Tesco’s Virtual Stores in South Korea, a new Invention of the Retail Industry

“If people don’t come to the store, let the store come to the people”

Tesco Homeplus in South Korea has opened the world’s first virtual store today in the Seoul subway to help time-pressed commuters shop on the go using their smart phones.

The walls of the Seonreung subway station in down town Seoul came to life today with virtual displays of over 500 of the most popular products by pasting posters of stocked shelves onto platform walls with QR coads and turned the place into a 'virtual supermarket' through which customers can scan the barcode and shop by using the Homeplus app on their smartphones and The contents of the shoppers' ­'virtual baskets' were later ­delivered to their homes.

The main importance of the idea is that busy commuters can scan their groceries on their way to work in the morning and, as long as their order is placed before 13.00, their items will be delivered home that same evening, creating even greater speed and convenience in the whole shopping experience.

Tesco Virtual Store , A short Video

The displays, which include a range of different daily items from milk and apples to pet food and stationery, will be placed on the pillars and the screen doors at the subway station. Commuters turned shoppers can then scan the QR code beneath the desired item via the Homeplus app on their smartphone and the item will then be delivered direct to the customer’s home at a time of their choosing.

In the words of Executive Vice President of Corporate Affairs at Tesco Homeplus, D W Seol ,

“I am extremely proud of the great work the Tesco Homeplus team have done to launch this idea in the Seoul subway. We are always looking to make the shopping experience easier and more convenient for our customers and the introduction of the virtual store is a great achievement. This is a real triumph for the Korean retailing industry as it continues to be at the forefront of technological innovation.”

The trial was a great success story, Tesco Homeplus is now expanding its virtual stores, to 20 bus stops in Seoul. with a view to rolling the format out across South Korea within two years. "The concept made sense," said Irene Lam, a spokeswoman for Cheil Worldwide, the global marketing agency that helped develop the store. The trial boosted the retailer's online sales 130% and online members 76%, claimed Cheil.

The smartphone app is the most popular shopping app in Korea, with more than 900,000 downloads since it launched in April last year.

The concept can next be applied in UK, according to experts. "The time is right for this," said Simon Goodall, director of strategy at Saatchi & Saatchi X. "This is about bringing the store to the people."

To be successful in the UK, two vital pieces of infrastructure would be required: mobile connectivity on all forms of public transport, including the tube networks in London and other cities, and a fleet of delivery vans set up for fast reactions.

Most of the big supermarkets in the UK have mobile-optimised websites for online shopping and Ocado’s iPhone app has won several awards, but Home Plus’s subway poster shops pushed the idea of mobile shopping into the minds of people who could use it right where they are.

This concept of the virtual store has created a kind of wave in retail industry. Some other retailers are on their way to grab their share of the success, like Yihaodian , China's leading online grocery store, introduced “virtual supermarkets" to Shanghai's metro stations earlier this week. Large LED screens advertising everything, from diapers to raw meat, have been posted at nine metro lines across the city.

So let’s revise what are the key benefits here :

• It’s time saving
• It’s more approachable
• The concept can save lots of money of the retailer, which they would had been spending on opening a real store
• It also solve the retailers problem of the search for a suitable location for the store
• This concept will help Tesco in competing with the number one store E-Mart.
• Saving money on store staff
• Helpful on gathering market data
• It also serves as an advertisement for the retailers

But, for in the opinion of some people it’s not all the bed of rose. Some difficulties can also be seen here :-

• Its virtual shopping mode might elevate the case of returning the product.
• This concept could create the war among the retail giants for the prime space to put up their virtual store.
• It might make the metro station more crowed.
• All the other dangers which are applicable for an online shopping are applicable here as well.
• Good mobile connectivity is required.

Whether we see these virtual stores as a display advertising campaign or a new way of building supermarkets in spaces that already exist, that are a remarkable achievement.

Important links

Virtual store news on BBC

How Aldi Sells at Low Price ? – Adli Business Model

ALDI is a global chain of no-frills supermarkets offering a limited assortment of groceries for the best prices in town. Brothers Theo and Karl Albrecht opened their first food store in 1948 in the Ruhr Valley, Germany. The chain is made up of two separate groups, ALDI Nord (North - operating as ALDI MARKET), headquartered in Essen, and ALDI Süd (South - operating as Aldi Süd), headquartered in Mülheim an der Ruhr.

 They honed their unique approach to retailing over the years to become one of the world’s biggest grocery chains with reported annual sales of E 29 billion (US$ 27B).

The privately-held ALDI Group today operates around 4,400 supermarkets under the ALDI banner (the name is short for “Albrecht Discounts”). About 3,000 stores are in Germany, but the chain has stores in nine other countries and is now spreading throughout Western Europe, Australia and the US.

Why we head for Aldi, leaving the big fancy stores behind? The answer is simple; shopping in Aldi gives a customer heavy shopping basket without making a painful hole in their wallet.

While the recession has certainly given a tough time to many supermarket giants, it has proved a profit accelerator for the “Discount No Frill” stores like Aldi.

Let’s examine their business model strategy:-

To deliver the right value to their Customer the Aldi store has stood on the three basic pillars , that are :-

• Cost Control
• Low price
• Limited selection of the quality products

Cost Control

Aldi has taken each of those steps that helps it to minimise the cost like :-

• Store Size - Typically measures 15,000 sq.ft , which is way less than many famous supermarket stores.

• No frill product display strategy – The Products are not stocked on shelves. Rather, they are merchandised in their original shipping cartons with the lids cut off and placed on a row of wooden or steel pallets on either side of an aisle. The idea is to save on labour to stock shelves and saving on luxury display facilities.

• Shopping bags - The shopper can bring their own bags, or buy paper, plastic, or insulated bags for a very nominal charge. Aldi clearly explains that they don’t hide the cost of the shopping bags in their prices.

• Green Saving – In their small store, Aldi saves on electricity, recycling of the bag and cartons.

• Cart on rent – The shopper need to rent the cart by inserting the coins and after shopping they need to get back to the cart deposit place to get their coin back. This system cuts down on the labour of collecting carts left in the parking lot, damage to cars, and they pass the savings on to the shopper in the form of low price products.

• Most of the Aldi stores don’t keep the hand shopping basket at the store to save the staff from arranging it after a customer leaves it on the point of sale.

• Limited store hours – Open only during regular shopping hours and save on electricity and Staff wage.

• Less store staff and less overhead cost.

• Avoid to stock Special licence product on every store – They stock wine and beer in very few of their store where the customer demand for those products are high because these kind of products require licence , which also means extra cost.

• Store Location – The stores are opened only on the profitable locations.

Low Price

• Bulk buy at good price - Aldi buys in great bulk to cut on the cost price. Aldi keeps limited product than the other super market but they keep strict eye on the regular supply of the products, thats make them a strong and big buyer with continuous and sure demand, that means  losing Aldi as a buyer could prove as a disaster for some suppliers and that gives Aldi the enormous negotiation power.

• Strong and Good relationships with the buyers - Aldi is famous for their great purchasing power and strong relationship with the supplier. Which allow them to negotiate low prices, which at the end means low price product for the customers. 

• National Brands but only on less price mode - Some time you see some national brands at Aldi; these are usually “special buys”—limited-time offers of products that get the shopper huge savings, but are only available while supplies last. This also means that Aldi keep the national brands at their stores only if they get them on Aldi’s low price frame. 

Limited selection of the quality products- 

• Product Assortment - ALDI stocks 700 to 1,000 of the most often used items for the average household unlike other supermarkets with around 25 000 products.

• Brands & private labels - Only 15 percent of the goods are national brands that too those which are agree to supply their brands to Aldi on Aldi’ s  business model of low price. The rest is private label products sold under a variety of exclusive names.

• Quality Suppliers - ALDI partners with the best suppliers in the country—often the same ones that produce national brands. In addition, they have a test kitchen to ensure that their products meet or exceed the quality and taste of the national name brands.

• Commitment for the good quality - They back every regularly stocked food and non-food item with their Double Guarantee. If the shoppers are not satisfied for any reason, they can simply return the unused portion (or even the empty package) with the receipt to the store; and Aldi will refund their money and give them a replacement product.

Despite their low price model, Aldi has created a pool of loyal Aldi customers. These customers feel happy and proud while shopping in Aldi ; because they are not only saving the almost 50% money on their shopping but also indirectly helping the society by going “green”.

Different types of Tea and the English Tea Tradition

     Aroma, Taste, Tradition, Enjoyment and Social gathering, all these beautiful elements are associated with the wonderful beverage called TEA. There are a great number of varieties of tea available in market today. Serving of tea has also been evolved through all these years. It was never l just like drinking a beverage but there are proper format of serving also exist.

 China and Japan are having very rich tradition of drinking and serving tea in a form of proper ceremony,

While in India , tea has been used as a must have morning beverage, a drink for the visitors at home  and remedy for cough and cold.

 Here we will see tea traditions evolved in UK, some of those have now become popular in most part of the world.

Let’s see the different varieties of tea and different types serving traditions.

The great Assortment of Teas

English Breakfast: The prototype of this most popular of all teas was developed over a hundred years ago by the Scottish Tea Master Drysdale in EdInburgh. It was marketed simply as "Breakfast Tea". It became popular in England due to the craze Queen Victoria created for things Scottish (the summer home of Victoria and Albert was the Highland castle of Balmoral). Teashops in London, however, changed the name and marketed it as "English Breakfast Tea". It is a blend of fine black teas, often including some Keemun tea. Many tea authorities suggest that the Keemun tea blended with milk creates a bouquet that reminds people of "toast hot from the oven" and maybe the original source for the name. It should be offered with milk or lemon. (One never serves lemon to a guest if they request milk-the lemon is never used. It would curdle the milk.) It may also be used to brew iced tea.

Irish Breakfast: The Irish have always been great tea drinkers, and they drink their tea brewed very strong. In fact, there is a common tea saying among the Irish that a "proper cup of tea" should be "strong enough for a mouse to trot on”. Along the same line, the Irish believed there were only three types of tea fit to drink. The first and best of quality was in China with the Chinese, of course. The second best was sent directly to Ireland. The third and lowest in quality was sent to the English. Irish Breakfast because of its robust flavour is usually drunk only in the morning (except for the Irish who drink it all day). Usually it is blended from an Assam tea base. Because of its full taste, it is served with lots of sugar (loose is considered correct here-sugar cubes are an English matter) and milk (milk, never cream, is served with tea. Cream is too heavy for tea and belongs with coffee. The milk is always served at room temperature, never cold, as it cools the tea too quickly).

Caravan: This excellent tea was created in imperial Russia from the teas brought overland by camel from Asia. Because the trade route was dangerous and supplies unsteady, Russian tea merchants blended the varying incoming tea cargoes, selling a blend rather than a single tea form. It was usually a combination of China and India black teas. Like the Irish, the Russian favoured this tea all day long.

Earl Grey: Earl Grey (1764-1845) was an actual person who, though he was prime minister of England under William IV, is better remembered for the tea named after him. Tea legends say a Chinese Mandarin gave the blend to him seeking to influence trade relations. A smoky tea with a hint of sweetness to it, it is served plain and is the second most popular tea in the world today. It is generally a blend of black teas and bergamot oil.

Black Teas and Oolong Darjeeling: Refers to tea grown in this mountain area of India. The mountain altitude and gentle misting rains of the region, produce a unique full bodied but light flavor with a subtly lingering aroma reminiscent of Muscatel. Reserved for afternoon use, it is traditionally offered to guests plain. One might take a lemon with it, if the Darjeeling were of the highest grade, but never milk. (Milk would "bury" the very qualities that make it unique.

Oolong: The elegant tea is sometimes known as the "champagne of teas". Originally grown in the Fukien province of China, it was first imported to England in 1869 by John Dodd. Today, the highest grade Oolongs (Formosa Oolongs) are grown in Taiwan. A cross between green and black teas, it is fermented to achieve a delicious fruity taste that makes milk, lemon, and sugar unthinkable. With such clarity, it is perfect for afternoon use with such tea fare as cucumber sandwiches and madelaines.

Green Teas: Green tea makes up only ten percent of the world's produced tea. The Japanese tea service (in which green tea is used), is an art form in and of itself. The serving of a full Japanese tea service would be beyond the ability of most properties and as a result, should not be attempted. Green tea is not generally part of the afternoon tea tradition as appropriate to hotel use.

China Tea Keemun : Is the most famous of China's black teas. Because of its subtle and complex nature, it is considered the "burgundy of teas". It is a mellow tea that will stand alone as well as support sugar and/or milk. Because of its "wine-like" quality, lemon should not be offered as the combined tastes are too tart.

White tea: White tea is the lightest and purest type of tea with a delicate, slightly sweet flavour. It is grown and harvested almost exclusively in China's Fujian province and is made from the unopened and youngest buds and softest leaves of the tea plant - Camellia Sinensis - and then left to wither a little in the sunlight. The leaves are lightly processed to prevent oxidation.

White tea is said to have been the tea of choice for Chinese royalty because it was so rare and expensive and during the T'ang Dynasty, only the emperor was allowed to drink white tea.

White tea is a very high natural source of antioxidants that may help protect the body from damage caused by free radicals. White tea does contain caffeine, but at very much lower levels than black tea or coffee.

Masala Chai or Masala Tea (Indian Tea with Spices) : Prepared with the boiling of black tea with water and milk and adding spices like cinnamon , cardamom , pepper corn or ginger . Some time all these spices are added in a certain quantity at once and some time only one or two spices are used. Generally sugar is used to sweetening the tea but some time jaggery is used in place of sugar. The spices create a nice aroma, providing the refreshing feeling. This tea has some health benefits also like helps in digestion , give relaxation during cough and cold , tea with cinnamon said to improve the memory as well as lower the cholesterol level. Sugar in tea provides instant energy.

Herbal or fruit infused Tea : Herbal and fruit infusions or commonly known as herbal teas are not in fact produced from the Camellia Sinensis (popularly known as the tea plant)  plant, but from other plants and fruits. Herbal tea has been popular for centuries in the East and Middle East; at present, herbal infusions are enjoying an astonishing rise in popularity in the West as part of alternative medicine.

They can be drunk either hot or cold, but it is crucially important to let the infusion steep for a few minutes to extract the flavour. Herbal infusions are made from the fruits, flowers, leaves, seeds or roots of the plant which are then boiled and strained. Frequently, herbal tea is sold in the form of tea bags.

Herbal and fruit infusions are famed for their reported health benefits. Containing antioxidants, they have therapeutic properties which amongst others, relax and stimulate.

Peppermint tea , Moroccan peppermint tea ,Acai berry tea , Cinnamon tea and Camomile tea are some popular example of this category.Herbal teas and fruit infusions are often used to help with weight loss as part of a calorie controlled diet.

Rooibos Tea : Rooibos Tea Also known as Redbush Tea, Rooibos is produced from the Aspalathus Linearis - a plant similar to gorse - this type of tea has come from South Africa. Rooibos tea has been consumed in southern Africa for many years, but recently its warm and malty taste has become extremely popular in the UK. In South Africa, Rooibos tea is prepared in the same way black tea is prepared: with milk and sugar to taste. Alternatively Rooibos tea can be drunk with lemon and honey instead of milk and sugar. Rooibos tea is caffeine-free, with minimal tannin and rich in antioxidants; it can also be used to alleviate tension, allergies and digestion problems. Rooibos tea is also thought to reduce the risk of heart disease.

Ice tea: Ice tea is prepared from black or green tea  . Ice tea can be enjoyed in many flavors. This is an excellent way for tea drinkers to enjoy a nice cool drink on a hot summer day. These are available in powder forms, as well as premade bottled versions or tea bags and of course there are many ice tea recipes available to make your own fresh variety.

Advent and Expansion of the Tea Cuisine in UK :-

Prior to the introduction of tea into Britain, the English had two main meals-breakfast and dinner. Breakfast was Ale, bread, and beef. Dinner was a long, massive meal at the end of the day.

The trend of serving tea late afternoon with small bites of food had been started by the Duchess of Bedford (1788-1861), who invited few friends over the afternoon tea.

Tea cuisine quickly expanded in range to quickly include wafer thin crust less sandwiches, shrimp, or fish pates, toasted breads with jams, and regional British pastries such as scones (Scottish) and crumpets (English).At this time two distinct forms of tea services evolved: "High" and "Low".

Let’s see some of the classic trends about the serving time and Style of serving the Tea ( English trends) –

Low Tea Or Afternoon Tea : Served around 4 o’clock in the afternoon. It was served in aristocratic homes of the wealthy and featured gourmet titbits rather than solid meals. Afternoon Tea is a meal composed of sandwiches (usually cut delicately into 'fingers'), scones with clotted cream and jam, sweet pastries and cakes. The emphasis was on presentation and conversation.

High Tea or Meat Tea : Served  late in the afternoon. It was the major meal of the middle and lower classes and consisted of mostly full dinner items such as roast beef, mashed potatoes, peas, and of course, tea. In eighteenth century, workers used to go home very late in the evening after 6 or 6 :30 . to save them from fatigue ,”High Tea” had been introduced in many factory, providing proper meal with the tea. Now why it is called “High Tea” because It was eaten at a table ( or you can say dining table ). In comparison, Afternoon Tea was taken whilst seating in low, comfortable chairs or sofas.

Later , the upper classes developed their own variation and also called it ‘high tea'. It was a meal that could be eaten when their servants were away or not available, as it was so easy to prepare. The upper class ‘high tea' involved the amalgamation of Afternoon Tea and high tea.

Today in most parts of the world , the afternoon tea has been referred to as “High Tea”

Afternoon Tea Etiquette

Penny Universities: Tea was the major beverage served in the coffee houses, but they were so named because coffee arrived in England some years before tea. Exclusively for men, they were called "Penny Universities" because for a penny any man could obtain a pot of tea, a copy of the newspaper, and engage in conversation with the sharpest wits of the day. The various houses specialized in selected areas of interest, some serving attorneys, and some authors, others the military. They were the forerunner of the English Gentlemen's Private Club. One such beverage house was owned by Edward Lloyd and was favored by ship owners, merchants, and marine insurers. That simple shop was the origin of Lloyd's, the worldwide insurance firm. Attempts to close the coffee houses were made throughout the eighteenth century because of the free speech they encouraged, but such measures proved so unpopular they were always quickly revoked.

The Tea Gardens : The English developed the idea of Tea Gardens. Here ladies and gentlemen took their tea out of doors surrounded by entertainment such as orchestras, hidden arbors, flowered walks, bowling greens, concerts, gambling, or fireworks at night. It was at just such a Tea Garden that Lord Nelson, who defeated Napoleon by sea, met the great love of his life, Emma, later Lady Hamilton. Women were permitted to enter a mixed, public gathering for the first time without social criticism. At the gardens were public, British society mixed here freely for the first time, cutting across lines of class and birth.

Many famous historical incidents are also associated with the Tea . So tea is not just another beverage  , its a tradition , culture , history and last but not the least a billion dollar industry.

Useful links

Rooibos tea

British Tea Culture

Tea in UK

Tea in News

The Tea Festival -

Great British Tea Week

The Holiday Inn Winchester will be hosting a Great British Tea Week. Featuring a selection of afternoon tea menus and tea themed events.

Opening times

Great British Tea Week at Holiday Inn Winchester 11/06/2012 - 15/06/2012

For event information-

Click here -

Twinings Tea Master class in support of Naomi House - 11 June 2012

A very British Bake Off - 12 June 2012

Cake naming Celebration - 13 June 2012

Venue

Holiday Inn Winchester, Winchester

Contact information

Telegraph Way

Morn Hill

Winchester

Hants

SO21 1HZ

Tel: +44 (0)871 942 9188

Know Your Coffee - Different types of Coffee in the Cafe Menu card

      Many of us start our day with a nice cup of coffee , full of rich aroma. Today , coffee is just not the morning brew but also a big Industry. Many coffee chains are earning millions of dollar through it. Starbucks , Costa Coffee , Barista , Mecca Espresso , Nero are a few successful name out of the long list.
When we  go to a coffee shop we find a whole list of coffee in their menu card and if we are not an avid coffee drinker some time we actually get confused on what to order and even if we know  our choice out of that list , many of us hardly know what actually our favourite cuppa has in it.

Lets see how our favourite coffee cup takes its perfec form -

Black coffee - A drip brew, percolated or French press style coffee served straight, with no milk.

Cappuccino - Usually equal parts espresso, steamed milk, and frothed milk, often with cinnamon or flaked chocolate sprinkled on top.

Dry cappuccino - A regular cappuccino, only with a smaller amount of foam, and no steamed milk at all.

Caffe latte - Essentially, a single shot of espresso in steamed (not frothed) milk. The ratio of milk to coffee should be about 3:1

Cafe au lait - Similar to Caffe Latte, except that an au lait is made with brewed coffee instead of espresso. Additionally, the ratio of milk to coffee is 1:1, making for a much less intense taste.

Espresso - Strong black coffee made by forcing steam through ground coffee beans.

Americano - A single shot of espresso with about 30 ml of hot water added to the mix. The name for this coffee drink stemmed from an insult to 'uncouth' Americans, who weren't up to drinking full espressos.

Cafe Macchiato - A shot of espresso with steamed milk added. The ratio of coffee to milk is approximately 4:1.

Hammerhead - A real caffeine fix, this drink consists of a shot of espresso in a regular-sized coffee cup, which is then filled with drip coffee. Also known as a 'shot in the dark'.

Double or double shot - Just as it sounds, this is two shots of espresso mixed in with the regular amount of additional ingredients. So, for example, if you were going to make a double hammerhead, you would put two shots of espresso into a coffee cup, and fill it with the drip blend, rather than the usual single espresso shot.

Instant coffee - These grounds have usually been freeze-dried and turned into soluble powder or coffee granules.

Irish coffee - A coffee spiked with Irish whiskey, with cream on top.

Cafe mocha - This popular drink is basically a cappuccino or latte with chocolate syrup added to the mix.

Indian filter coffee - Indian filter coffee is made from rough ground, dark-roasted coffee Arabica or Peaberry beans. It's drip-brewed for several hours in a traditional metal coffee filter before being served. The ratio of coffee to milk is usually 3:1.

Espresso con panna - Your basic standard espresso with a shot of whipped cream on top.

Frappe - Originally a cold espresso, it has more recently been prepared putting 1-2 teaspoons of instant coffee with sugar, water and ice. The brew is placed in a long glass with ice, and milk if you like, turning it into a big coffee milkshake.

Next time while relaxing in a Cafe and sipping your coffee , you know whats in your cup.

Enjoy the coffee !!!

FEMSA acquisition –The Heineken’s profit growth accelerator

Heineken’s decision to acquire FEMSA is a strategic step towards its market development. It increases Heineken's exposure to the faster-growing emerging markets in Mexico and Brazil, and enhances support to its sluggish European and US market in year 2009. Though, this profit bar raising deal for the Heineken is having some challenges also.

The vision behind the acquisition was delivering some key strategic benefits globally for Heineken N.V. such as:-

Þ      Heineken needed FEMSA to increase its presence in the 35% of the profit generating emerging markets in US and Latin America, where the company has lower exposure than its big rivals.

Þ      Accessing the world’s 3 out of the 4 largest beer profit pools ie Mexico, Brazil and USA which represents 35% of the global beer profit share.            

Þ      Targeting the growing Hispanic segments in the USA and strengthening Heineken’s leading position in the highly profitable beer market in the world. The deal enhances the Heineken’s leading position in the US import market.

Þ      Making Heineken’s leading international portfolio strong with the addition of the  Dos Equis ,

Tecate and Sol brands.

Þ      The acquisition makes Heineken one of the only two beer makers in Mexico, the world’s fourth-most profitable market, and reduces the company’s reliance on slower-growing European markets. Heineken, which distributes FEMSA beers including Dos Equis in the United States, expects savings of 150m Euros a year by 2013 and said it will use the acquisition to sell FEMSA brands in Europe and Heineken in Mexico.

Þ      FEMSA Cerveza’s established distribution channels and strong presence in market, offers significant scope to accelerate the growth of the Heineken brand in the premium segment in both Mexico and Brazil.

Þ      Heineken access to strong revenues and cash flows, consolidating its position as the world’s second largest brewer by revenue (€16.7 billion) after A-B InBev.

So far this deal has proved very lucrative for Heineken. Some positive facts and figures are very clear from Heineken’s Half-Year results for 2010. It is reaping all the previous mention benefits which it has targeted through this deal:-

Þ      Consolidated beer volume grew 5.6 million hectolitres driven by first time consolidation effects of FEMSA Cerveza.

Þ      The deal has boosted Heineken's share of global beer volume to 9.2% from 6.9%, and total revenue to almost 17 billion euros, cementing its No. 2 position behind Anheuser-Busch/InBev .It has consolidated Heineken‟s position as the world’s second largest brewer by revenue and third largest by volume, and has expanded its exposure to developing beer markets. In addition, it has created a platform for future value growth in three of the four largest beer profit pools in the world.

Þ      The volume of FEMSA beers sold by Heineken to retailers in the US rose in the third quarter.

Þ      Significant opportunity for premium segment in Mexico, especially in the more affluent North/North West regions where FEMSA Cerveza is strong.

Þ      10-year exclusivity arrangement with OXXO, Mexico’s largest convenience stores chain.

Þ      Revenue increased 5.2% to €7,520 m

Þ      The FEMSA Cervenza deal has also boosted investor’s confidence in Heineken management, long criticized for focusing on slower-growing developed markets.

The company Heineken is having lots of plans to improve the performance of FEMSA under the Heineken’s global experienced management team. The aim is to make the most of the benefits of FEMSA‘s brand and position in the Latin America and USA. It expects €150 million in annually synergies by 2013, which taxed and capitalized are worth €1 billion.

Though, this deal is also having certain challenges to meet on its ladder to success:-

Þ      The dominance of Anheuser-Busch InBev, Modelo and SABMiller and the instability of certain markets in Latin and South America creates a very challenging environment for Heineken-FEMSA acquisitive growth in the region.

Þ      The deal has added another €2.1 billion of debt to Heineken's balance sheet, atop the €8 billion already there.

Þ      In order to increase the shares of their premium Heineken brand in Mexico and Brazil to justify the price tag they might cannibalize FEMSA brand in the process.

Þ      The purchase of the Newcastle has effectively doubled down the Heineken’s share on mature markets, now the pressure is on the Heineken-FEMSA deal to compensate that.

Þ      After the acquisition now the management team of FEMSA will focus more on the OXXO convenience store chain and on Coke FEMSA, which can be proved as a hurdle in the aggressive growth strategy of Heineken.

Þ      FEMSA’s expansion in soft drinks and convenience stores outpaces beer, FEMSA Cerveza accounted for 16% of FEMSA's revenues in the first nine months of 2009, down from 18% in the same period previous year, which is a point to keep an eye upon.

Þ      FEMSA brand Sol hasn’t done well in Brazilian market last year.

Þ      Continuous innovation in flavour and products supported with aggressive marketing strategies and potential health benefits is swaying the market away from beer in favour of wines and spirits.

Þ      The popularity of craft beers reflects an attitude change among U.S. consumers. Industry giants face slowing U.S. sales as smaller brewers gain from Americans' growing taste for craft beers. In the first half of 2010, sales volume at craft brewers rose 9 percent while overall sales volume for the U.S. beer industry dropped 2.7 percent. Craft beer makes up about 7 percent of the total U.S. beer market. Player like Boston Beer (largest Craft brewer in US ) and Molson Coors are taking the better advantage of this situation.  

Impact of Heineken FEMSA deal on the Global Beer Industry:-

Þ      The world's four biggest European brewers now account for over 50% of the global market for beer after the acquisition of FEMSA by Heineken. Belgium-based Anheuser-Busch InBev, London-listed SABMiller, Heineken, and Denmark's Carlsberg have moved ahead of the rest of the players led by China's Tsingtao Brewery in fifth place.

Þ      The Acquisition has marked the strong move of the Heineken to the growing beer market.(Brazil, Mexico and USA).

Þ      Mexico, after this deal, could be closed to acquisitions due to its duopolistic landscape, with Heineken/FEMSA and Modelo being the major brewers with a combined 97% market share. Anheuser-Busch InBev, with a substantial stake in Modelo, means acquisitive entry into this market would be impossible unless it decides or is forced to sell or reduce its stake in Modelo.

Þ      The deal has created the platform for the cut throat competition among the world’s 3 largest beer brewers in the American region.

Recommendations:-

Þ      Buying FEMSA presents substantial challenges. The Heineken must upgrade FEMSA’s beer business, which has delivered sluggish profits on declining volume, amid intense competition.

Þ      On the current economic scenario, Heineken could explore and concentrate more on FEMSA’s low cost packaging of beer to penetrate the price sensitive beer market in Latin and South America.

Þ      The Heineken should make sure that any of the FEMSA brand should not be cannibalized by the Heineken brand in the process of promoting the Heineken brand in the American region. 

Þ      The predicted growth for the world beer market is 3% in 2010 in comparison to 0.1% in 2009; Heineken should take advantage of this lucrative situation.

Þ      Brazil, the Latin American region's largest beer market, is dominated by Anheuser-Busch InBev, but there are a few brewers which could facilitate entry into this attractive market, namely Schincariol and Petrópolis. Now after the acquisition of FEMSA, the Heineken should keep close watch on Schincariol and Petrópolis.

Þ      As consumer are becoming more health, environmental and social life conscious, the Heineken  should continue focusing on its 'Brewing a Better Future' programme. It can give good social image to the company particularly in the developing countries’ region like Latin and South America and Africa.

Þ      Craft and Lager beer is in huge demand in the largest beer market like China and USA and growing market like Africa and Middle East. This Category is taking the profit out of the pocket of the big players. The Heineken should make proper strategies to encounter this situation.

Þ      Most of the African countries are now enjoying the political and economical peace and stability. China is doing huge investment in the infrastructure development of many of them. There is a huge growth of middle class in the region, which has increased the demand of beer in the region. The Heineken should capture the growing demand very well.

Þ      By keeping in mind the tough competition in the American region and the consumer becoming choosy on product, the innovation and NDP strategies should be at par to the other leading companies for better growth.

Þ      The beer market is not homogenous; there are multiple segments of consumes with unique kind of demand and different perception about the brands, in this kind of situation clear communication about the brand image and its positioning to the target segment becomes essential. Emphasis should be on value based branding, proper marketing strategy and high quality advertisement and promotion programmes. These areas might need more investment and expert supervision from the Heineken management.

The FEMSA acquisition is proving itself on the right track till now; the fact is visible from the Heineken’s half year report. However, this so far success story of the acquisition has leaded the path for more JVs, mergers and acquisitions in the fast growing regions of the global beer industry.