Comparison of Beer Industry in Italy and Canada

Comparison of Beer Industry in Italy and Canada Introduction Beer is one of the most used beverages in the world next to coffee and tea. The beer industry therefore as we can imagine is one of the biggest industries in the world with many competitors inside of the industry. It is not surprising that many different kinds of beer and a variety of brands can be found in both Italy and Canada, and both of the countries has a long history of development of brewery industry as well. In this article, we are going to compare both of the countries markets, industry condition, cultural differences, political background and so forth, all those information will be taken into consideration, and be processed to make the final decision on which county environment is more suitable and beneficial for us to invest into. Some theories are going to be applied to analyse the cultural dimensions of both countries, such as Hofstedes cultural dimensions, and SWOT analysis, Porters Five Forces Model. Methodology What method do you use to compile your factbook and why? The methods i use to compile my factbook is that i are going to apply some frameworks from respected authors that are most applicable to my chosen industry (beer industry) such as Hofstede, SWOT analysis and Porters five forces. What prime theory and approaches do you draw on and why? Hofstedes Cultural Dimensions Hofstede measures the cultural dimensions differences in different countries. There are five dimensions in this framework, namely the Power Distance Index (PDI), the Individualism-Collectivism, Masculinity-Femininity and Uncertainty Avoidance. Since Hofstede measures cultural dimensions, therefore it will be used in the cultural system page of the paper when the cultural aspects are discussed. SWOT Analysis SWOT is the abbreviation for Strengths, Weaknesses, Opportunities and Threats. It is an analytical framework to help summarize in a quick and concise way the risks and opportunities for a certain company, for my case the beer industry in two different countries, Canada and Italy. The SWOT analysis looks into internal factors within the company/industry/country (Strengths and Weaknesses) and external factors outside the company/industry/country (Opportunities and Threats). This method will eventually help us to look at the main positive, (strength and opportunities), and the negative, (weaknesses and threats), sides of both countries when comparing. Initially this should help us decide on which country would be most attractive to invest in the beer industry. For this reason, this method will be used at the end of the paper, which will give us an conclusive overview of the both countries. Porters Five Forces Model Porters five forces model argues that there are five forces in an industry to determine the extent and scale of the competition. These five forces affect the industries attractiveness. It is an efficient tool to analyse competition in the industry. In this model, five forces are the threat of substitute products or services, the threat of the entry of new competitors, the intensity of competitive rivalry, the bargaining power of customers, and the bargaining power of suppliers. The industrys attractiveness is the primary and fundamental factor to deciding the profitability, and in any industry, the rule of competition will be reflected in any of the five competitive forces. The purpose of Porters five forces is to show the attractiveness of the beer industry in both Canada and Italy and to help investors decide in which country to enter in the beer industry, besides it could help companies to develop a particular strategy in the industry, and this theory might be used in chapter whic h deals with market / industry conditions. What method of data collection and analysis do you use and why? The methods i use to collect my data are searching my universitys library modules for useful academic articles and using a mix of articles from authors known through literature and the Theory Tutorials for my Comparative Country Studies course. Of course, the reliable information on Internet is also consulted as additional sources, and i have also analyzed the annual report of the company. The beer industry of Italy and Canada In this section, relevant market conditions that apply to the Italian and Canadian beer sector will be explained. The market can be separated according to different factors like size and attractiveness as well. If we divide the market according the different market shares which individual brewery holds, we can see that there are several main player in the beer industry in both of the countries. Italy Italy is famous for its wines, however, it is not well-known for its own beer. Generally speaking, Italy doesnt consume nearly as much beer as its European neighbour, however, there is a growing trend of consumption for beer in Italy, the beer in Italy is not as widespread as in its European neighbours, mainly because there is a historical preference for wine in the country. Italian breweries have undergone a Renaissance in recent years. In fact, only in the past few years, Italy has started having beer drinking and tasting competitions and many related festivals. Normally, this sort of activity is reserved for wine, however, nowadays beer is earning more and more respect from wine-preferred Italians, and even many young Italians prefer to support their countrys beer industry rather than the wine industry now, still, the Italian beer industry has much space to grow and be developed. There are some brands of beer in Italy, one of the oldest and most recognized breweries is Birra Peroni, which was established in 1846 and the headquarter of Peroni is in Rome. Peronis most famous product is a pilsner-style beer. Nastro Azzuro, which is also one of the few Italian beers that marketed all over the world, Nastro Azzuro, is a rather light style beer, many breweries are crafting darker, heavier beers that are rousing interest from new and experienced beer drinkers alike. In addition to those giant breweries, there are many microbreweries in Italy, and they play a important role and have a great portion of the market as well. A microbrewery particularly gains attention from young Italians is Birrificio Baladin, the brewery appeals to young generation through quirky advertisements and sponsoring international music festivals and young Italians think theres room in the global beer market for some of their most outstanding brews. Canada Traditionally, Canadas largest brewing companies were Labatts and Molson. In 1995, Labatts was purchased by an Belgian company which is called Interbrew and it is now a part of Brazilian-Belgian Anheuser-Busch InBev, the worlds largest brewing company and Molson, the other largest beer company, which was merged with US company Coors in 2005 and created a new company called Molson Coors, which is the worlds fifth largest brewing company now. In 2006, with the purchase of Sleeman Breweries, the largest remaining Canadian brewery was purchased by the Japanese owned Sapporo Brewery, Canadas beer production has been mainly under the control of foreign multinationals. By the end of 2006, nearly 90% of beer sales was of product brewed domestically under licence from non-domestic corporations. American beers brewed under licence dominate much of the market. For instance, Budweiser is brewed under licence in Canada by Labatts and Coors Light by Molson. The market in Canada for domestic beer is dominated by Labatt, Molson and Sleeman, all foreign-owned companies. The largest Canadian-owned brewer, Moosehead breweries, only controls about 5.5% of the Canadian market. Country comparison Macro-economic indicators Economy Canada population 33,487,208 (July 2009 est.). Italy population 58,126,212 (July 2009 est.). Economic freedom Canada world rank 6. Economic freedom Italy world rank 87. Finance Financial freedom for Canada: 80.0. Financial freedom in Italy 60.0 Canada investment freedom 75.0. Italy investment freedom 75.0. Canada Economy -GDP (Purchasing Power Parity) $ 1.335 trillion (2010 est.). Country comparison to the world: 15. $1.297 trillion (2009 est.) $1.33 trillion (2008 est.) -GDP Per capita (PPP) $39,600 (2010 est.) country comparison to the world: 22 $38,700 (2009 est.) $40,000 (2008 est.) -Inflation rate (consumer prices) 1.6% (2010 est.) country comparison to the world: 41 0.3% (2009 est.) Italy Economy -GDP (PPP) $1.782 trillion (2010 est.) country comparison to the world: 11 $1.763 trillion (2009 est.) $1.857 trillion (2008 est.) -GDP per capita (PPP) $30,700 (2010 est.) country comparison to the world: 43 $30,300 (2009 est.) $31,900 (2008 est.) -Inflation rate (consumer prices) 1.4% (2010 est.) country comparison to the world: 32 0.8% (2009 est.) Historical developments Italy Beer is known and drank in Italy very long time ago, Italians brewed and consumed the blond drink. It said that Roman Emperor Agricola was a fan of beer when he was the governor of Britannia, and in 83 AD Roman Emperor Agricola raised to the imperial throne and came back to Italy, he took three master brewers with him from Glevum of which the ancient name Gloucester and opened the first real pub in Italy. Nowadays beer is especially loved by young people in Italy, which has been seen as an informal drink, compared to the wine which is alway used in much more formal places. Aperitif and wine tasting have now gained back to wine many casual drinkers, however, until a few years ago, young Italians actually drank more beer than wine. Pub-styled bars are still very popular in Italy and they have spread the love for the more exotic brands of beer: many of them serve Japanese, German, Australian and East European beers along with the more known ones brewed in the UK and Belgium. At least one bottle of Birra cinese (Chinese beer) is served on every table of every Chinese restaurant. Canada Beer was first introduced to Canada by European settlers in the seventeenth century, as Canada had an ideal climate for making and storing beer before refrigeration was introduced. The first commercial brewery was built by Jean Talon in Quebec City, in the year 1668. Over a century later a number of commercial brewers thrived, including some that became the staple of the Canadian industry: John Molson founded a brewery in Montreal in 1786, Alexander Keith inHalifax in 1820, Thomas Carling in London in 1840, John Kinder Labatt in 1847, also in London, Susannah Oland in Halifax in 1867, and Eugene OKeefe in Toronto in 1891. The very first patent to be issued by the Canadian government on July 6, 1842, was to one G. Riley for an improved method of brewing ale, beer, porter, and other maltliquors. Prohibition in Canada did not last as long as in the U.S. and was largely over by the mid 1920s (apart from Prince Edward Island, where it ran from 1901 to 1948). Nevertheless, it had a similar effect of leaving very few brewers, and it was only in the late twentieth century that there has been a revival and microbreweries have started. Brewpubs are still illegal in some provinces. Cultural system Hofstedes Cultural Dimensions of Italy and Canada Power Distance Individualism Masculinity Uncertainty Avoidance Italy Higher More collective More masculine Strong Canada Lower More individualistic More feminine Weak Power distance Canada is lower on the Hofstedes power distance index than Italy, Italy falls in the middle on the index overall. Italian seems to expect differences in power between people. Canadas Power Distance (PDI) is relatively low, with an index of 39, compared to a world average of 55. This is indicative of a greater equality between societal levels, including government, organizations, and even within families. This orientation reinforces a cooperative interaction across power levels and creates a more stable cultural environment. Individualism The more collective nature of Italy compared to Canada can be seen in many ways. It is not uncommon for grown children to live with their parents for years. Italian businesses are primarily owned by individuals and families. Business is preferably done with people with which one is familiar. Unacquainted guests will not be invited into an Italian home. Coffee or dinner will be taken with non-family members at a cafe or restaurant. Canada has Individualism (IDV) as the highest ranking (80) Hofstede Dimension, and is indicative of a society with a more individualistic attitude and relatively loose bonds with others. The populace is more self-reliant and looks out for themselves and their close family members. Masculinity Italy is a fairly masculine society and ranks slightly higher on this index than Canada. Many Italian men still treat women with gallantry and value machismo. Although women have entered the workforce, their numbers are still small and few are in upper echelon positions. Italian household are the sole domain of women; Italian women for the most part cook, clean and care for the children. Italians place a prime importance on material possessions. It is very important to look good in Italy. However, like a more feminine culture, Italians also know how to take time to appreciate the good things in life. Italians work in order to live rather than living to work. Ambition is not prevalent in Italian culture. Therefore i assume that beer as a informal beverage, it is more popular under this kind of cultural background rather than more formal cultural background countries. Uncertainty Avoidance Italy avoids uncertainly more strongly than Canada. By and large Italians prefer to do business with people they know. In addition, Italians prefer to know something about an individual before they speak with him/her on the phone. Thus, in business one should send an introductory fax and follow-up with a phone call. Political/Government System Beer or malt liquor, is defined as all fermented liquor brewed in whole or in part from malt for the purposes of the Excise Act, grain or any saccharine matter without any process of distillation, but does not include wine. Italian Alcohol Taxes and Duties Legislative Framework Alcohol Duty Beer (5% ABV or 12ËÅ ¡ Plato) 0.12Â £ per pint Wine (bottle 11.5% ABV) 0.00Â £ per 75 cl As we can see in the table of different rates of duty applies to beer in Italy, which contains following level of duty. Italy is a member of the European Union, therefore it shares the Common External Tariff regime. EU duties are charged by the Italian Customs Agency on the CIF (cost, insurance and freight) value of the product imported into Italy. The Alcohol Act (2001) bans TV and radio advertising of alcoholic products between 4PM and 9PM and prohibits alcohol advertisements from being shown on TV within 15 minutes before or after any childrens programs. The Act also requires a self-regulatory code to be provided jointly by media companies, advertising agencies and advertisers to govern alcohol advertising. For the legal drinking age, there is no minimum age of legal drinking. And the legal purchasing age of alcohol is 16 and 18. South Tyrol prohibits both serving and purchase for people under the age of 18 and to everybody in a state of inebriation. Milan has enforced a ban on those under 16 purchasing alcohol. Heavy fines are given to proprieters and parents if a transaction is completed. Canadian Alcohol Taxes and Duties Legislative Framework Beer Duty Up to 1.2% alcohol $2.591/hectolitre 1.2% to 2.5% alcohol $13.990/hectolitre Over 2.5% alcohol $27.985/hectolitre As we can see in the table of different rates of duty applies to beer, which contains following level of duty: (1) more than 2.5% absolute ethyl alcohol by volume; (2) more than 1.2% but not more than 2.5% absolute ethyl alcohol by volume; and (3) less than 1.2% absolute ethyl alcohol by volume, and for all beer containing more than 2.5% absolute ethyl alcohol by volume, the rate of excise duty is currently $27.985 per hectolitre. However, excise duties are not imposed on beer provided it is brewed by a person for personal or family use or to be given away without charge and is not for sale commercially. Canadian government showed how highly they value beer production and its breweries by lowering the taxes exercised on beer production. This is a benefit to the industry. As one of the leaders of the whole economy of Canada, the beer sector is likely to maintain these tax benefits and other benefits might be offered as well to the beer sector to develop the Canadian beer industry. In Canada, alcohol was taxed pursuant to the Excise Act previously. However, a new regime in Canada for the federal taxation of certain alcohol, including spirits and wines, was introduced in the Excise Act, 2001, which was implemented effective July 1, 2003. Excise duties on beer (and malt liquor) continue to be imposed under the Excise Act. Generally, different excise duty treatment applies to alcohol for non-beverage use. A licence is required authorizing certain alcohol operations under both the Excise Act, 2001, and the Excise Act. For beer, a licence is only required under the Excise Act for the commercial operation as a brewery, for example, the place where beer is manufactured. All brewery licensees are required to post and maintain security with the Canadian government. The amount of security is set at a minimum of $5,000. Generally, beer is subject to an excise duty that is imposed and becomes payable during the production process. The legal drinking and purchasing age in Canada are both 19. However, In some areas such as Ontario, Saskatchewan, British Columbia, Newfoundland and Labrador, Nova Scotia, Northwest Territories, Yukon, and Nunavut, underage drinking under parental supervision is permitted, with some restrictions, on ones own property in the provinces of New Brunswick andOntario and at home in the provinces of Prince Edward Island, British Columbia and Saskatchewan. InBritish Columbia, only children of the supervising parents, not any other minors such as guests, are allowed underage drinking. Consumption of alcohol in another persons home is subject to other laws. Major players The brewing industry had become extremely concentrated in Canada by the 1970s, being dominated by just three major companies, which are Molson, Labatt, and Carling-OKeefe. Canadas largest brewing companies were Labatts and Molson as we mentioned in the previous overview of industry condition of both countries. In 1995, Labatts was purchased by an Belgian company which is called Interbrew which is now part of Brazilian-Belgian Anheuser-Busch InBev, the worlds largest brewing company and Molson, the other largest beer company, which was merged with US company Coors in 2005 and created a new company called Molson Coors, and it is the worlds fifth largest brewing company now. In 2006, the largest remaining Canadian brewery was purchased by the Japanese owned Sapporo Brewery, Canadas beer production has been mainly under the control of foreign multinationals. By the end of 2006, nearly 90% of beer sales was of product brewed domestically under licence from non-domestic corporations. American beers brewed under licence dominate much of the market. For instance, Budweiser is brewed under licence in Canada by Labatts and Coors Light by Molson. The market in Canada for domestic beer is dominated by Labatt, Molson and Sleeman, all foreign-owned companies. The largest Canadian-owned brewer, Moosehead breweries, only controls small portion of the Canadian market. Italy hosts a few breweries, with the largest owned by the best known Italian and foreign brands. Peronis brewery produces the best known Italian beer: la Peroni. Peroni also produces the premium beer Mastro Azzurro and the brands WÃ ¼hrer, and lesser known Raffo. Heineken Italy brews its famous Heineken, but has also acquired the brands Moretti, Ichnusa, Birra Messina and Dreher. Carslberg owns a few brewerys in Northern and Central Italy. In Northern Italy, Forst brews its own branded beer as well as the famed Menabrea. In Friuli Venezia Giulia the latest brand of Italian beer Birra Castello, has been active since 1997. Along with these big players, there are lots of microbreweries small scale breweries that produce small quantities of beer, they also have premium quality. Major finding of comparison and recommendations Making a decision in which country to invest is not so easy, because of all those different variances in both of the counties, some of the variances are strength for Canada, however, some of them are favorable for Italy. In the first place, the tax rates between Canada and Italy differ. In Canada the rates are relatively lower than in Italy due to the fact that the tax level is relatively high in the European context. In addition to this, the Canadian government reduced taxes even more to benefit Canadian brewers. Secondly, when a look is taken at macroeconomic indicators like GDP per capita we see that Canada is a bit more favorable. However, since this differences are so small, both of the countries that we have chosen are developed countries, and GDP per capita which above certain level has a relatively weak influence on the consumption of beer. Therefore, this factor is not likely to have a significant influences on the desicion of investment in the countries. Thirdly, the population above legal drinking age in the markets has been calculated starting from the age at which alcohol consumption is allowed. This would mean that we start counting the population starting from 18 years old in Italy (some area start from 16 years old) and 19 years old in Canada. We find that the relative amount of people able to purchase and consume alcohol in Italy is larger than in Canada, because the whole population is larger in Italy than in Canada, and the population of legal drinking age are also higher in Italy than in Canada, therefore, the potential market in Italy are larger than in Canada. Lastly, when comparing markets according to its players and their market shares we find that Canada has a more concentrated market with high market share large players and many small players. Italy on the other hand has two old players with a high share and one smaller player while the rest of the market consists of really small players. It would therefore be an advantage to invest in the Italian market; trying to gain and increase a market share because of the fact that there are many foreign players already play very important roles in the Canadian market, Molson Coors Brewing company and Anheuser-Busch InBev have a market share of 42,70 and 42,20 percent respectively. Third place is hold by Moosehead Brewing company with a share of 5,90 percent. These three main players hold 90,8 percent of the market in total by volume. Taking all those facts into consideration, i would say that Italy would be the country that we are going to invest in. As we explained above, we analysed both countries SWOT, for Italy, the strength is market size, the weakness is relatively higher tax rate on alcohol, and the opportunities is that there are only two big old players and some extreme small players, gaining or increasing a share is relatively easy, and the market of Italy are more potential, because Italy still on the growing phase of beer industry. Moreover, since the age allowed to drink in Italy starting from the age of 18 and in some areas are even lower to 16, and with more population in Italy, therefore the market is bigger in Italy than in Canada. In addition, nowadays the Italian government highly values the Italian beer industry due to the impact on its economy and therefore taxes are getting lower and lower. And the threats of Italy is that new public policy may harm the beer industry, such as the advertising policy we mentioned before which bans the ads of alcohol in specific period of time on TV. Comparison of Beer Industry in Italy and Canada Comparison of Beer Industry in Italy and Canada Introduction Beer is one of the most used beverages in the world next to coffee and tea. The beer industry therefore as we can imagine is one of the biggest industries in the world with many competitors inside of the industry. It is not surprising that many different kinds of beer and a variety of brands can be found in both Italy and Canada, and both of the countries has a long history of development of brewery industry as well. In this article, we are going to compare both of the countries markets, industry condition, cultural differences, political background and so forth, all those information will be taken into consideration, and be processed to make the final decision on which county environment is more suitable and beneficial for us to invest into. Some theories are going to be applied to analyse the cultural dimensions of both countries, such as Hofstedes cultural dimensions, and SWOT analysis, Porters Five Forces Model. Methodology What method do you use to compile your factbook and why? The methods i use to compile my factbook is that i are going to apply some frameworks from respected authors that are most applicable to my chosen industry (beer industry) such as Hofstede, SWOT analysis and Porters five forces. What prime theory and approaches do you draw on and why? Hofstedes Cultural Dimensions Hofstede measures the cultural dimensions differences in different countries. There are five dimensions in this framework, namely the Power Distance Index (PDI), the Individualism-Collectivism, Masculinity-Femininity and Uncertainty Avoidance. Since Hofstede measures cultural dimensions, therefore it will be used in the cultural system page of the paper when the cultural aspects are discussed. SWOT Analysis SWOT is the abbreviation for Strengths, Weaknesses, Opportunities and Threats. It is an analytical framework to help summarize in a quick and concise way the risks and opportunities for a certain company, for my case the beer industry in two different countries, Canada and Italy. The SWOT analysis looks into internal factors within the company/industry/country (Strengths and Weaknesses) and external factors outside the company/industry/country (Opportunities and Threats). This method will eventually help us to look at the main positive, (strength and opportunities), and the negative, (weaknesses and threats), sides of both countries when comparing. Initially this should help us decide on which country would be most attractive to invest in the beer industry. For this reason, this method will be used at the end of the paper, which will give us an conclusive overview of the both countries. Porters Five Forces Model Porters five forces model argues that there are five forces in an industry to determine the extent and scale of the competition. These five forces affect the industries attractiveness. It is an efficient tool to analyse competition in the industry. In this model, five forces are the threat of substitute products or services, the threat of the entry of new competitors, the intensity of competitive rivalry, the bargaining power of customers, and the bargaining power of suppliers. The industrys attractiveness is the primary and fundamental factor to deciding the profitability, and in any industry, the rule of competition will be reflected in any of the five competitive forces. The purpose of Porters five forces is to show the attractiveness of the beer industry in both Canada and Italy and to help investors decide in which country to enter in the beer industry, besides it could help companies to develop a particular strategy in the industry, and this theory might be used in chapter whic h deals with market / industry conditions. What method of data collection and analysis do you use and why? The methods i use to collect my data are searching my universitys library modules for useful academic articles and using a mix of articles from authors known through literature and the Theory Tutorials for my Comparative Country Studies course. Of course, the reliable information on Internet is also consulted as additional sources, and i have also analyzed the annual report of the company. The beer industry of Italy and Canada In this section, relevant market conditions that apply to the Italian and Canadian beer sector will be explained. The market can be separated according to different factors like size and attractiveness as well. If we divide the market according the different market shares which individual brewery holds, we can see that there are several main player in the beer industry in both of the countries. Italy Italy is famous for its wines, however, it is not well-known for its own beer. Generally speaking, Italy doesnt consume nearly as much beer as its European neighbour, however, there is a growing trend of consumption for beer in Italy, the beer in Italy is not as widespread as in its European neighbours, mainly because there is a historical preference for wine in the country. Italian breweries have undergone a Renaissance in recent years. In fact, only in the past few years, Italy has started having beer drinking and tasting competitions and many related festivals. Normally, this sort of activity is reserved for wine, however, nowadays beer is earning more and more respect from wine-preferred Italians, and even many young Italians prefer to support their countrys beer industry rather than the wine industry now, still, the Italian beer industry has much space to grow and be developed. There are some brands of beer in Italy, one of the oldest and most recognized breweries is Birra Peroni, which was established in 1846 and the headquarter of Peroni is in Rome. Peronis most famous product is a pilsner-style beer. Nastro Azzuro, which is also one of the few Italian beers that marketed all over the world, Nastro Azzuro, is a rather light style beer, many breweries are crafting darker, heavier beers that are rousing interest from new and experienced beer drinkers alike. In addition to those giant breweries, there are many microbreweries in Italy, and they play a important role and have a great portion of the market as well. A microbrewery particularly gains attention from young Italians is Birrificio Baladin, the brewery appeals to young generation through quirky advertisements and sponsoring international music festivals and young Italians think theres room in the global beer market for some of their most outstanding brews. Canada Traditionally, Canadas largest brewing companies were Labatts and Molson. In 1995, Labatts was purchased by an Belgian company which is called Interbrew and it is now a part of Brazilian-Belgian Anheuser-Busch InBev, the worlds largest brewing company and Molson, the other largest beer company, which was merged with US company Coors in 2005 and created a new company called Molson Coors, which is the worlds fifth largest brewing company now. In 2006, with the purchase of Sleeman Breweries, the largest remaining Canadian brewery was purchased by the Japanese owned Sapporo Brewery, Canadas beer production has been mainly under the control of foreign multinationals. By the end of 2006, nearly 90% of beer sales was of product brewed domestically under licence from non-domestic corporations. American beers brewed under licence dominate much of the market. For instance, Budweiser is brewed under licence in Canada by Labatts and Coors Light by Molson. The market in Canada for domestic beer is dominated by Labatt, Molson and Sleeman, all foreign-owned companies. The largest Canadian-owned brewer, Moosehead breweries, only controls about 5.5% of the Canadian market. Country comparison Macro-economic indicators Economy Canada population 33,487,208 (July 2009 est.). Italy population 58,126,212 (July 2009 est.). Economic freedom Canada world rank 6. Economic freedom Italy world rank 87. Finance Financial freedom for Canada: 80.0. Financial freedom in Italy 60.0 Canada investment freedom 75.0. Italy investment freedom 75.0. Canada Economy -GDP (Purchasing Power Parity) $ 1.335 trillion (2010 est.). Country comparison to the world: 15. $1.297 trillion (2009 est.) $1.33 trillion (2008 est.) -GDP Per capita (PPP) $39,600 (2010 est.) country comparison to the world: 22 $38,700 (2009 est.) $40,000 (2008 est.) -Inflation rate (consumer prices) 1.6% (2010 est.) country comparison to the world: 41 0.3% (2009 est.) Italy Economy -GDP (PPP) $1.782 trillion (2010 est.) country comparison to the world: 11 $1.763 trillion (2009 est.) $1.857 trillion (2008 est.) -GDP per capita (PPP) $30,700 (2010 est.) country comparison to the world: 43 $30,300 (2009 est.) $31,900 (2008 est.) -Inflation rate (consumer prices) 1.4% (2010 est.) country comparison to the world: 32 0.8% (2009 est.) Historical developments Italy Beer is known and drank in Italy very long time ago, Italians brewed and consumed the blond drink. It said that Roman Emperor Agricola was a fan of beer when he was the governor of Britannia, and in 83 AD Roman Emperor Agricola raised to the imperial throne and came back to Italy, he took three master brewers with him from Glevum of which the ancient name Gloucester and opened the first real pub in Italy. Nowadays beer is especially loved by young people in Italy, which has been seen as an informal drink, compared to the wine which is alway used in much more formal places. Aperitif and wine tasting have now gained back to wine many casual drinkers, however, until a few years ago, young Italians actually drank more beer than wine. Pub-styled bars are still very popular in Italy and they have spread the love for the more exotic brands of beer: many of them serve Japanese, German, Australian and East European beers along with the more known ones brewed in the UK and Belgium. At least one bottle of Birra cinese (Chinese beer) is served on every table of every Chinese restaurant. Canada Beer was first introduced to Canada by European settlers in the seventeenth century, as Canada had an ideal climate for making and storing beer before refrigeration was introduced. The first commercial brewery was built by Jean Talon in Quebec City, in the year 1668. Over a century later a number of commercial brewers thrived, including some that became the staple of the Canadian industry: John Molson founded a brewery in Montreal in 1786, Alexander Keith inHalifax in 1820, Thomas Carling in London in 1840, John Kinder Labatt in 1847, also in London, Susannah Oland in Halifax in 1867, and Eugene OKeefe in Toronto in 1891. The very first patent to be issued by the Canadian government on July 6, 1842, was to one G. Riley for an improved method of brewing ale, beer, porter, and other maltliquors. Prohibition in Canada did not last as long as in the U.S. and was largely over by the mid 1920s (apart from Prince Edward Island, where it ran from 1901 to 1948). Nevertheless, it had a similar effect of leaving very few brewers, and it was only in the late twentieth century that there has been a revival and microbreweries have started. Brewpubs are still illegal in some provinces. Cultural system Hofstedes Cultural Dimensions of Italy and Canada Power Distance Individualism Masculinity Uncertainty Avoidance Italy Higher More collective More masculine Strong Canada Lower More individualistic More feminine Weak Power distance Canada is lower on the Hofstedes power distance index than Italy, Italy falls in the middle on the index overall. Italian seems to expect differences in power between people. Canadas Power Distance (PDI) is relatively low, with an index of 39, compared to a world average of 55. This is indicative of a greater equality between societal levels, including government, organizations, and even within families. This orientation reinforces a cooperative interaction across power levels and creates a more stable cultural environment. Individualism The more collective nature of Italy compared to Canada can be seen in many ways. It is not uncommon for grown children to live with their parents for years. Italian businesses are primarily owned by individuals and families. Business is preferably done with people with which one is familiar. Unacquainted guests will not be invited into an Italian home. Coffee or dinner will be taken with non-family members at a cafe or restaurant. Canada has Individualism (IDV) as the highest ranking (80) Hofstede Dimension, and is indicative of a society with a more individualistic attitude and relatively loose bonds with others. The populace is more self-reliant and looks out for themselves and their close family members. Masculinity Italy is a fairly masculine society and ranks slightly higher on this index than Canada. Many Italian men still treat women with gallantry and value machismo. Although women have entered the workforce, their numbers are still small and few are in upper echelon positions. Italian household are the sole domain of women; Italian women for the most part cook, clean and care for the children. Italians place a prime importance on material possessions. It is very important to look good in Italy. However, like a more feminine culture, Italians also know how to take time to appreciate the good things in life. Italians work in order to live rather than living to work. Ambition is not prevalent in Italian culture. Therefore i assume that beer as a informal beverage, it is more popular under this kind of cultural background rather than more formal cultural background countries. Uncertainty Avoidance Italy avoids uncertainly more strongly than Canada. By and large Italians prefer to do business with people they know. In addition, Italians prefer to know something about an individual before they speak with him/her on the phone. Thus, in business one should send an introductory fax and follow-up with a phone call. Political/Government System Beer or malt liquor, is defined as all fermented liquor brewed in whole or in part from malt for the purposes of the Excise Act, grain or any saccharine matter without any process of distillation, but does not include wine. Italian Alcohol Taxes and Duties Legislative Framework Alcohol Duty Beer (5% ABV or 12ËÅ ¡ Plato) 0.12Â £ per pint Wine (bottle 11.5% ABV) 0.00Â £ per 75 cl As we can see in the table of different rates of duty applies to beer in Italy, which contains following level of duty. Italy is a member of the European Union, therefore it shares the Common External Tariff regime. EU duties are charged by the Italian Customs Agency on the CIF (cost, insurance and freight) value of the product imported into Italy. The Alcohol Act (2001) bans TV and radio advertising of alcoholic products between 4PM and 9PM and prohibits alcohol advertisements from being shown on TV within 15 minutes before or after any childrens programs. The Act also requires a self-regulatory code to be provided jointly by media companies, advertising agencies and advertisers to govern alcohol advertising. For the legal drinking age, there is no minimum age of legal drinking. And the legal purchasing age of alcohol is 16 and 18. South Tyrol prohibits both serving and purchase for people under the age of 18 and to everybody in a state of inebriation. Milan has enforced a ban on those under 16 purchasing alcohol. Heavy fines are given to proprieters and parents if a transaction is completed. Canadian Alcohol Taxes and Duties Legislative Framework Beer Duty Up to 1.2% alcohol $2.591/hectolitre 1.2% to 2.5% alcohol $13.990/hectolitre Over 2.5% alcohol $27.985/hectolitre As we can see in the table of different rates of duty applies to beer, which contains following level of duty: (1) more than 2.5% absolute ethyl alcohol by volume; (2) more than 1.2% but not more than 2.5% absolute ethyl alcohol by volume; and (3) less than 1.2% absolute ethyl alcohol by volume, and for all beer containing more than 2.5% absolute ethyl alcohol by volume, the rate of excise duty is currently $27.985 per hectolitre. However, excise duties are not imposed on beer provided it is brewed by a person for personal or family use or to be given away without charge and is not for sale commercially. Canadian government showed how highly they value beer production and its breweries by lowering the taxes exercised on beer production. This is a benefit to the industry. As one of the leaders of the whole economy of Canada, the beer sector is likely to maintain these tax benefits and other benefits might be offered as well to the beer sector to develop the Canadian beer industry. In Canada, alcohol was taxed pursuant to the Excise Act previously. However, a new regime in Canada for the federal taxation of certain alcohol, including spirits and wines, was introduced in the Excise Act, 2001, which was implemented effective July 1, 2003. Excise duties on beer (and malt liquor) continue to be imposed under the Excise Act. Generally, different excise duty treatment applies to alcohol for non-beverage use. A licence is required authorizing certain alcohol operations under both the Excise Act, 2001, and the Excise Act. For beer, a licence is only required under the Excise Act for the commercial operation as a brewery, for example, the place where beer is manufactured. All brewery licensees are required to post and maintain security with the Canadian government. The amount of security is set at a minimum of $5,000. Generally, beer is subject to an excise duty that is imposed and becomes payable during the production process. The legal drinking and purchasing age in Canada are both 19. However, In some areas such as Ontario, Saskatchewan, British Columbia, Newfoundland and Labrador, Nova Scotia, Northwest Territories, Yukon, and Nunavut, underage drinking under parental supervision is permitted, with some restrictions, on ones own property in the provinces of New Brunswick andOntario and at home in the provinces of Prince Edward Island, British Columbia and Saskatchewan. InBritish Columbia, only children of the supervising parents, not any other minors such as guests, are allowed underage drinking. Consumption of alcohol in another persons home is subject to other laws. Major players The brewing industry had become extremely concentrated in Canada by the 1970s, being dominated by just three major companies, which are Molson, Labatt, and Carling-OKeefe. Canadas largest brewing companies were Labatts and Molson as we mentioned in the previous overview of industry condition of both countries. In 1995, Labatts was purchased by an Belgian company which is called Interbrew which is now part of Brazilian-Belgian Anheuser-Busch InBev, the worlds largest brewing company and Molson, the other largest beer company, which was merged with US company Coors in 2005 and created a new company called Molson Coors, and it is the worlds fifth largest brewing company now. In 2006, the largest remaining Canadian brewery was purchased by the Japanese owned Sapporo Brewery, Canadas beer production has been mainly under the control of foreign multinationals. By the end of 2006, nearly 90% of beer sales was of product brewed domestically under licence from non-domestic corporations. American beers brewed under licence dominate much of the market. For instance, Budweiser is brewed under licence in Canada by Labatts and Coors Light by Molson. The market in Canada for domestic beer is dominated by Labatt, Molson and Sleeman, all foreign-owned companies. The largest Canadian-owned brewer, Moosehead breweries, only controls small portion of the Canadian market. Italy hosts a few breweries, with the largest owned by the best known Italian and foreign brands. Peronis brewery produces the best known Italian beer: la Peroni. Peroni also produces the premium beer Mastro Azzurro and the brands WÃ ¼hrer, and lesser known Raffo. Heineken Italy brews its famous Heineken, but has also acquired the brands Moretti, Ichnusa, Birra Messina and Dreher. Carslberg owns a few brewerys in Northern and Central Italy. In Northern Italy, Forst brews its own branded beer as well as the famed Menabrea. In Friuli Venezia Giulia the latest brand of Italian beer Birra Castello, has been active since 1997. Along with these big players, there are lots of microbreweries small scale breweries that produce small quantities of beer, they also have premium quality. Major finding of comparison and recommendations Making a decision in which country to invest is not so easy, because of all those different variances in both of the counties, some of the variances are strength for Canada, however, some of them are favorable for Italy. In the first place, the tax rates between Canada and Italy differ. In Canada the rates are relatively lower than in Italy due to the fact that the tax level is relatively high in the European context. In addition to this, the Canadian government reduced taxes even more to benefit Canadian brewers. Secondly, when a look is taken at macroeconomic indicators like GDP per capita we see that Canada is a bit more favorable. However, since this differences are so small, both of the countries that we have chosen are developed countries, and GDP per capita which above certain level has a relatively weak influence on the consumption of beer. Therefore, this factor is not likely to have a significant influences on the desicion of investment in the countries. Thirdly, the population above legal drinking age in the markets has been calculated starting from the age at which alcohol consumption is allowed. This would mean that we start counting the population starting from 18 years old in Italy (some area start from 16 years old) and 19 years old in Canada. We find that the relative amount of people able to purchase and consume alcohol in Italy is larger than in Canada, because the whole population is larger in Italy than in Canada, and the population of legal drinking age are also higher in Italy than in Canada, therefore, the potential market in Italy are larger than in Canada. Lastly, when comparing markets according to its players and their market shares we find that Canada has a more concentrated market with high market share large players and many small players. Italy on the other hand has two old players with a high share and one smaller player while the rest of the market consists of really small players. It would therefore be an advantage to invest in the Italian market; trying to gain and increase a market share because of the fact that there are many foreign players already play very important roles in the Canadian market, Molson Coors Brewing company and Anheuser-Busch InBev have a market share of 42,70 and 42,20 percent respectively. Third place is hold by Moosehead Brewing company with a share of 5,90 percent. These three main players hold 90,8 percent of the market in total by volume. Taking all those facts into consideration, i would say that Italy would be the country that we are going to invest in. As we explained above, we analysed both countries SWOT, for Italy, the strength is market size, the weakness is relatively higher tax rate on alcohol, and the opportunities is that there are only two big old players and some extreme small players, gaining or increasing a share is relatively easy, and the market of Italy are more potential, because Italy still on the growing phase of beer industry. Moreover, since the age allowed to drink in Italy starting from the age of 18 and in some areas are even lower to 16, and with more population in Italy, therefore the market is bigger in Italy than in Canada. In addition, nowadays the Italian government highly values the Italian beer industry due to the impact on its economy and therefore taxes are getting lower and lower. And the threats of Italy is that new public policy may harm the beer industry, such as the advertising policy we mentioned before which bans the ads of alcohol in specific period of time on TV.