- •Acknowledgement
- •Abstract
- •International Market Entry Strategies
- •Regulatory Environment
- •Challenges of International Expansion
- •Purpose of the Study
- •Research Objectives
- •Research Questions
- •Justification for the Study
- •Scope of the Study
- •Delimitations
- •Chapter 2: Literature Review
- •Introduction
- •International Expansion
- •Internationalization/Transaction-Cost Theory
- •Eclectic Theory
- •Resource-Based Theory
- •Uppsala Model
- •International Market Entry Strategies
- •Exporting
- •Licensing
- •Franchising
- •Joint-Ventures/Strategic Alliances
- •Acquisitions
- •Wholly-Owned Subsidiaries/Greenfield Operations
- •Figure 2‑1: Selecting Market Entry Mode: Risk Profiling
- •Regulatory Environment
- •Challenges of International Expansion
- •Research Gaps
- •Chapter 3: Research Methodology
- •Introduction
- •Research Methodology
- •Research Methods
- •Research Approach
- •Research Design
- •Choice of Companies
- •International Expansion
- •Host Country Overview: Kenya
- •Company Overview: eabl
- •Table 4‑1: Kenyan Beer Market
- •Source: Irungu (2012)
- •Market Entry Strategy
- •Regulatory Environment
- •Market Performance
- •Market Challenges
- •Case Study: sab Miller (Colombia – Grupo Bavaria)
- •Company Background: sab Miller
- •International Expansion
- •Host Country Overview: Colombia
- •Company Overview: Grupo Bavaria
- •Market Entry Strategy
- •Regulatory Environment
- •Market Performance
- •Market Challenges
- •Chapter 5: Discussion of Findings
- •Introduction
- •Case Analysis: Diageo (Kenya)
- •Case Analysis: sab Miller (Colombia)
- •Cross-Case Analysis
- •Chapter 6: Summary, Conclusions, and Recommendations
- •Introduction
- •Summary
- •Conclusions
- •Recommendations
- •Future Research
- •Chapter 7: References
- •Chapter 8: Appendices Table 8‑2: Common Size Analysis: Diageo and sab Miller
- •Source: Diageo (2013) and sab Miller (2013a)
- •Table 8‑3: Comparison of Market Entry Modes and Performance
- •Source: Diageo (2013a), eabl (2013), and sab Miller (2013)
Market Entry Strategy
SAB Miller entered the Colombian market with the 99% acquisition of Grupo Bavaria in 2005. The company paid $7.8 billion for the group through a mixture of cash and equity. It paid $3.5 billion in equity to the Santo Domingo family with controlled the company while paying a further $1.5 billion and $1.8 billion to minority shareholders and to clear debt respectively.
Grupo Bavaria had subsidiaries in Ecuador, Peru, and Colombia with stakes of 96%, 98%, and 92% in those operations (SAB Miller, 2013b). This accelerated market access has been beneficial to SAB Miller as it sought to boost its existing market presence that it had achieved through the acquisition of Cerveceria Hondureña in 2001.
It has further cemented regional market presence with the acquisition of Mexican brewer, Cerveceria Argentina SA in 2011. Revenues from Latin America account for 22.7% of the group’s net revenues of $34.5 billion (SAB Miller, 2013). Colombia accounts for $3.7 billion which represented 10.8% of net revenues which is quite significant.
The acquisition of the entire stake in the company has ensured that Grupo Bavaria essentially operates as a wholly-owned subsidiary. SAB Miller has been able to leverage on the scale created by the acquisition to aggressive penetrate the greater Latin American market and this strategy is in-line with existing business strategy.
Injection of additional funds in the company has boosted its market position in all the key markets that it operates. It effectively has market leadership in the beer category in all the markets. The market entry though quite costly has been very effective in rapidly cementing marketing presence by taking advantage of local knowledge and global efficiencies.
Regulatory Environment
Colombia has generally higher taxation rates towards alcoholic beverages. The standard VAT rate is 16% but alcoholic beverages and wines attract rates of between 20% and 25%. There are additional excise duties that are charged as part of input taxes. Corporation tax is quite high at about 33%.
Combined excise duties and VAT taxes in Colombia are some of the stiffest in Latin America. The country charges $13.8 excise duty and $4.6 VAT tax per hectoliter and this result in a total tax rate of $18.4 against a global average of approximately $12.0 (SAB Miller, 2013b). Taxes have been incremental and are likely to edge further.
The government is encouraging increased investment in domestic industries and has adopted fair operating practices. Taxation rates have been relatively stable despite being quite high but it offers incentives for capital expenditure recovery for international firms. Effectively, premium brands dominate the market and thus taxation has a modest influence on demand.
Market Performance
Since the acquisition of Grupo Bavaria by SAB Miller, the company has grown exponentially to effectively monopolize the market. It dictates trends and despite having several competitors, Grupo Bavaria has been dominant in Colombia. The company generates revenues of just over $3.7 billion and controls 63% of the entire alcohol market.
SAB Miller has effective control on the company and thus derives plenty of benefits from dividends from the firm. Latin American revenues stood at $7.8 billion with Colombian contributing 47.8% of the entire Latin American revenue. This is a dominant performance by an individual nation as it generates similar revenues as the entire Africa segment.