. For instanceï¼ŒBudweiser is brewed under licence in Canada by Labatt’s and Coors Light by Molson. The market in Canada for domestic beer is dominated by Labattï¼ŒMolson and Sleemanï¼Œall foreign-owned companies. The largest Canadian-owned brewerï¼ŒMoosehead breweriesï¼Œonly controls small portion of the Canadian market.
Italy hosts a few breweriesï¼Œwith the largest owned by the best known Italian and foreign brands. Peroni’s brewery produces the best known Italian beer: "la Peroni". Peroni also produces the premium beer Mastro Azzurro and the brands WÃ¼hrerï¼Œand lesser known Raffo. Heineken Italy brews it’s famous Heinekenï¼Œbut has also acquired the brands Morettiï¼ŒIchnusaï¼ŒBirra Messina and Dreher. Carslberg owns a few brewerys in Northern and Central Italy. In Northern Italyï¼ŒForst brews its own branded beer as well as the famed Menabrea. In Friuli Venezia Giulia the latest brand of Italian beer Birra Castelloï¼Œhas been active since 1997. Along with these big playersï¼Œthere are lots of microbreweries – small scale breweries that produce small quantities of beerï¼Œthey also have premium quality.
Making a decision in which country to invest is not so easyï¼Œbecause of all those different variances in both of the countiesï¼Œsome of the variances are strength for Canadaï¼Œhoweverï¼Œsome of them are favorable for Italy.
In the first placeï¼Œthe tax rates between Canada and Italy differ. In Canada the rates are relatively lower than in Italy due to the fact that the tax level is relatively high in the European context. In addition to thisï¼Œthe Canadian government reduced taxes even more to benefit Canadian brewers.
Secondlyï¼Œwhen a look is taken at macroeconomic indicators like GDP per capita we see that Canada is a bit more favorable. Howeverï¼Œsince this differences are so smallï¼Œboth of the countries that we have chosen are developed countriesï¼Œand GDP per capita which above certain level has a relatively weak influence on the consumption of beer. Thereforeï¼Œthis factor is not likely to have a significant influences on the desicion of investment in the countries.
Thirdlyï¼Œthe population above legal drinking age in the markets has been calculated starting from the age at which alcohol consumption is allowed. This would mean that we start counting the population starting from 18 years old in Italy (some area start from 16 years old) and 19 years old in Canada. We find that the relative amount of people able to purchase and consume alcohol in Italy is larger than in Canadaï¼Œbecause the whole population is larger in Italy than in Canadaï¼Œand the population of legal drinking age are also higher in Italy than in Canadaï¼Œthereforeï¼Œthe potential market in Italy are larger than in Canada.
Lastlyï¼Œwhen comparing markets according to its players and their market shares we find that Canada has a more concentrated market with high market share large players and many small players. Italy on the other hand has two old players with a high share and one smaller player while the rest of the market consists of really small players. It would therefore be an advantage to invest in the Italian market; trying to gain and increase a market share because of the fact that there are many foreign players already play very important roles in the Canadian marketï¼ŒMolson Coors Brewing company and Anheuser-Busch InBev have a market share of 42,70 and 42,20 percent respectively. Third place is hold by Moosehead Brewing company with a share of 5,90 percent. These three main players hold 90,8 percent of the market in total by volume.
Taking all those facts into consideration, i would say that Italy would be the country that we are going to invest in. As we explained aboveï¼Œwe analysed both countries SWOT, for Italy, the strength is market size, the weakness is relatively higher tax rate on alcohol, and the opportunities is that there are only two big old players and some extreme small playersï¼Œgaining or increasing a share is relatively easyï¼Œand the market of Italy are more potentialï¼Œbecause Italy still on the growing phase of beer industry. Moreoverï¼Œsince the age allowed to drink in Italy starting from the age of 18 and in some areas are even lower to 16ï¼Œand with more population in Italyï¼Œtherefore the market is bigger in Italy than in Canada. In additionï¼Œnowadays the Italian government highly values the Italian beer industry due to the impact on its economy and therefore taxes are getting lower and lower. And the threats of Italy is that new public policy may harm the beer industry, such as the advertising policy we mentioned before which bans the ads of alcohol in specific period of time on TV.
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