Table of contents

Introduction…………………………………………………..…………………………….2

I- Company presentation………………………………………………...………………3

1.1 Essential information on the company……………………………………………...3

1.2 History of the company………………………………………………………………3

1.3 The specificity of the Trappist beer…………………………………………………3

1.4 Chimay beers…………………………………………………………………………4

II- The beer market……………………………………………………………………….4

2.1 The beer sector………………………………………………………………………..4

2.2 The Belgium’s beer sector……………………………………………………………5

III- Import and Exports………………………………………………………………….6

3.1 Import…………………………………………………………………………………6

3.2 Export………………………………………………………………………….………6

3.3 Goodies………………………………………………………………………………...7

3.4 Infrastructure and logistic……………………………………………………………8

IV- Problematic…………………………………………………………………………..10

4.1 Analysis of the product………………………………………………………………….10

4.2 The selection of the best market………………………………………………………..11

4.3 The selection among the different prospects…………………………………………..12

Conclusion…………………………………………………………………………………14

Bibliography………………………………………………………………………………15

Appendix…………………………………………………………………………………...16

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Introduction

As part of our master in International Management at ICHEC (Institut Catholique des Hautes Etudes Commerciales), we have been asked to analyse a company through different aspects by focusing on the international level activities. This work is part of the “Managing International Operations” course supervised by Mrs Heinen and is a way for us to put the theory we have learnt into practice.

Therefore, we contacted a lot of exporting companies and the firm « Chimay » agreed to work with us. We were really enthusiastic because of our interest for this kind of business. Indeed, Chimay is a company that is specialized in high quality beers and cheese. But for this report we have decided to only focus on the beers because we wanted to work on a real Belgium product.

Let’s now move on to the different elements we will develop in this file. This work will be divided in three parts:

First of all, we will give a brief presentation of the company and present the main competitors of the company on the world and on the Belgian market.

The second part deals with a brief assessment of the company’s activities at international level. In fact, we will develop three main points: the imports of raw materials, the exports that the company does all around the world and the risks and opportunities faced by Chimay.

Finally, we will develop our problematic and try to establish a concrete selection process which can help Chimay selecting the best market and trading partner possible.

I) Presentation of the company

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The purpose of this part is to give an overview of the company we chose to analyze.

1.1 Essential information on the company 1

Name of the company : Bières de Chimay SA

Identification number : BE 0438.560.655

Address of the company : 8 Route de Charlemagne6464 Baileux

Creation date : 21 September 1989

Sector : Brasseries et assimilées

Turn over (2002): 23 million Euros

Number of employees : 75

1.2 History of the company 2 :

See in the Appendix page I

1.3 The specificity of the Trappist beer:

One of the competitive advantages that Chimay has compared to the other companies in the brewery sector is that it produces Trappist beer. But what is exactly a Trappist beer? It is “a beer brewed by or under control of Trappist monks. Of the world's 171 Trappist monasteries (as of April 2005), seven produce beer (six in Belgium and one in The Netherlands). Only these seven breweries are authorized to label their beers with the Authentic Trappist Product logo that indicates compliance to various rules decided by the International Trappist Association. This private association created a logo that is assigned to goods (cheese, beer, wine, etc.) that respect precise production criteria. For the beers, these criteria are the following:

The beer must be brewed within the walls of a Trappist abbey, by or under control of Trappist monks.

The brewery, the choices of brewing, and the commercial orientations must obviously depend on the monastic community.

The economic purpose of the brewery must be directed toward assistance and not toward financial profit.

This association has a legal standing, and its logo gives to the consumer some information and guarantees about the produce. There are currently seven breweries that are allowed to have their products wear the Authentic Trappist Product logo: Bières de Chimay, Brasserie 1 Most of the informations were found on the following web site:http://www.trendstop.be/FR/detail/438560655/bieres-de-chimay.aspx2 This paragraph is inspired by the Chimay web site (10/10/08)http://www.chimay.com/en/the_origins_110.php

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d'Orval, Brasserie de Rochefort, Brouwerij Westmalle, Brouwerij Westvleteren, Brouwerij de Achelse Kluis, Brouwerij de Koningshoeven3 (in the Netherlands).

Because of this specific niche in the beer market, we will only consider those six companies as potential competitors to Chimay as, according to the Export director of Chimay, it is not relevant to compare Trappist beers with more traditional beers or even abbey beers. Abbey beers try to compete with Trappist beers licensing their names from abbeys but they are in fact commercial brewers so they do not have the same quality as authentic Trappist beers.

1.4 Chimay beers 4 :

See Appendix page I

II) The beer sector

In this section, we are first going to analyse the beer market at world level and then in Belgium and secondly determine the market share of Chimay in those markets.

2.1 The beer sector

The beer sector is today a high competitive disputed market. Large companies with a worldwide presence are competing for the “pol-position”. There are different types of competitors: some of them are international players, such as InBev, Heineken, Budweiser... while others just want to win market shares on the national field like Ch’ti, Unibroue…

From year to year there is a constant rise in the beer consumption. Consequently, there is an increase of the international beer production. As we can see on the graph in the Appendix 5, Asia is the most important producer and inside this continent, China is the first producer.

Due to the multiple mergers of those last five years, “brewer giants” emerged on the international market: the Belgian-Brazilians Inbev, the Brit SABMiller, the American Anheuser-Busch and of course the Dutch with Heineken. Today, as we can see on the chart in the Appendix6, the beer world market is dominated by three major competitors and InBev has become number 1 since the acquisition of Anheuser-Busch (previously n°4).

2.2 The Belgium’s beer sector

We will now deal with the beer market in Belgium and analyse Chimay’s market share.

3 www.Chimay.be (21/11/08)4 This paragraph is inspired by the following web site :http://en.wikipedia.org/wiki/Chimay_Brewery; (23/10/08)5 Appendix page IV6 Appendix page IV

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Consumption’s trend

Belgium is well known for its delicious beers. Yet, it seems that the Belgian drink less quantity of beer year after year. It also seems that they prefer quality to quantity. Therefore, Trappist, blond and abbey beers are performing well compared to the other traditional beers and have not decreased yet.7That decrease in the beer’s consumption is due to the high prices of the raw materials and energy (repercussion of the oil price in the energy cost) which affect the price of the final product too.

More precisely, beer consumption in our country went down by 10, 8% between 1997 and 2007. On the contrary, the export demand is still booming (+ 93, 58% between 2000 and 2007)8.

In Belgium, the “Pils” accounts for 70% of the total beer consumption. The other 30% are the special beers, “bières spéciales” in French. Those are les “bières de dégustation9”, Trappist and Abbey beers10.

Finally, we can also notice11 that although there have been some changes in terms of quantities consumed in the segment of the “bières spéciales”, the market shares between the “Pils” and the “bières spéciales” remained the same.

Volume and turn over

In the Belgian’s Top 150 00012, Chimay is ranking 10th in the beer sector according to its turn over in the sector. Actually, Chimay enjoys that excellent position due to the enthusiasm of the Belgians who pay more attention to the quality and the authenticity of the product rather than the price. More precisely, Chimay realized in 2003 for its three beers, a market share of de 13,2% in the segment «  bières spéciales ».13

Chimay’s volume of production and turn over increases year by year. They offer a production level of about 123.000 hectolitres per year and since 2002, the turn over increases at least by 5% each year. “The income in 2006 amounted to 31 millions EUR (+7, 5% compared with 2005), which was principally due to the increase in export (50 % of the 2006’s revenue). Its Chimay Blue accounts in general for 55% of their total sales, then it is the Chimay Red and finally the Chimay Triple.” 14

7 http://www.statbel.fgov.be/press/fl044_fr.asp (30/10/08)8 the Belgian brewers website : http://www.beerparadise.be/emc.asp?pageId=526, (30/10/08) 9 In that segment are beers with an exotic taste: “la Gueuze”, beer with fruit’s taste, etc….10 See the table of belgian beer consumption in the annex11 Appendix page V12 http://www.trendstop.be/FR/detail/438560655/bieres-de-chimay.aspx (12/11/08)13 http://event.chimay.com/fr/010301.php?page=news-infos.php&id_news=8&statut=&catid=&ancpos=&sort=&keyword=&affi=&numdeb=0&thislangue=1&affonline=&numtott=11&limit=all (15/11/08)14http://www.lecho.be/dossier/bieres_trappistes/article/Chimay__la_boite_a_couleurs_des_peres_brasseurs.7174213-1875.art (15/11/08)

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The competition

In fact, as seen previously, Chimay’s competitors are the entire “bières spéciales” segment. Yet Chimay decided to specialize in the strong beer segment with high alcohol degree instead of also producing lighter or fruity beers. That is why they only considered the other Trappist beer’s producers as their competitor15. Unfortunately, we did not find the market share of all the Trappist beer producers. Yet, as far as Chimay is concerned, they were the first to export and today they are only two in the international market with Orval.

III – Import and Export16

3.1 Import

Chimay imports some raw materials which are important in their production. The bottles are imported from France and the glasses from Deutschland or Portugal. Let’s now talk about some ingredients. They import the hop which gives the bitterness and the aroma of the beer from Deutschland and the malt is imported from France.

3.2 Export

Chimay exports in over forty countries around the world. The internal organisation of the commercial sector is a bit specific. They have two different departments to manage independently the exports:

Benelux department

Chimay does not consider Belgium as an individual market. The internal market is composed of Belgium, Luxembourg and Deutschland. We can explain this by the fact that the behaviour of Luxembourg and Walloons populations and the Dutch and Flemish populations are very similar. The Belgium market is the most stable if we consider the demand because of the important place of the beer in our country. Moreover, Holland and Luxembourg do not represent an important part in the Benelux sales if we compare it to Belgium.

The export department

In this department, the exportations are shared with around forty different countries and with various importances.

15 http://www.dhnet.be/free_dossiers/interactif/biere/interview.htm (15/11/08)16 The information given in this part are coming from the interview with mister Marangon (see Appendix page I)

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- The first importing country in terms of history is France. Chimay is located near the French border. So because of the proximity, France is the first place where the monks have exported their beer. Moreover, the culture of the north part of France is very similar to the Belgian culture and people are use to drink and appreciate the Belgian beer.

- The first importing country in terms of volume of exportation is the United States. The United States also have an historical link with Chimay and they are having a long and a good partnership. As a result, Chimay beers have a relative important share in the American beer market. Those excellent results are mostly due to the image of the product, the quality and also the fact that people are now more and more looking for typical traditional beers instead of big famous commercial ones.

- Then we have Italy which is less important in terms of volume but where there is also an historical past. The product is well-know in Italy because of the great number of Italians expatriated in Belgium that have brought back Chimay beers to their family.

- Another country is Japan. It is quite a new relation and they do not know yet why the Japanese are interested in Belgium beers. But we can say that in Asia they are use to drinking beers and now there are looking for quality products, well-know brand and a good part of the population have the money for that kind of luxury goods.

- Finally, Chimay also export in other countries like Denmark, England, Ireland, Sweden, Norway, Finland, Germany, Switzerland, Greece, Cyprus, Spain, Portugal, China, Hong-Kong, Thailand, Russia… It is less important than the above countries in terms of volume.

To conclude on the exportations, we can say that Chimay export 50% of his production17. The French and the United States markets represent the biggest part of Chimay exportations, around 75% in terms of volume. And the other 25% of the exports are shared between countries of the European Union and over sea countries.

3.3 Goodies 18

Chimay wants its beers to be different and represent quality. Therefore, they are really strict on the presentation of their beers. It is for example forbidden for a bar to sell a Chimay beer in anything else than a Chimay glass. This is why Chimay offer with all the orders they have 5% of the amount of the invoice in goodies such as glasses, outside signs, sunshades, Chimay trays, badges, flags, stickers… All those elements are making the brand visible and are good marketing tools.

3.4 Infrastructure and logistic

17 http://www.chimay.com/fr/le_departement_export_106.php, (11/11/08)18 http://www.discobeer.be/produit/artpub.htm, (11/11/08) See some examples of goodies in the Appendix page III

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● Importing:

In general, there are two main beer distribution channels. The first one is the Horeca channel and the second one is the mass marketing channel.

On the one hand, Chimay have one importer and one customer for each country. Chimay have two different ways to get in contact with the customers from the two channels.

- The importers are working directly with the customers. The importers have a warehouse to stock the beers and they then use their commercial power to find new customers. After that, the importers sell the beers through a subcontractor (importer = distributor).

- The importers are working with distributors. This second solutions is a mix of two things. On the one hand the importers are directly delivering a part of their products to the customers. On the other hand, for geographical or commercial reasons, they use distributor network to deliver the other part to the customers.

On the other hand Chimay works with several importers in a country.

- The first reason is that in that country, one importer is very good in the Horeca sector and the other one in better in the mass marketing sector. So it is better to divide the market directly between the two importers. It is the case in Spain where they have two importers and in Italy where they have four importers.

- The second reason is that one importer is the best in the distribution of bottles and the other one in the distribution of barrel. If they sell beers in a foreign country, the bottles are lost but they have to bring the barrel back in Belgium. That is the case in Russia.

Chimay is really implicated at each step of the process. They want to meet in person the several speakers who are part of the selling process. Furthermore, according to the monk principles, they want to offer a quality product which means that every step of the process have to be control, from the production to the final customers. Consequently, each distributor has to respect some basic criterions in order to maintain the quality of product and a strong relationship based on trust has to be created between Chimay and its partners.

● Distribution process

Chimay has a very strict commercial policy. The customers have to pay before receiving the goods. It is something very unusual but due to the image, the brand and the quality of the beer, Chimay has the possibility to impose their conditions to the customers.

● Delivery process: Incoterms

In general, Chimay does not deliver the products to the customers. So when a customer make an order and pay it, they have to wait for Chimay to tell them that the order is ready and they have to organize themselves to transport from the Abbey to their warehouse.

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They are using 2 different ways of delivering:

The ex-work: Chimay gives the responsibility of the goods directly from the company to the customers.

- Chimay contact directly the transporters if they have a regular contact with a customer.

- The customers contact the transporters and tell to Chimay when they are going to come.

The Free on Board “FOB”: Chimay takes the responsibility of the goods from the company until the harbour of Antwerp.

- Chimay only use that Incoterm with big costumers such as Japan who buy a whole container or more.

IV) Problematic

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Now that a good overview of our company has been given, it is time to turn to the problematic we have chosen to develop. As the previous parts of this report have shown, Chimay is doing very well both on the Benelux market and on the international market. Indeed, its situation is close to ideal: the demand is higher than the offer, they constantly have proposals for new commercial partnership, their turnover is increasing… Therefore, it was hard to find a real problem they could face. However, during the interview with the director of export, we noticed that they did not have a specific procedure in order to choose the best trading partner possible on a given country and that they were relying more on subjective matters rather than objective criterions. Therefore, we decided to focus on that subject in the problematic part of our report. We will try to establish a concrete selection process that Chimay will be able to use in order to select the best trading partner possible that will be based on what we have learned during our Managing International Operations course and on some other books (cf bibliography).

4.1 Analysis of the product 19

Here are some questions that Chimay must ask itself before considering exporting.

→ Functional Analysis

● Production function: analysing the company’s capacity

- Does Chimay have enough quantity left after satisfying their actual customers?- Is it possible to maintain the quality of products and meet the needs of foreign

customers? - Does the production line allow the adaptation of the product/packaging to the norms

and needs of the country considered at a reasonable price?

● Financial function: analyse of the company’s financial capacity at three levels

- Investment : No need because Chimay is running at full capacity- Working capital needs: No need because Chimay is running at full capacity- Financial risk: For the moment Chimay does not care about it because they do not

have any risks. Indeed, the costumers have to pay the order before it is send to them. But it is right to say that if their new prospect go bankrupt after six months, all the time spent doing the selection is lost.

● Human resources function:

It is not relevant in Chimay’s case as they already have an entire department dedicated to exports. They are consequently used to deal with foreigners.

19 PASCO C., Commerce international, 5ème édition, DUNOD, 2004, 155p

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● Marketing function

- If the product has a particularity, something that will make the product unique and so easier to sell?

- Which image Chimay wants to give to its products?- What is the development strategy?- Every time they enter a new market will they have to translate into the national

language the sales literature, handling instructions or service manuals?

→ Competition analysis

As we said before, there are only seven Trappist beers in the world and out of them, only Orval and Chimay are in competition for the international market. Furthermore, Orval exports way less than Chimay so the latter has a competitive advantage over Orval.

4.2 The selection of the best market

→ Two different ways to develop their exportation

Most of the time, Chimay receive proposals of potential new customers in a new markets via their web site. They regroup the prospects from the same country and in order to choose the one they will work with, they look at some key points that we will develop later.

Sometimes Chimay is interested in developing their presence on other markets because they consider that it is a country where they have to be present. In this case, they contact themselves potential costumers and see if they are interested in their products. For example, they are now looking for a contact in the Czech Republic because it is a country where Chimay was present in the past but is not represented anymore which is a shame as people have a strong beer culture.

→ Key points in order to determine the best market

Accessibility of the market

An important factor is the culture/ religion of the people in the country. Indeed, it can be helpful to know if this country has a strong “beer culture” or if the majority of the population is for example Muslims as they are not allowed to drink alcohol. Consequently, Chimay should take into account those cultural elements to determine if this market is viable and the potential difficulties to inter the product in the country. Moreover, it is essential to take into account the costumes dues of the country.

Potentiality of the market

The company should have a look on the different statistics available on the country (GDP, standards of living…). We can find those kinds of information in the national statistical

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office, in the Embassy or in the consulates of foreign countries. Another solution is also to talk and share experience with exporters already on the market. In order to complete the information on the market, it could be a good idea to buy information from database companies which could provide them more detailed data.

At this stage, the interesting new markets are defined. The next step is therefore to designate the best trading partner in that market.

4.3 The selection among the different prospects

→ First step: Basic information

- What is your type of activity? (Cafés, restaurants, pub, liquor store…)- Are you a well-established company or are you new?- What is the range of beer you already have?- Do you already have a Trappist beer? - How would you store the beers? - How would you present a Chimay to your costumers?-Which quantity would you like to import? (Palette, container…)-What would be the frequency of the deliveries? -Are you more interested in kegs or bottles?-Would you agree on our conditions (‘contrat cadre’) as they are not negotiable?

→ Second step:

Motivation

Now they have already eliminated some prospects thanks to the basic questions and can make a first selection. In order to have only one future customer, they contact the selected prospects by phone or organize a meeting and they judge their motivation. That step is of course more subjective as the selection is made according to the impressions of the responsible.

Marketing strategy

What really matters is the image of the company and the product. As a result, because of the Trappist appellation, some strict rules must be respected concerning the advertisement and the marketing strategy (no monks in the ad, no controversial images, no shared advertisement with other brands…). Furthermore, to respect the image of the product, the prospect must serve the beers in the appropriate glasses and temperature, respect the Trappist logo length and the colors’ code in their beer advertisings or communications. In fact, every marketing project should be approved prior to his publication. All those requirements are explain in the sales manual on the B to B’s website of Chimay20. Communicating those rules to the prospect is an important step as his reactions are an indicator of his commitment to the project.

20 http://export.chimay.com/

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Fulfilling the needs of the final consumer

Finally the last step is to make sure that the typical customer of the prospect would be attracted by a Chimay beer. Chimay is concerned about the client’s needs and so it is important to make sure that all the basic intangibles are covered:- Functionality: Chimay is a special and uncommon beer that each costumer should take

the time to appreciate. - Security: the product passed through all the process: controls and analysis - Quality: as it is the main basic intangible that Chimay claims, this is where they

concentrate all their efforts. Indeed, several laboratory analyses are done at different steps in the production process in order to ensure the quality is optimum. If by any chance a test result would not meet Chimay’s standards, the entire mash tun would be destroyed.

- Continuity: the beer production is planned in advance. Moreover, the production must take place at specific hours in order to respect the monks’ timetable. Finally, the three beers are produced successively according to the demand.

- Conformity: It is important that the taste of Chimay remain constant. This is why the formula of the brewery’s yeast is kept secret in a Belgian University.

After all those steps, one prospect should stand out and be the one chosen by Chimay. In 2008, according to market studies, the consumption of beer on their traditional markets will be weaker. Indeed, the volumes on the American and French market have been reduced. Consequently Chimay will this year have the opportunity to look for new interesting prospects. So the selection process that we have developed will be useful for them. However in 2007, the consumption of beer on the Benelux market was higher than usual and therefore Chimay had to decline all the requests of new prospect. Nevertheless, it is a risky strategy to say no to potential prospects who are interested for two main reasons:

- A good prospect, who is interested in Chimay, will complete his beer range with another Trappist beer or with an abbey beer. As a result, they will be less interested in Chimay because their range will be complete.

- Instead of buying the beer directly to Chimay, they will go to a Belgian distributor. So Chimay will export to another country without knowing it. In this case, the problem is that the capacity will not be better and Chimay will loose the control over its export.

Conclusion

The task we have been given was to analyse an import-export issue and try to find a solution that can be implemented in the company.

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As far as we were concerned, we have chosen to work with Chimay, a Trappist beer producer and the problematic we developed was to propose a concrete selection process in order to find the best markets and trading partners possible while keeping in mind the particular constraints of Chimay which mainly is a limited capacity of production.

Thanks to the International Management Operation course we have attended this semester and some other references, we were able to create as a solution to our problematic a concrete selection process that Chimay will be able to use in their daily life in order to be the most efficient possible concerning the selection of their future exporting market and costumers.

We really hope that this solution will fit them and we warmly thank Chimay staff and mister Marangon in particular for the opportunity given to work with them and for their availability. We also thank our school and teachers to allow us to take into practice what we learnt at school.

Bibliography

● Books:

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- PAVEAU J. DUPHIL F., Exporter: Pratique du commerce international, 18ème édition, Foucher, 2004, 655p

- PASCO C., Commerce international, 5ème édition, DUNOD, 2004, 155p

● Courses :- CRACCO E. Getting started in export trade : excerpts & amendments, 2007, 94p- HEINEN M-L, Managing international operations, 2008.

● Web sites:

Chimay’s website:

http://www.chimay.com/en/the_origins_110.phpwww.Chimay.be (21/11/08) http://event.chimay.com/fr/010301.php?page=news-

infos.php&id_news=8&statut=&catid=&ancpos=&sort=&keyword=&affi=&numdeb=0&thislangue=1&affonline=&numtott=11&limit=all (15/11/08)

http://export.chimay.com/ (29/11/08), B to B website http://www.chimay.com/fr/le_departement_export_106.php, (11/11/08)

About the beer sector and Chimay in this sector:

http://en.wikipedia.org/wiki/Chimay_Brewery; (23/10/08) http://www.statbel.fgov.be/press/fl044_fr.asp (30/10/08) The Belgian brewers website : http://www.beerparadise.be/emc.asp?pageId=526,

(30/10/08) http://www.trendstop.be/FR/detail/438560655/bieres-de-chimay.aspx (10/11/08) http://www.lecho.be/dossier/bieres_trappistes/article/

Chimay__la_boite_a_couleurs_des_peres_brasseurs.7174213-1875.art (15/11/08) http://www.dhnet.be/free_dossiers/interactif/biere/interview.htm (15/11/08) http://www.discobeer.be/produit/artpub.htm, (11/11/08)

● Interview: With Steve Marangon on the 17/10/08 and on the 28/11/08

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