Final Strategic Recommendation - Grupo Damm
George Simmons
Friday, May 4, 2012
International Studies Program – Barcelona
Professor Fischer
Grupo Damm Final Strategic Recommendation
Introduction and Summary of Recommendation Grupo Damm, one of the largest beer brewers in Spain, is a strong company in a weak home market. Although many opportunities exist for expansion, the strongest plan for the company to embark on is an aggressive expansion of its business in the United States. This project will give Damm access to a large consumer base with minimal risk due to previous conservative investments in the region.
Situation Analysis Grupo Damm’s current situation is the third largest beer company in Spain. It is a large player in a market dominated by two other beer producers: Grupo Mahou, and Heineken (Appendix 3). Grupo Damm is extremely concentrated in the Catalonia region and, more specifically, Barcelona. The company commands 70% of the market share in and around Barcelona, but it claims only about 30% of the beer market nation-wide (Company presentation). Grupo Damm’s main strength lies in its quality portfolio of beers, which commands an extremely loyal following in its home region of Catalonia. Also, valuable resources the company controls, like a high tech factory with excess production capacity, add to their overall strengths. One weakness with Grupo Damm’s current market concentration is the risk of this small market weakening and hurting the company’s overall sales dramatically. Companies without diversified revenue streams, whether it is through product line diversification or geographic diversification, are more risky than diversified companies. Grupo Damm’s main competitors are larger and more diversified than itself, and this produces a competitive disadvantage from a risk-adjusted return standpoint. One way to mitigate this weakness is to expand Grupo Damm’s geographic distribution, potentially outside of Spain. Although the Spanish market is project to contract severely over
Friday, May 4, 2012
International Studies Program – Barcelona
Professor Fischer
Grupo Damm Final Strategic Recommendation
Introduction and Summary of Recommendation Grupo Damm, one of the largest beer brewers in Spain, is a strong company in a weak home market. Although many opportunities exist for expansion, the strongest plan for the company to embark on is an aggressive expansion of its business in the United States. This project will give Damm access to a large consumer base with minimal risk due to previous conservative investments in the region.
Situation Analysis Grupo Damm’s current situation is the third largest beer company in Spain. It is a large player in a market dominated by two other beer producers: Grupo Mahou, and Heineken (Appendix 3). Grupo Damm is extremely concentrated in the Catalonia region and, more specifically, Barcelona. The company commands 70% of the market share in and around Barcelona, but it claims only about 30% of the beer market nation-wide (Company presentation). Grupo Damm’s main strength lies in its quality portfolio of beers, which commands an extremely loyal following in its home region of Catalonia. Also, valuable resources the company controls, like a high tech factory with excess production capacity, add to their overall strengths. One weakness with Grupo Damm’s current market concentration is the risk of this small market weakening and hurting the company’s overall sales dramatically. Companies without diversified revenue streams, whether it is through product line diversification or geographic diversification, are more risky than diversified companies. Grupo Damm’s main competitors are larger and more diversified than itself, and this produces a competitive disadvantage from a risk-adjusted return standpoint. One way to mitigate this weakness is to expand Grupo Damm’s geographic distribution, potentially outside of Spain. Although the Spanish market is project to contract severely over
Bibliography: "Beer Industry Profile: Spain." Beer Industry Profile: Spain (2009): 1. Business Source Complete. Web. 4 May 2012. Jones, Lester. "Brewers Almanac." The Beer Institute. 1 Aug. 2011. Web. 02 May 2012. <http://www.beerinstitute.org/statistics.asp?bid=200>. Peet, Laura B. "S. A. Damm Makes Equity Investment in US Beverage." E-Releases. MEK Enterprises, 29 Nov. 2010. Web. 02 May 2012. <http://www.ereleases.com/pr/damm-equity-investment-beverage-43518>.