EFES PILSENDerya Nasirli, Mine Ülgüray, Appaz Bavbekov

Outline

• Introduction• SWOT analysis– Porter’s Five Forces

• Current strategy analysis• Sustainability of competitive advantage• Possible future strategies

EFES PILSEN

• Efes Beverage Group formed in 1969 with 2 beer production factories• Now Efes has 14 beer factories (5 Turkey 9 abroad) in 5 countries, and 6 malt factories• Efes has 35.7 million hectoliter beer and 254.000 ton malt production capacities• Efes beverage group is the sixth largest European brewer on combined production basis• There are 220 exclusive dealers countrywide, and 31 exclusive distributers in 6 metropolitan areas

EFES PILSEN

1987 2004 2005 2006 2007 2008

60%79% 80% 82% 83% 86%

40%21% 20% 18% 17% 14%

EFES Beverage Group Market Share

Efes Others

RUSSIA MOLDAVIA KAZAKHSTAN GEORGIA SERBIA9%

72%

28%47%

13%

91%

28%

72%53%

87%

EFES Market Shares Abroad

Efes Others

#4 #1 #4#1#2

Strengths

• Europe’s sixth largest beer producer• Most recognized brand in Turkey, 100% awareness among

Turkish consumers• Has international high quality and wide range of products• Sector is transparent and consolidated. They don’t have to deal

with 4-5 companies. • In terms of illegal production, it is very hard to imitate beer,

unlike raki and wine• Market is closed for new entrants because beer production is a

technology/knowledge intensive business and TV&Radio advertisement is fully restricted since 1984. It is a disable use of an important brand building tool.

Weaknesses

• Hardly to find suitable barley for beer production

• Beer consumption per capita is very low in Turkey

• It is very hard to introduce new products to the market because of the TV&Radio advertisement restrictions.

Opportunities

• Having well developed distribution system it is easy to introduce new products

• Turkey has a young population• Market share increase opportunity in the

abroad operations, especially in Russia

Porter’s Five Forces

• Bargaining Power of Suppliers– Agricultural market is very competitive, no

producer can influence prices• Bargaining Power of Customers– Mainly Efes educates its customers• Ex. Creation of Birahaneler

• Competitive Rivalry within Industry– Tuborg and Carlsberg are second movers after Efes

Porter’s Five Forces (cont’d)

• Threat of New Entrants– Turkish Beer Market is highly consolidated, top 2

players control 99%– 100% awareness of Efes Brand

• Threat of Substitute Products– Turkish alcoholic market is not saturated,

producers “teach” their customers– High excise duty

Other Forces

• Government policy• Current Government pro-Islamic, opposed to the

alcoholic drinks consumption• High Excise Duty• Customs Union with EU, no import taxes imposed

Choosing a Strategy

• It’s common to see one of the two strategies:– product differentiation

or– cost leadership

Where does Efes Pilsen fit?

Choosing a Strategy

• It’s common to see one of the two strategies:– product differentiation

or– cost leadership

Where does Efes Pilsen fit?

Sources of Cost Advantage

• Economies of scale– High sales (86% market share)– Intranet Stock Control System

• Learning curve economies– High level of experience

Sources of Product Differentiation

• Product attributes– E.g. Timing of introduction• First mover in 1969

• Firm-Customer relationships– E.g. Consumer Marketing and Reputation• Advertisement through sponsoring sport activities

• Firm Linkages– E.g. Linkages with other firms• Anadolu Grup

Value Creation

• Sustainability of Efes Pilsen’s competitive advantage comes mainly from:– The unique brand perception or popularity by the

customer• Thus, Value Creation is high: B-C– Customers are willing to pay more for Efes

(B:Benefit)– Production cost of Efes Pilsen is low because of

economies of scale (C:Cost)

Economic rent

• Economic rent = (P-C)*Q– P is high (price premium) because of high Benefits

received by the customer and low competition– C is low (as explained in s.3)– Q is high (86% market share)

Economic rent received by Efes Pilsen is high!

17

Analyzing Rents

Lower C withsame/close B as rivals

Higher B withsame/close C as rivals

3 Firm’s cost and benefitposition as compared to rivals?

2. Firm’smix of products, and customersvs. rivals?

Sameas significant rivals in the Industry…

Unique from most significant rivalsin the industry…

… with products and activities tightlyoptimized to customer economics

Cost advantage

Benefit advantage

Niche advantage1. Attractive 5

Forces in Industry?

No

Yes….

…game theory used to deter entry and maintain win-win game Market power

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Market Power

1. Attractive 5 Forces in Industry?

Yes….

…game theory used to deter entry and maintain win-win game

Market Power

Efes is..

• competing in Turkey on the basis of a combination of:

– Benefit advantage+

– Market Power

EFES Possible Strategies

Czech Rep.

Germany

UK

Poland

USA

Hungary

W. Europe

Romania

Serbia M.

Russia

Bulgaria

Greece

Moldova

Kazakhistan

China

Turkey

159114

9683

777574

7168

6561

3833

3025

11

Beer per Capita Consumption

* Source: Canadean Global Beer Trends, 2006, Company Data

TURKEY INTERNATIONAL

Turkish MarketINCREASE THE MARKET SHARE BY ENLARGING THE TURKISH BEER MARKET

WHILE MAINTAINING THE PROFITABILITY• Enlargement and diversification of the beer consumption area, like sports

games, jazz/blues organizations etc.• Continue with the Birahane improvement project. Changing the concepts

of traditional Turkish Birahanes into modern and civilized environments where people share their best times. Clean, fashionable, and entertaining. By this, also woman will be targeted as a new customer type. Efes has to increase the woman’s beer consumption amount within the total consumption.

• Continue with effective portfolio management of brands, SKU’s and Channels.

International Markets

• INCREASE THE MARKET SHARE IN THE TARGETED MARKETS BY M&A

• Increasing the presence in the current markets, such as Russia, Kazakhstan, Moldavia, Georgia and Serbia – Ex. By 2012 Efes plans to increase its market share in

Russia from 9% to 15% • Analyze potential markets and continue the

international expansion– Advantage of CCI Distribution channels

Thanks for your attention