Beer Market In Norway Essay, Research Paper
Beer Market in Norway
By Nathan S Hosley
The beer industry is an ever present and growing industry in Norway. The people of Norway have a long history of drinking beer. Even though the tax on beer is the second highest in the world Norwegians continue to drink copiously. Norwegians spend more money on beer per capita than any other nationality. (Turborg P1)
Norwegians are very proud of their country and it is not an easy task to compete with local products (Tuborg P1), thus, there is not a heavy market saturation of imported beer in Norway. Heineken, Guinness, Beck’s, Mac Ewan’s, Newcastle Brown ale, Carlsberg, Tuborg and a few others are available but mostly in bottles, hardly ever on tap. (Burzlaff P1)
The imported beer industry is there and seems ripe for someone like our company to move in on. But before jumping in we must ask ourselves some very important questions. Is there going to be enough profit to warrant a full-scale campaign? Are the people of Norway too proud of their own country’s products to purchase much U.S. imported beer? Is the future of beer sales in Norway growing or declining? Is the competition in Norway too fierce with the few imports already there being major players in the European market? What about the country itself? Is it stable and what about its infrastructure?
In the next few pages I will try to address these questions and give a personal viewpoint on whether or not to attempt to enter this market with a U.S. product.
Is there going to be enough profit to warrant a full-scale campaign?
The people of Norway spend more per capita than any other nation on beer. But, the government also charges the second highest taxes on beer in the
World. Pripps-Ringnes, the largest beer producer in Norway, claims that on a
Single bottle of beer sold for 11.55nok 7.40 goes to taxes, 1.05 goes to deposit and only 3.10 is left for expenses and profit. (Pripps-Ringness P1) This means that only a small percentage of income is available to pay for the shop’s mark up, ingredients, packaging, production, distribution, wages, marketing etc. Still, we must also realize that the alcohol consumption in Norway is rising and is almost at an all time high with 1987 as the only year higher than last year. (Ssb P1)
Are the people of Norway too proud of their country’s products to purchase much imported beer?
The Norwegians are a very proud people with strong ties to local brands. Almost every town in Norway has its own brewpub and locals are very loyal. Until 1976 importers could only sell their beers to the Norwegian Court and Embassies. (Tuborg P1) The people of Norway are spread out and live mostly in rural areas where new things tend to take a while to reach and even then the people don’t like to change the way they have been doing things for years. That is one of the main reasons there are so few imports in the country and why the ones that are there aren’t doing well or advancing in market share. The ones that are successful are the very large transnational corporations.
The largest segment of people in Norway are age 25 to 35 with a high number of singles between 25 and 30 and a much lower number between 30 and 35. (Ssb P1) This is a young, professional market of people who want to go out and show off, so to speak, meet people and party before they settle down and it’s too late.
The average income of families aged 30 to 35 with small children has grown 21 percent in the last ten years. (Ssb P 1) This shows a greater purchasing power which could be transformed into beer sales at both bars and at home. This shows that it might not really be a lack of interest in foreign beer but possibly the lack of foreign beer itself and the previous absence of extra income to warrant the more expensive imported beer.
Is the future of beer sales in Norway growing or declining?
There seems to be a strong and growing market for beer sales in Norway. Beer consumption is almost at an all time high and contrary to rates in most European countries it is rising. Only Norway, United Kingdom, Holland,
Luxembourg and Denmark have a rising rate of alcohol consumption in Europe over the past ten years. (Alcoweb P1) Wine sales are also down in these countries which might be a factor in the increase of beer sales. Overall, though, the trend appears to be rising and keeps rising. As far back as the Vikings, the overall culture of Norwegians has been to drink beer so I don’t foresee a fall in the level of consumption on the horizon.
Is the competition in Norway too fierce with the few imports there all being major players in the European market?
One of the major disadvantages of entering the Norwegian beer market is the competition already there. The beer industry giants of Europe are all there and trying to gain market share everyday. The problem is not just that they are already there but that they have distribution channels and a known name already in place. The market is largely under the control of the Norwegian beer companies with little room left for newcomers. The giants have already filled the room that is left. It would take a huge investment to infiltrate the market.
However, the beer market is one that tends not to be set in stone. If a company is content with its share of the market and focuses somewhere else, that leaves an opportunity for a competitor to jump in and this might be the case with Ringnes. Ringnes is the biggest beer producer and distributor in Norway and right now is trying to infiltrate the eastern European market, mainly in the Baltic States and Russia. While their attention is turned eastward it could be a huge chance to gain ground in the Norwegian market.
What about the country itself? Is it stable and what about its infrastructure?
The country of Norway is very stable. The wage rate in Norway is higher than in most countries, which gives them a high standard of living and free health care. Prices are also higher than most countries for the same reasons so in the end it balances itself out. The country of Norway is not part of the European Union and doesn’t have plans to enter it until the country as a whole votes in favor of becoming a member. This could cause problems at borders with shipments getting held up in customs, etc. This is also something that must be considered in the future if we enter the market and wish to enter other European markets as well.
The country’s infrastructure is very good as the Norwegians are an advanced society. The roads and trains are excellent plus Norway has large access by sea. Political risk in Norway is minimal. They have been governed by a constitutional monarchy since 1905. The economy is stable and boasted a large increase in real GDP in the last few years. Norway is a large exporter of raw materials and imports almost all of their food. This also means that the channels used to import beer are easier than in most countries because so much of their food must also come through them. Market access is good and although there are high taxes it is an even playing field because the local companies are subject to the high tax as well. The Norwegian government has one of the highest average tax burdens in the world at 46%. The Norwegian Krone is quite stable and can be converted easily to dollars without problem. As of October 21 1998 the exchange rate was 10 Krone for every 1.35 U.S. dollars.
There is a massive opening in Norway for a U.S. based company to attack. The country loves to drink and is willing to pay. I believe that the move should be made quickly while Ringnes is pursuing other markets. The people of Norway need to be shown that there are other outstanding beers and the U.S. produces some of the finest. My recommendation is to continue researching and start developing a plan of action to enter the market.
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