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Strategic Management
Labatt Breweries of Europe Case
Individual Case Analysis Paper
1. In 1989, Labatt Breweries of Europe, located in Toronto, Canada, was in an endeavor to expand and increase its beer brewing market share overseas. Their primary focus was to acquire two Italian brewing companies, Birra Moretti, SpA and Prinz Brau Brewing Company. Additionally during the company’s push into Europe, they focused on the “toll brewing’ method, which employed regional brewers that had excess capacity to brew the beer. This move proved to be highly profitable for Labatt. This further opened the door for the company to expand its reach in the region.
Three major factors that influenced these expansions included:
- The need to invest extra cash that was made in brewing
-The attractive purchase prices of the two Italian brewing companies.
-The increased threat of competition in Canada, originated by the merger of two rival breweries and the U.S.-Canada free trade agreement.
With a profitable and growing beer industry, Labatt aggressively focused on the two breweries in Italy. Factors which were attractive to the firm included: an annual growth of 2.5% over the previous 10 years, a growing beer target group of 10 to 35 year old males and the ability to distribute operations through small vendors.
After lengthy negotiations, Luigi Moretti was purchased for an undisclosed amount of cash. The deal’s attractiveness centered on strong financial projections and a present value analysis.
Afterwards, Labbatt focused its sights on the second piece of this acquisition puzzle on Prinz. Both buys had to be made in order for the business model to be successful. A purchase price of $25 million was decided upon. Soon, concerns developed over inflated sales figures at Prinz. Errors in billing and returns caused their recorded sales to plummet in December of 1988.
These problems caused a dilemma for the acquisition team because of the importance...
Labatt Breweries of Europe Case
Individual Case Analysis Paper
1. In 1989, Labatt Breweries of Europe, located in Toronto, Canada, was in an endeavor to expand and increase its beer brewing market share overseas. Their primary focus was to acquire two Italian brewing companies, Birra Moretti, SpA and Prinz Brau Brewing Company. Additionally during the company’s push into Europe, they focused on the “toll brewing’ method, which employed regional brewers that had excess capacity to brew the beer. This move proved to be highly profitable for Labatt. This further opened the door for the company to expand its reach in the region.
Three major factors that influenced these expansions included:
- The need to invest extra cash that was made in brewing
-The attractive purchase prices of the two Italian brewing companies.
-The increased threat of competition in Canada, originated by the merger of two rival breweries and the U.S.-Canada free trade agreement.
With a profitable and growing beer industry, Labatt aggressively focused on the two breweries in Italy. Factors which were attractive to the firm included: an annual growth of 2.5% over the previous 10 years, a growing beer target group of 10 to 35 year old males and the ability to distribute operations through small vendors.
After lengthy negotiations, Luigi Moretti was purchased for an undisclosed amount of cash. The deal’s attractiveness centered on strong financial projections and a present value analysis.
Afterwards, Labbatt focused its sights on the second piece of this acquisition puzzle on Prinz. Both buys had to be made in order for the business model to be successful. A purchase price of $25 million was decided upon. Soon, concerns developed over inflated sales figures at Prinz. Errors in billing and returns caused their recorded sales to plummet in December of 1988.
These problems caused a dilemma for the acquisition team because of the importance...