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Anadolu Efes Case
Optimization of Location, Distribution and Capacity
Expansion Decisions
Company Background
Anadolu Efes Leading beer producer and distributor in Turkey Emerging international presence in Eastern
Europe and Central Asia
• operates 9 breweries and 4 malteries in 5 countries
• annual beer production capacity: 1.4 billion liters
• sells its products in over 30 countries
• domestic market - 77% of total sales volume
Organization
Anadolu Holding
Anadolu Efes
(Beverage Group)Production Group:
Brewery and Malteries
International Operations:
Efes Breweries International
Soft Drinks:
Coca-Cola
Sales and Distribution:
Efes Marketing
Efes’ Domestic Beer Market Share
In 2000, Efes’ share in the Turkish beer market reached a record high of 78%
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1986
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1998
2000
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Sales Volume (millionliters)
Market Share (%)
Domestic Beer Market
Potential for market growth
Per capita beer consumption in Turkey increased by more than 50% from 1995 to 2000
Annual population growth of 1-2% over the years increases the adult population each year
Market Size
730 million liters sales and around $294 million sales value in 2001
Turkey ranks as the tenth largest beer-consuming nation in Europe
Beer Trivia
Who drinks the most beer?Annual Beer Consumption
1. USA 23.00 billion liters2. China 20.73 3. Germany 10.464. Brazil 7.885. Japan 7.15
Beer Trivia
Who drinks the most beer?Per Capita Beer Consumption
Czech Republic has the largest per capita beer consumption in the world: 156 liters
Global average is around 25 liters
Global Beer Market
Market Size World beer consumption was around 126 billion
liters in 2000 USA and China account for 36% of the global
beer market; emerging markets make up 45%
Growth Opportunities Consumption in emerging markets has been
growing Major US and Europe based brewers have been
focusing on Eastern Europe, China and the CIS countries
Efes’ Strategic Goals
Business diversification and international presence
Maintain domestic market share
Concerns:
1. Increasing competition due to new entries into the domestic beer market
2. Anticipated increases in beer demand that will surpass the available beer production capacity
Plans
1. Optimize malt and beer distribution network to provide leverage against increasing competition
2. Open new breweries and possibly expand the capacity over the next several years to supply for increased demand
Analysis
1. Improve the current distribution system
• Analyze Efes’distribution strategy and develop a malt and beer shipment plan that minimizes total transportation costs
2. Determine when and where Efes should build new breweries and possibly expand their capacities
• Optimize distribution, location, and capacity expansion decisions over the next three years.
Beer Trivia
a) 1,000 years
b) 2,000 years
c) 7,000 years
d) 20,000 years
How long have we been drinking beer?
How long have we been drinking beer?
The earliest recorded beer recipe was found in clay tablets written 7,000 years ago.
Beer originated in Mesopotamia and then found its way to Anatolia.
Four thousand years ago in Anatolia, Hittites, were drinking beer in daily life as well as in sacred rituals.
Beer Production
Barley Malt
Hops
+
+ H2O + yeast =
Beer Production Process
malting barley
distilling
brewing
bottling
•Mashing•Boiling•Fermentation•Aging
Production and Distribution System
Afyon
Konya
Import
Istanbul
Ankara
Istanbul
Izmir
Antalya
Bursa
Kayseri
Export
Distribution System - Current Malt
Supply / Capacity
24 / 30
2 / 68
20 / 20
Beer Demand
103
74
50
60
102
13
202/ 220
200 / 200
BrewerySupply / Capacity
49
103
0
2
20
0
0
50
0
0
0
0
25
0
60
102
13
24
Current
Malt Transportation
Current
Beer Transportation
Current Distribution System
The current shipment plan enforces certain restrictions due to established relations between brewery-distributor pairs:
• Ankara brewery supplies all the beer demand of Bursa distributor
• Istanbul brewery supplies all the beer demand of Antalya distributor
Total shipment costs can be reduced by optimizing the shipment plan
Analysis
Optimize the distribution system by formulating and solving a linear programming model,
1) with existing relationship limitations,
2) by relaxing these limitations,
and summarize the resulting savings in costs.
Analysis - continued
Discuss the sensitivity of the model solution to changes in model parametersFor example:
1) analyze how much reduction in transportation costs would justify keeping the existing brewery-distributor relations.
2) discuss other input parameter changes that would make certain shipment choices in the current distribution plan, i.e. malt import, cost-effective.
3) discuss sensitivity to demand changes
Capacity Expansion Decisions
Multi-period strategic planning problem
Total beer production capacity can be increased by opening a new brewery at one of the identified potential three sites, and by expanding the capacity of the newly established brewery, if necessary, over the next three years.
Analysis Optimize
• new brewery location and capacity expansion decisions
• malt and beer distribution decisions over the next three years
Objective:
• Minimize the present value of the malt and beer transportation costs over a 20-year horizon
• and the present value of the capacity expansion costs
• such that all of the beer demand at the distribution centers is satisfied in each year.
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