MBA – Managing in the Competitive Environment
Brasseries Kronenbourg – Indicative Answer
Read the “Brasseries Kronenbourg” case study (J & S pp 607-621) using the following
questions to help prepare your case study analysis:
1. Outline the main resources and competences of Brasseries Kronenbourg, identifying the
ways in which they contribute to its strategy.
2. Identify the sources of competitive advantage that Brasseries Kronenbourg seeks to
exploit.
General Comments
This Indicative Answer aims to highlight the main issues within the case study and provide
comment upon the questions raised. It is not intended to provide a comprehensive and
definitive answer to the questions – particularly as most case studies are not designed to
provide one definitive answer but to encourage discussion.
The Brasseries Kronenbourg case study is the source from which the illustration Creating
Core Competences at Brasseries Kronenbourg in Session 3 of the course material is drawn.
Consequently, the answers to SAA 2 to SAA 4 within Session 3 are a helpful starting point
for this case study analysis, but further work is required to address the issues in the broader
case study.
Question 1
The assessment of the resources and capabilities of Brasseries Kronenbourg and the wider
beer division of which it is the major part is likely include a resource audit that includes some
or all of the following:
Brasseries Kronenbourg - Resource Audit
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Physical – large efficient breweries and warehouses within Brasseries Kronenbourg,
along with the beer division’s brewery acquisitions outside France.
Human – professional development, qualification and apprenticeship programmes have
enhanced the skills of brewery staff following restructuring which led to 570 fewer jobs;
the combined sales and marketing team from Kronenbourg and Kanterbraü.
Financial – the Danone Group acts as the provider (or underwriter) of investment capital
for both Brasseries Kronenbourg and the beer division.
Intangible assets – 28 international and local brands.
Intangible resources – brewing skills; merchandising skills and relationships with
retailers; and brand management skills.
The ways in which some of these resources are used and/or created can be explored
through the use of value chain analysis, which attempts to identify the key activities and
linkages that can potentially drive competitive advantage.
As indicated above, the answers to the SAAs 2 & 4 in Session 3 are a useful starting point
and the relevant details from the SAA answers are included below. However, further details
from the more extensive Brasseries Kronenbourg case can be added to these observations.
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Value Chain Activities within Brasseries Kronenbourg (Session 3 – SAA 2)
Your analysis might include the following:
Value Chain Linkages at Brasseries Kronenbourg (Session 3 – SAA3)
The value chain for Brasseries Kronenbourg points to a number of linkages. The “Pluton”
merchandising system provides a linkage between activities as well as a linkage with the
value chains of other companies – the retailers. The development of new packaging, in
conjunction with another division of Danone is an example of a linkage with the value
chain of another business unit within the group. The sponsorship of the Paris St Germain
and Strasbourg football teams demonstrates linkages with the value chains of other
companies.
Further Comments on Value Chain Activities and Linkages at Brasseries Kronenbourg
Improvements in productivity were made as a result of high investment in automation and
reductions in staffing levels (as identified above), but the investment of 3.5% of wages in
personnel training, including an extensive qualifications and apprenticeship scheme was
also critical. Further, an employee share participation scheme distributed FF130 million in
1994 which with the personnel training can be seen as key Human Resource Management
activities.
Brand management is identified as a key activity in the value chain above, but the full case
study allows for further details to be added. Starting with the brands themselves: the
international brands Kronenbourg and Kronenbourg 1664 are not as strong as their main
competitors (Heineken and Carlsberg), though Tourtel has a strong position in the nonalcoholic sector. The spécialitiés sector is growing fast but Kronenbourg currently relies on
Belgian beers from Alken-Maes and imports from Guinness and Kilkenny. Kronenbourg is
building upon a combination of local brands (inherited from its acquisitions and license
agreements) and international brands targeted at each market segment, but more needs to
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be done to build brand presence in places. Product innovation is a key aspect of brand
development and Kronenbourg has experience of developing a range of new products
(Tourtel Brune, Tourtel Ambrée, Tourtel 100% pure malt, German and British Kronenbourg
being some of the examples). Product presentation is a critical factor in this industry, so
developments in labels, glass and temperature-sensitive labels are important, relying in part
on the links to the Danone packaging division. The Pluton merchandising system is also a
contributor to product presentation to the supermarkets. Sports sponsorship and the
company’s concern for ecological issues also contribute to overall corporate image.
A critical part of the case study focuses upon the international strategy of Brasseries
Kronenbourg and the beer division. High international distribution and marketing costs, the
need for high sales volume and over capacity within the brewing industry have led
Brasseries Kronenbourg to adopt an internationalisation strategy based on partnerships
(licensed brewing) and acquisitions of local breweries in chosen markets. The broad
strategy was to build up a strong international position based on a combination of
international brands and strong local brands in each market. The development of local
licensing deals or acquisitions depended upon critical activities within Brasseries
Kronenbourg, the beer division and the Danone Group. Experts from Danone Group would
analyse the commercial value of a potential acquisition based on the brands, market
shares and distribution network of the target, as well as productivity gains to be achieved
from integration into the Danone industrial network. The beer division would be responsible
for transferring skills in research & development, production and marketing, as well as
any restructuring. Brasseries Kronenbourg retained marketing control of the international
brands and also played a role in signalling opportunities to the beer division and transferring
its particular skills. Some cash would also be provided by Brasseries Kronenbourg to the
local breweries, but the key decisions on acquisitions, and by implication the financing of
these deals, rested with the Danone Group.
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Identifying Strategic Capabilities at Brasseries Kronenbourg
All the analyses above provide insight into resources and competences that contribute to the
strategic capabilities of Brasseries Kronenbourg, but there are many complex
interrelationships. A clearer idea as to the main capabilities can be shown in an activity
map that highlights the importance of efficient operations, brand management and
internationalisation management and the activities (competences) on which they are
based, as shown below:
Training
&
Development
Programmes
Staff
Reductions
Efficient
Large Scale
Breweries
Efficient
Logistics
System
Human
Resource
management
Share
Participation
Scheme
Efficient
Operations
Warehouse
Acquisitions
Merged
Salesforce
Kronenbourg &
Kanterbrau
Product
Innovation
Transfer of
R&D
Knowledge
Pluton
Merchandising
System
Transfer of
Production
Knowledge
Group
Financing of
Acquisitions
Brand
Management
Internationalisation
Management
(Acquisitions &
Partnerships)
International
Brands
Development
Acquisition
Production
Assessment
Packaging
Development
Sports
Sponsorship
Brand
Portfolio
Assessment
Acquisition
Distribution
Assessment
Question 2
In discussing the sources of advantage Brasseries Kronenbourg seeks to exploit, good use
can be made of SAA 4 in Session 3. However, whilst the SAA answer (printed below)
provides a good basis for addressing the factors underpinning efficient operations and
brand management, further work is required to explore the issues surrounding
internationalisation management.
Bases of Advantage at Brasseries Kronenbourg (Session 3 – SAA4)
Economies of scale – the concentration on large, efficient breweries and the development
of new distribution systems point to economies of scale in these areas. However, their
facilities are unlikely to be significantly different to those possessed by their major
competitors.
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Economies of scope – the best example is the way in which the company produces and
distributes a range of brands using the same facilities. Again, the question is the extent to
which these bases will provide an advantage over the main competition.
Experience effects – it is difficult to identify particular experience effects where Brasseries
Kronenbourg would have an advantage over other major competitors.
Overall, bases of lower cost may confer some advantage to Brasseries Kronenbourg with
local, regional or national competitors, but their position vis-à-vis the other pan-European
brewers like Heineken and Carlsberg is probably a one of parity, at best.
Value added – the main source of advantage here rests upon the quality of the brand family
and the activities taken to support and develop it. The extent of the brand family, with 28
brands from the Kronenbourg/Kanterbraü stable, including the 1664 and Tourtel international
brands, along with local brands from its foreign partners is a possible strength. The ability to
develop new products to meet the needs of new segments points to an understanding of
customer needs. Image is also seen as a key factor, so the quality of the packaging (where
awards and the temperature-sensitive 1664 label are examples of competences), advertising
and sponsorship activities are important. It is also important to see that Kronenbourg’s
activities in this area involve channel development, such as increasing its strength of
presence with retailers by using Pluton, as well as focusing on the drinker.
As mentioned above, these sources of low cost and added value underpin the efficient
operations (brewing and distribution) and brand management of Brasseries Kronenbourg.
Whilst some of these factors will also underpin internationalisation, like the cost
advantages that come from greater geographical scope and the added value of international
brands, other factors are also critical. Most significant to this strategy of international
expansion by acquisition and local partnerships are the skills and finance provided by the
Danone Group. Hence it is important to refer to the stated strategy of the Group to be the
leader or number two in each area of business, first on a European basis and then globally.
Indeed, at the end of the case study, Antoine Riboud states that Danone is now based on
three main activities: dairy products, mineral waters and biscuits. Significantly, beer
expansion was to be decided step by step.
Whilst some of the issues implied by these comments are debated at more length later in the
course (corporate parenting), it is clear that a significant part of Brasseries Kronenbourg’s
strategic capabilities lie with the Danone Group – could they internationalize without
Danone?
A postscript to the case study: in July 2000 the British brewing company Scottish Courage,
who brewed Brasseries Kronenbourg under license in the UK, bought Brasseries
Kronenbourg and Alken-Maes from the Danone Group, with other parts of the beer division
also likely to follow.
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