1.

Company description

Background
TheGroupCervecero Backus & Johnston's main economic activity is brewing.
packagingsale, distributionand all kinds of negotiations related to malt beverages and
malts, non-alcoholic beverages, and sparkling waters. It is corporately organized, made up of
twenty-sevencompanies, which follows the criteria ofintegrationvertical and horizontal, which allows you to
self-supply of supplies andservices.

Below is a briefdescriptionfrom the Backus Brewery Group.

In 1876, Mr. Jacobo Backus and Howard Johnston, of American nationality, founded a
ice factory.
1879. The companyThe Backus and Johnston Brewery, Ltd.
1954. A group of Peruvian businessmen acquires Backus and Johnston Brewery S.A.
establishing an example of nationalization through private initiative and widespread shareholding. It
they acquire and create new companies related to the brewing business in different regions of the country,
turning the Backus business group into one of the leaders of thedecentralizationin Peru.
1994. Backus and Johnston Brewery S.A. acquires 62% of theactionscommon of the Company
National ofBeerS.A., and in this way, also acquires thecontrolofSocietyBrewer
Trujillo S.A. andWaterMineral Litinada San Mateo S.A., previous competing companies.
1996. Through thefusionfrom Cervecería Backus and Johnston S.A., National Beer Company
S.A., Cervecería del Norte S.A. and Sociedad Cervecera de Trujillo S.A.; begins itsoperationsthe Union
of Peruvian Breweries Backus and Johnston S.A.A., thecompanymost important brewery in Peru.
In the spring of 2000, Unión de Cervecerías Backus y Johnston S.A.A. acquired 97.85%
of the common shares of Cervesur (competing company), consolidating a Peruvian company that
may be able to compete effectively in a globalized environment.
2001. In November 2001, the purchase of 12.82% of the shares of Unión was carried out.
Peruvian Breweries Backus and Johnston S.A.A. to the Polar group, leaders of theindustrybrewery and
Venezuelan food. With this, this Venezuelan group represents approximately 22% of
common stock type A of Backus.
2002. In December 2002, the Bavaria Business Group ofColombiathe fourth brewery of
Latin Americaincreased its stake in Backus from 24.5% to 49.1%. Saidinvestmentrose to US$
567.9 million dollars.

Mission

Themissionde Backus is: Produce and marketgoodsand optimal servicesquality

primarily aimed at the beverage sector andfood, both for themarketplace like of
export.
Meet the real needs of consumers.
Generate aprocesscontinuation ofchange, to maintain modern, efficient productive units,
profitable and competitive at a global level.
Contribute to the process ofdevelopmentof the country.

1. Objectives

Theobjectivesthe Backus are:

• To be the first brewing group in Peru, with international projection.

• Manage companies with common objectives.
• Generate timely responsiveness to changes in the environment.
 • The business relationship between corporate companies must be established equitably.
prioritizing thecompetitivenessof them, seeking to reduce their dependence on the
brewing sector.
• To produce non-alcoholic beverages and food, reaching positions ofleadership.
• Develop the qualification and well-being ofpersonalat all levels.
• Look for theTotal Qualityat all levels: people,processes, productsand services.
• Increase thevalueofheritageof the shareholders and grant annual dividends.
• Develop and maintain theimageof a Corporationleaderand modern in Peru.

Values

Thevaluesde Backus son:

• LEADERSHIP: It is forged through a process of sincerity and the development of virtues.

It is about getting people to do what should be done.
• BUEN EJEMPLO: Practicar lo que se predica. Es la forma como el líder transmite sus valores
yprinciples.
• TRUSTFriendshipCondition to achieve commitment to the company and autonomy for
create. It stimulates theefficiencyand avoid limiting yourself to pointing out the mistakes, but rather, help to
correct them and overcome them. It is the foundation for working in a team.
• TEAMWORK: Association of efforts. Team members share the
goals, plansstrategiesand mistakes, ensuring that the goals of the group prevail
about individual objectives.
• INNOVATION: It involves supporting the initiative andcreativitypersonal and the team, tolerating
errors and seeking permanent action. Without this value, opportunities would not be taken advantage of, since
which are by definition uncertain.
• TOTAL QUALITYPRODUCTIVITYProduce well from the beginning, in a chain of
responsibilities, satisfying the needs of theclientIt is to achieve results at the leastcost,
optimizing the use of theresources, which are scarce and expensive, seeking to achieve advantages
competitive.
• RESPECT FORENVIRONMENTIt is to act in harmony with the ecological environment.
promoting conservation of thenaturebasic requirement to achieve better
living conditions in the future.
• MORALITY OF ACTIONS: It is to act respecting thelaw, without engaging in acts
dishonest or questionablenegotiationno to bribery. It is to respect therightsfrom others,
avoiding taking advantage of our business position. It provides stability in the long term and is a
example for the moralization of our country.
• SOCIAL SOLIDARITY: Commitment of the company and the people who make it up, in
support of thecommunityThis value ispowereven more due to the social differences of
our country.

1. Offered Products

The group is dedicated to the manufacture, distribution, and sale of beer and mineral water; however
ouranalysisand product presentationbrandsit will be the one corresponding to the Division of
Beers, so the products it offers are:

Beer 'crystal'

Type: Lager

Classification: Pilsener
Content ofalcohol(in %Volume4.8 - 5.2

General characteristics: Beer ofcolorclear andpersonalitymasculine. It is easy to

full-bodied and rich in flavor, with a perfect and complete balance of body, taste, and bitterness.
Preferred by most consumers for its moderate alcohol content and its
attractive foam.

Presentaciones (Envases) Botellas: 1.1 lt, 1 lt, 620ml., 355 ml. y 310 ml.

Container ofAluminum355 ml.

Draft beer: 50 lt. and 30 lt.

Pilsen Callao beer

Type: Lager

Classification: Pilsener

Contenido de alcohol (en % Volumen): 4.8-5.2

Características generales: Cerveza para el conocedor acostumbrado a la calidad y

tradition. The golden color combines a fine aromatic flavor that harmonizes with a
pleasant bitterproductone of the best varieties of hops. Its light body and
pleasant flavor encourages the second glass.

Presentaciones (Envases) Botellas: 1.1 lt., 1 lt, 620ml., 355ml. y 310 ml.
Aluminum Container: 355 ml.
Draft beer: 30 liters.

3. 'Real' beer

Type: Lager

Classification: Pilsener

Contenido de alcohol (en % Volumen): 4.7-5.0

General characteristics: Beer with a light color and white, consistent foam.
Developed to please and refresh inclimatewarm. Its alcohol content is
moderate and its flavor is slightly fruity.

Presentaciones (Envases) Botellas: 1.1 lt, 620ml. y 310 ml.

4. Pilsen Trujillo beer

Type: Lager

Classification: Pilsner

Alcohol content (in % Volume): 4.8-5.2

General characteristics: Beer with a pronounced color and a smooth, slightly flavorful taste.
fruity that combines its medium body and pleasant [Link] waterused in your
the elaboration recalls that of European cities with a millenary tradition
brewer.

Presentaciones (Envases) Botellas: 1.1lt., 620ml., 355ml. y 310 ml.

Aluminum Can: 355 ml.
Draft beer: 50 liters and 30 liters.

San Juan beer

Type: Lager

Classification: Pilsener

Alcohol content (in % Volume): 4.8-5.2

General characteristics: Light-colored beer with an aromatic and dry flavor, which
combined with its fine bitter hop it makes it very refreshing in hot weather and
tropical.

Presentaciones (Envases) Botellas: 1.1Lt., 620ml., y 310 ml.

Aluminum Can: 355 ml.

6. Beer 'dark malt'

Type: Lager

Classification: Dark (almost black)

Contenido de alcohol (en % Volumen): 5.5-6.0

General characteristics: Dark beer with a deep color and creamy foam
abundant. Its flavor is tinged with a caramel taste and an accentuated sweetness that
they are combined with a low level of hop bitterness. With a consistent and generous body
alcohol content.

Presentaciones (Envases) Botellas: 620ml., 355ml. y 310 ml.

7. Beer 'malta polar'

Type: Lager

Classification: Dark (almost black)

Contenido de alcohol (en % Volumen): 5.5-6.0

General characteristics: Dark beer, with abundant, creamy foam and

consistent. It combines a sweet flavor with a pleasant dry note and a balanced bitterness
of hops that accentuates its powerful flavor and high alcohol content.

Presentaciones (Envases) Botellas: 620ml.,355ml. y 310ml.

Arequipeña Beer

General characteristics: Unique body and flavor. Made with ingredients of

first quality: selected barley malt, the hops from the best harvests and the
purer water.

Presentaciones (Envases) Botellas: 1100 ml., 620ml., y 310ml.

9. Beer 'Arequipeña Malt'

General characteristics: Unique body and flavor. Made with ingredients of

top quality: selected barley malt, the hops from the best harvests and the
purer water.

Presentaciones (Envases) Botellas: 1100 ml., 620ml., y 310ml.

10. Beer 'Cusqueña'

 Cusqueña beer, the premium beer par excellence, is the result of an exclusive
process ofproductionwith the best barley malt, selected hops, malt, and water
of the highest purity according to the stricteststandardsinternational.

Presentaciones (Envases) Botellas: 620 ml., 330ml., 310 ml.

Aluminum container: 473 ml., and 335 ml.

Cusqueña Malt Beer

The exclusive and unparalleled flavor of Cerveza Cusqueña Malta comes from its unbeatable quality.
its raw materials: selected barley malt, the best hops, and water of the highest purity.

Presentaciones (Envases) Botellas: 620 ml., 355ml., y 310 ml.

The market share by brands for the year 2001 can be seen in ANNEX 1, where
ifshowthat the brands of the Backus Group dominate the market.

Markets Where The Group Develops Its Activities

The group distinguishes twotypes of market:

2. Domestic Or Local Market:

The Peruvian market is considered the domestic or local market, where the group has a
total participation of 98.2 %.

6.2 Foreign Market:

The group carries outexportsmainly to:
United StatesofAmericawhich represents 64% of total exports, having presence
in the states of New York, California, Texas, and Florida. This country represents a potential market
Since it consumes one fifth of the world's beer production, it is therefore the main one.
destination of exports.

Followed byChilewith 17% and Colombia with 9%. Additionally, in this South American area it also has
presence in countries such asEcuadoryBolivia.
Other countries with lower exports areJapan, Spainwhere he tripled hissalesfrom the period 2001 to
2002, United Kingdom, Sweden,France, ItalyeEngland.
Likewise, it has managed to enter newmarketslike Australia, a country with a long tradition in the
consumptionof beer.

The brands that are exported the most are Cuzqueña and Arequipeña with 44.7% of the total exports.
followed by Cristal with 30.5% and Pilsen with 24.8%.
One of the reasons that justifies the acceptance of the group's products is the extraordinary quality.
of their inputs used, mainly the dark beers that have been considered as
premium beers and they are considerably more expensive. For this reason, Peru has become the
main exporter of South America to the United States representing 55% of the exports
sudamericanas.

In ANNEX 2, the main exported brands and the destination of the exports can be seen.
beer.

1. Financial Situation

In this section, we will only refer to Unión de Cervecerías Peruanas Backus y Johnston.
S.A.A, insofar as itsincomerepresent more than 70% of the total of the Beer Division of
the Backus Corporation, which is composed of Cervecería San Juan S.A.A and Cervesur S.A.A.
 The following table summarizes theIncome Statementof said company: Union of Breweries
Peruanas Backus & Johnston (UCPBJ).

Unión de Cervecerías Peruanas Backus y Johnston S.A.A. recorded net sales of US$ 143.
millions as of June 30, 2002, which means an increase of 8.7% in average terms
monthly compared to 2001. Thisbehavioris due to the higher consumption, corresponding to 4
600 million boxes of beer during that period, as a consequence of the lowerpricesof
retail sale, having decreased theTaxSelective Consumption.

On the other hand, it continues in the process of achieving high levels of international efficiency.
having reduced the operating cost as a percentage of net sales from 71% in the year
2001 to 65% in June 2002. This can also be seen by comparing the closed period of
2001 (71% compared to sales) with the year 2000 (75% compared to sales).

Theutilitynet income rose from US$ 31MM in 2000 to US$ 34MM in 2001, which shows a
growth of 9.6%. In June 2002, the growth has been 72%, however
these are preliminary results that possibly do not include certainexpensesy
provisions that are charged towards the end of the year.

OthersFinancial Indicatorsofinterestthey are shown below in order to provide greater

Company overview:

The above table shows an acceptable level of liquidity to face

obligationscurrents, an adequate asset backing to meet the liabilities and a
positive return on investment.

2. Organizational Structure

The beer group Backus is part of the Backus Corporation, which is a conglomerate of
twenty-seven companies within the industrial, agro-industrial, and services sectors.

Take the followinggroupsbusiness

• Food and Beverage Group.

• Group of Containers and Packaging
• Transport Group
• Service Group
• Social Projection Companies
• Companies ofInvestmentsin Values.

Theorganizational structureFrom the Backus Corporation, it can be seen in ANNEX 3.

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1. Current Strategy
According to the company's analysis, theinformationinternal obtained andknowledgethat we
we have of her, we consider that the current competitive strategy followed by the Corporation
Backus is:

Competitiveness:
It is known that the company has within its annual plansprogramsof Total Quality and
Mejoramiento Continuo de la Productividad en todos los procesos y en los productos finales.

Technology:
The company maintains itself at thevanguardof thenew technologiesin relation to
beer production, according to their showsmemoriesannual investment.
Financiero:
It is aorganizationwith efficient management of itscostsand economic solvency, and is considered
as one of the most attractive and secure companies for investors of thebag of
values.

Corporate Business:
The Corporation maintains astructureof vertical and horizontal integration, as a source of
competitive advantage, as shown in yourorg chart.

Diversification:
It is a flexible organization that seeks to identify new opportunities forbusiness, in
activities in which he has developed his own skills, whether in subsidiary companies
existing or new companies, as well as in new product lines.

Decentralization:
The Corporation has productive investments in various regions of the country and in the
exterior, in order to ensure the development of the activities of the Group.

Organization:
It is observed that the Corporation has a modern, efficient, and flexible structure to the rapid
changes of theeconomyworldwide, and to the adaptation of new business opportunities.

Strategic alliances:
The Corporation has agreements with nationals and foreigners regarding markets, products, and
technology, and of management, as assistance for development and a complement to one's own capabilities.

Exportation:
The Corporation is currently developing business units that generate
exports of products in which Peru has competitive advantages, such as beer
premium "Gold of theIncas".

Training:
As part of its staff development plans, the Corporation has programs for
trainingpermanent staff at all levels andfunctionsboth in the country and
abroad.

Planning:
It is known that the Corporation has the development of plans within its strategy process.
decentralized, in the short, medium, and long term, corporately guided.

National transcendence:
The Corporation develops plans to strengthen aCorporate Image, which includes
aspects of social projection,promotionofemploymentand business creation, as well as how it feels
committed to national development and environmental careenvironment.

It is important to note that 'Cusqueña' beer has a successful entry into the markets.
European and North American. For this purpose, the Group introduced the philosophy ofinnovation
permanent because it is no longer enough to be competitive in quality andpricebut rather that
it must be persistently creative and innovative to satisfy consumers' tastes
in increasingly demanding markets.

As mentioned by theManagerGeneral of Cervesur "creativity is present in every

movementin the strategy to make Cusqueña the beer that the world prefers." To do this,
the company has recently designed a newpackagingfor the export six pack,
highlighting the symbolism of the greatest civilization of America 'The Gold of The Incas' and
boosting their exports by generating added value and creating synergies with others
economic sectors.
 This statement confirms the analysis we made of the brewing industry according to themodelof
Porter, which we present in part IV of this work (Rivalry among competitors -
CharacterProduct Features

2. Key Competencies and Capabilities

Thecompetenciesand key capabilities of the brewing group Backus that we have identified, based on
in thetheoryfrom Prahalad and Hamel, and that meet the three requirements that the authors present are
las siguientes:

The competencies / capabilities that we mention below have responded to these three.
questions to be considered as such:

• Provide thecompetitionkey capacity access potential to a wide variety of

markets?
• These key competencies/capabilities provide a significant contribution to the
benefits perceived by theconsumerfinal?
• Are these key competencies/capabilities difficult to imitate?

The identified key competencies / capabilities are:

• Onsystemof distribution, as it makes effective use of thetechniquesmanagerial of

logistics.

The company has the capacity to reach 300,000 points of sale per week, through 53
distribution centers and 143 wholesale channels nationwide. It also maintains a structure
organized from 550 sales territories with 535 delivery vehicles.

Its main points of sale are the wineries, which represent approximately 50% of the
sales. As additional points of sale, they have bars, restaurants, and liquor stores, which
represent 34% of sales, while sales in supermarkets and individuals
they represent the remaining 16%.

The company with this distribution structure can quickly reach a wide
variety of products and for all types of segments andclients, achieving thus to address the
the needs of all its customers. This has built a close relationship with the distributors and
wholesalers that limit or make it difficult for other companies to imitate.

• Their production process because their processes and knowledge are supported by technology.
tip, achieving products with international quality standards.

Production is carried out through standardized processes being controlled fromGermanyfor

breweries that guarantee product quality by following strict usage standards
the supplies, as well as their quality.

This production process allows Backus the flexibility ofto be ableto brew a variety of beers
as well as other types of beverages that have a similar production process, which has allowed
catering to the tastes and preferences of the different regional segments with different brands
that identify with each one. All of this has been made possible thanks to the experience gained over more than
120 years, which makes it difficult to imitate.

3. Analysis of the value chain

Analysis of primary activities

1. Internal logistics:
This first link of thevalue chainallows all the inputs that enter the company
have the requested quality and be managed as efficiently as possible (conservation and lower cost)
for its transfer to production. All of this is done through the following activities:

• Low-level control ofinventories, having a goodcommunicationwith its main ones

suppliersof products and services.
• Transport ofmaterialsthrough bands (electric belts), which allows for speed,
efficiency andsecurityin thetransport.
• Good preservation and location of the inventories in thewarehouses, which allows to maintain
the quality and the best distribution.
• Control and testing of the quality of products and services from suppliers, that is to say that
all the products that arrive atwarehousethey pass through aquality controlbefore the process
(from the unloading to its final location), as well as the products (samples are evaluated
random).

Manufacturing:

It is one of the most important parts of the value chain. In this link, the
production of all varieties of products with guaranteed quality. For this, it is carried out
the following activities:

• Electronically controlled processes, the entire production process is developed with

cutting-edge technology to ensure product quality.
• Processes certified under the regulationsISO 9000, the entire process is framed in System
of Quality, in thePoliticsof Quality and in Quality Assurance.
• Economies ofscale, each product is made in differentplantsfor the purpose of
ensure uniformity, standardization, and reduce costs.
• Security control of the process, theautomationfrom production allows to follow step to
paso y controlar el mínimo detalle del proceso, que con la ayuda de cerveceras de Alemania
provides additional security against unlikely failures in the master control module.

It is important to note that these processes take place in six plants that are located
strategically located in the Peruvian territory to cover thedemandfrom each region of the country.

Overall, there is an installed capacity of 10.2 million hectoliters per year, which is
detail in the following table:

External logistics:

Once the production process is completed, the final product is taken to the warehouses where
they stay littletime, in order to preserve it and deliver it quickly to thechannels of
distributionand the final consumer. This link has the following characteristics:

• Distribution centers located throughout the national territory, distributed through

wholesalers where the company has stake to guarantee the channels.
• Dispatch 24 hours a day and every day of the year, to ensure delivery.
• Guarantee of product conservation, all products are stored in places
fresco to ensure its preservation, and is used themethodPEPS for its exit.
• A wide and secure fleet of trucks, with modern trucks suitable for transportation of
these products, and of great capacity.

Market and sale:

This link aims to reach the majority of thepopulationa good product
quality, with the characteristics they desire. To achieve this, the following activities are carried out:

• Being the leader of the local market, with a 98% share of the national market.
• BroadadvertisingThroughout the year, it maintains all kinds of advertising in different
places to maintain yourpositioning.
• Scope of the international market.
• Diversity of products because one has abrandfor each region, and the advertising and the
promotions go according to these markets, as well as by season and important holidays
(national and regional holidays, Christmas and New Year).
• Broadforceof sales and distribution channels, beer is sold through 300,000
points of sale between warehouses, bars, restaurants, and direct sales.
• Prices in line with the national economy.

1.5Service:

To enhance the value of the products, the company has a policy to reach throughmeans
indirect. Do the following:

• Promoter and sponsor ofeventscultural (fairs), artistic (concerts) and sports

(own clubs and sponsor of national athletes).
• Projection and social assistance through preventive and emergency medical assistance, in
places ofpovertyand disasters.
• Protection and conservation of nature, with its foundation for the conservation of various
endangered species.

Analysis of Support Activities

2.1 Management Infrastructure:

In order to develop and maintain the image ofa companyleader and modern in Peru, the
addressthe company has committed to:

• Participation of the owners in the management to ensure continuity of the principles, values
ypoliciesensuring a strongculturecorporate.
• Total Quality at all levels: people, processes, and products, with a commitment to improvement
continue.
• Excellentadministrationoperational and financial, and in the execution of development plans to
C/P, M/P, and L/P, which is reflected in the results and in the expansion of its brands.
• Modern, efficient, and flexible structure for a quick and orderly adaptation to new
business opportunities, which has allowed him to stand out in times of uncertainty
economic, political and business.
• Management committed to the conservation of nature andecology, to achieve
better living conditions in the future.
• Vision outward, our market is the world, aware ofglobalizationand willing to
take on the challenges of the future.

Address ofhuman resources:

The company's commitment is to develop the qualification and well-being of the staff in all areas.
levels. To achieve this, the following is done:

• Friendly and cooperative labor relationsteamwork) based onthe

communicationlike alanguagecommon, that integrates and coheses.
 • Motivation of people asmotorfrom the company, and helps to achieve the objectives
personal, facilitating thetoolsto reach them.
• Development and practice of virtues to achieve Personal Quality, a prerequisite for
act with Total Quality.
• Training at all levels, the company asschoolof managers, in search of the Manager -
Entrepreneur, with a higher level of autonomy.
• Compensation, wellness, and programshealth, which complement personal development and
familiar.
• Identification and recognition of Corporate Culture, sharing excellence
business with personal, seeking to align them.

Technology Development:
In order to be prepared to face the changes in the environment and technology. This has
led to the company to do the following:

• Constant investment in infrastructure and cutting-edge technology, which creates strong barriers
entry of new competitors and improves productivity.
• Strategic alliances with nationals and foreigners, of markets, of products, of
technology and management, with the purpose of increasing knowledge.
• Total Quality Program and Continuous Improvement of Productivity in all
processes.
• Internal communication system, in real time, which integrates all levels ofthe
organization.

4. Supply:

• It is an important point in the value chain to ensure compliance with demand and
keep costs low. To achieve this, the company did:
• Vertical and horizontal integration of products and services, which has allowed to ensure the
supply and the quality of production.

This value chain of Backus has allowed it to be a leader in the local market, and has created a
barrier to entry for other competitors by having efficiencies in costs, production processes
efficient, flexible and agile distribution channels, as well as differentiated high-quality products
quality in each regional segment

1. Analysis of strengths and weaknesses

1. Strengths:

The main strengths of Backus are:

• Unique national beer producer.

• There is a strong horizontal and vertical integration.
• High barriers to entry for new competitors.
• Strong stock backing, strengthened by the acquisition of 49% of the shares by
of the Bavaria Group.
• Adequatemanagementmanagerial.
• Brand positioning in the local market and in Peruvian communities in countries
foreigners.
• Importantknowledgefrom the industry and the production process, constituting a
important curve oflearning.
 • Strategic alliances with German companies to ensure the quality of the products,
according to international standards.

Weaknesses:

The main weaknesses of Backus are:

• Rivalry among shareholders.

• Plant capacity lower than that of Latin American competitors.
• High dependence on the domestic market, low level of exports.

4. Industry analysis

1. Barriers to entry

o Economies of Scale: We consider that the beer industry is moderately

attractive, since competing companies at the Latin American level can match or even
overcome the economies of scale of the Peruvian beer industry. Unfortunately, the
per capita consumption in Peru has been decreasing since 1997, where 30 liters were consumed annually, and
In 2002, it only reaches 22 liters, this does not allow the industry to grow and has caused that
maintain idle capacity.
o Product Differentiation: Beer is an alcoholic beverage that according to
the inputs used achieve a great variety, being classified by types, content
alcoholic and presentations (containers). There is also a wide variety of brands which
They are already positioned in the market. We consider it an entry barrier.
highly attractive, since it would be difficult for new competitors to enter the market.
market without knowing the tastes of consumers and providing a variety of beers.
o Brand Identification: When analyzing the brewing industry at a Latin American level
we can indicate that there are oligopolies in every country. Brands like Corona inMexicoBrahma
inBrazilQuilmes inArgentinaCrystal in Peru is positioned at the local level.
constituting a relatively attractive barrier due to the difficulty that a new one would have
competitor when entering those markets.
o Cost of Change: We consider it to be a highly attractive barrier to entry,
Given the high degree of specialization, experience developed in the industry, and the
market knowledge. Similarly, companies are vertically integrated.
because they have packaging companies, transportation, distributors, among others, and it would be very
difficult to exit the market.
• Access to Distribution Channels: As we mentioned in the previous point, resulting from the
vertical integration, the distributors are basically wholesalers, are part of the companies and for
it is difficult to enter the market through such channels. However, access to
foreign competitors have occurred in retail channels (supermarkets and stores)
convenience). Therefore, we consider it to be a moderately attractive barrier.
• Requerimientos de CapitalWe consider it a highly attractive barrier, as it
requires a high investment not only in plant or cutting-edge technology equipment but also in
related companies that complement the value chain (packaging, labels, transportation,
among others).
• Access to Cutting-Edge Technology: There is access to the acquisition of state-of-the-art equipment.
in terms of beer production, but the cost limits access; therefore,
We consider it a neutral barrier.
• Access toRaw MaterialThe inputs for beer production such as hops, barley,
Malta, etc., are available in the market, and are quoted in the markets.
international. However, these are conditioned by climatic factors that may
limit its acquisition. In that sense, we consider it moderately attractive for the industry.
• Experience Curve: Highly attractive as a barrier to entry, because theindustries
they have developed a broad knowledge of the process and, most importantly, the market where it
they locate or direct. InLatin AmericaThere has been a continuous process of acquisitions being created.
oligopolies in the markets, the eight most important manufacturers commit around
85% of the Latino market, observing a markeddomainfrom the Brazilian AmBev (American
Beverage Company) and the Grupo Modelo of Mexico, which jointly account for more than 60% of
total.

Exit Barriers

o Specialization ofAssetsGiven that the investments made in equipment and plants

They are highly specialized, it is a highly unattractive barrier to exit.
o Exit Cost: It is a very unattractive exit barrier due to the strong
investments made in the industry and their local positioning.
o Strategic Interrelationships: It is very unattractive to withdraw from the industry, as
In Latin America, a phenomenon of integration of the beer market has been occurring due to
acquisitions and/or strategic alliances that benefit the existing industry. Likewise, the
objectivees incrementar el consumo per-cápita en Latinoamérica dado sus bajos niveles de
consumption compared to the United States andEurope, constituting potential markets of
growth.
o Emotional Barriers: Companies are leaders in their markets, with extensive
participation, in addition to being a business that generates liquidity (current ratio greater than one);
these would be moderately unattractive emotional barriers for investors to
retire from the industry.
o Government Restrictions: There are no government restrictions for
to withdraw, which is highly attractive.

1. Power of the Providers

o Number of important suppliers: We consider that the number of suppliers

it is medium and the industry is vertically integrated, however there are suppliers of
critical inputs such as hops that could have greater bargaining power.
We consider it to be moderately attractive to the industry.
o Availability of substitutes: The components of beer are governed by
formulas that guarantee the original flavor and the differentiation of them, so that the
raw materials used are critical ingredients in production; hence the use of
raw materials are very difficult to replace. Based on the above, we consider this to be a
highly unattractive barrier.
o Differentiation or switching costs for supplier products: How it is
As indicated in the previous point, the suppliers of those critical inputs exert power
about the industry, and the switching costs could be high. We consider this aspect as
moderately unattractive.
o Threats from suppliers for a forward integration: Highly
attractive since suppliers have a captive market and the investment they would need to
Doing this would be very important for them to integrate further.
o Threats from the industry to integrate backward: Recently there have been
forming strategic alliances with suppliers of the main inputs, such as the
hops, with the aim of ensuring supply. On the other hand, we see that the industry
 it is vertically integrated backward (packaging, labels, supplies-malt); therefore,
we consider it a moderately attractive factor for the industry.
o Contribution of suppliers to quality or service: As mentioned before, the
the quality of beer and its differentiation are the result of the quality of the raw materials,
being highly unattractive since the suppliers contribute in a way
important with the quality of the product.
o Importance of the industry in the profits of suppliers: They are important in
the contribution to the suppliers' profits from the negotiated volumes; therefore
we consider it highly attractive for the industry.

1. Substitutes

o Availability of Close Substitutes: There is a wide range of beverages

alcoholic beverages with various levels of alcohol and a variety of prices, which constitute
close substitutes for beer. Among these substitutes, we can mention rum,
vodka, tequila, whisky, pisco, wine, among others. We consider this a highly unattractive factor.
o Cost of Change for Users: Given the availability of substitutes, the cost of
the change of a product to its substitute is not relevant or of considerable value. We consider a
highly unattractive factor for the industry.
o Profitability and Aggressiveness of Substitute Products: We consider it neutral, as
that there is no marked aggressiveness in terms of advertising and prices on the part of the
producers of substitutes.
o Price / Value of Substitutes: Given that the price margins of beer and its
substitute products are established, and thewarsof prices are basically
Among beer producers, we consider this point as neutral.

1. Rivalry Among Competitors

o Number of Similar Competitors: As mentioned at the Latin American level,

There are important competitors such as the Bavaria Business Group from Colombia, the Group
Brazilian Ambev and the Modelo Group of Mexico. However, they are positioned
locally, forming oligopolies in their countries although with strong potential to enter
new markets, as can already be observed in the Peruvian market with the entry of
"Corona." There are few competitors but of a high level or great stature, so
We consider this factor neutral since the positioning factor of local brands
neutralizes financial capacity or economic power.
o Relative Growth of the Industry: We consider that Latin American consumption
per capita beer consumption (Peru 22 lt., Colombia 50 lt., Brazil 55 lt., Venezuela85lt.) is still low,
its growth is influenced by economic factors (purchasing power of
the population). We believe that there is potential, but growth will be slow. This is reinforced
when we compare consumption with European countries like Spain 70 lt., England 99 lt. And
Germany 128 lt.

In Peru, in the last 5 years, consumption has decreased despite the efforts made by the
brewing industry (promotions, advertising, assuming the ISC) to increase consumption. For the above
We mentioned that we consider it to be moderately unattractive for the industry.

o Fixed Costs: It is highly unattractive for the industry due to the high investment in
assets that are not being used at 100%.
o Product Features: Due to the existence of a wide variety of beers, with
different qualities, densities, alcohol levels, among other characteristics, which are
product of the knowledge of the production process, we consider it to be moderately
 attractive. Additionally, we believe that given this wide variety of products and prices,
it is necessary for companies in this industry to be innovative and creative not only in
the final product, but also in its containers, packaging, and other forms of presentation,
supplemented with promotions and creative advertising.
o Capacidad de crecimiento: Si bien el crecimiento del consumo per-cápita en
Latin America is low compared to other countries, there is a growth potential in this.
consumption, which has not yet been driven by high ratestaxeswhat do they pay for these
industries and the low purchasing power of the Latin American population. We consider it
moderately attractive.
o Diversity of Competitors: As we mentioned earlier, there are 8.
most important companies in Latin American beer production and maintain
approximately 85% participation, making it moderately attractive for the
industry.
• Strategic Risks: We consider it moderately unattractive, since the large groups
economic might acquire smaller companies as part of the process of the
globalization.

1. Power of Buyers

o Number of important buyers: Beer is a consumer product

massive, the distribution channels are diverse and numerous (wholesalers, retailers,
retailers, warehouses), to meet a significant number of customers. This is a barrier
highly attractive to the industry.
o Availability of Substitutes: We believe that there is a wide range of beverages
alcoholic beverages with different alcohol levels and a variety of prices, which constitute
close substitutes for beer. Among these substitutes, we can mention: rum, vodka,
tequila, whiskey, pisco, wine, among others. This creates a highly unattractive barrier for the
industry.
o Cost of Buyer Switching: Given the availability of substitutes and broad
variety of local and imported brands in the market, the cost of switching between beverages is not
it is high for the consumer, which is why we consider it a highly unattractive barrier to
the industry.
o Backward Integration Threat from Buyers: This is a very significant barrier.
attractive for the industry because it requires strong investments inactivos fijos (plant,
equipment) so that they are able to integrate backwards.
o Threat from the industry to integrate forward: It is a barrier
moderately attractive for the industry, due to the capacity that the industry should have to
acquire distribution channels. Basically, integration occurs with the big ones
distributors, but not with the medium or small ones.

1. Government Actions

o Industry Protection: ThegovernmentPeruvian or Latin American has policies of

protection for the brewing industry, which is why it is highly unattractive.
o Industry Regulation: Unfortunately, the tax policy that the
the government has made this industry very strict, high levels of Excise Tax on
Consumption affects the company's costs, as it cannot pass it on to the consumer; furthermore
that this is managed according to the government's tax collection policy interests.
This aspect is very unattractive and unfavorable for the industry.
 o Policy consistency: As mentioned in the previous point, the change in the
tax levels do not maintain a consistency in tax policies for the industry;
we believe this is a highly unattractive factor.
o Capital movement between countries: Peruvian legislation does not restrict entry nor
capital flight. On July 15, 2002, the Bavaria Business Group, a leader in the industry
brewery in Colombia, Ecuador andPanama, acquired 24.5% of the Class A shares, with
right to vote. Since the movement of capital is not restricted, we consider that it is a
highly attractive factor for the industry.
o Tariffs ofCustomsThey vary according to the country one wishes to enter,
increasing the costs of the product. We consider it moderately attractive for the industry.
o Properties of foreigners: acquisitions are not restricted.
foreign capitals to Peruvian companies. Therefore, this factor is highly attractive.
for the industry.

1. Summary of the Forces

Competitive

• Entry barriers = Moderately attractive

• Exit barriers = Moderately unattractive
• Competitors' rivalry = Neutral
• Buyer power = Neutral
• Power of suppliers = Neutral
• Availability of substitutes = Moderately unattractive
• Acciones del gobierno = Neutral

1. Conclusion of the Forces

Competitive

Having conducted the industry analysis at the level

Latin American, we have observed that this
maintains high entry barriers due to
product differentiation, requirements of
capital, exchange costs, and learning curve.
Likewise, the forces of rivalry between
competitors and bargaining power of suppliers are
neutral; considering it favorable for the
industry to have a high number of
buyers, which makes the possibility nonexistent
from an integration.

However, the barriers to exit,

availability of substitutes for buyers,
just as strategic alliances have little
the industry is attractive.

Based on the above, we conclude that the industry

the brewery is moderately attractive.

2. Positioning Map

Two have been designedmapsof positioning:

 • For the local market, since the company is the market leader (98%), we have
considered that thevariablesdo not be quality, price, etc. because it is the same company, and
what we consider most appropriate is to compare the degree of geographic coverage by region versus
the sales volume. Thus, this map allows us to identify strategies that have enabled
Backus positions itself nationally, as the strategy of offering different brands that
they identify with each region.
• For the foreign market, just as was done at the local level, we consider the
geographic coverage variables in the Latin American market versus sales volume,
to be able to position in this market. This map has allowed to locate Backus as a company
which has a relatively low level of coverage in this region, is basically found at
the level of South America, but thanks to the analysis we are developing, we see that Backus has
potential to continue growing at a Latin American level, following some strategic options
how to establish a partnership with your main shareholder partner Bavaria which has a greater presence in
this region, or buying medium breweries in other countries. We believe that the alliance
strategic with Bavaria is the most viable, because its distribution channels can be leveraged and
sell a wide variety of beers from different regions.

The maps can be seen in Annex 4.

5. Analysis of the Environment

1. Analisis Sectorial

• The demand for beer shows a marked seasonality according to patterns.

climatic, in this way consumption increases during the months of greaterheatbetween
December and March. However, there are important circumstances in which increases occur in the
consumption, such as the national holidays in July for example, as well as various events
promotional, etc.
• It is a capital-intensive industry with standard processes, so it requires high
production volumes and marketingthat allow for the generation of economies of scale.
• The growth of the sector is highly correlated with the behavior of GDP.
global and is very sensitive to theevolutionof the purchasing power of the population (cyclical effect). A
medium term, shows favorable prospects supported by high population growth, the
high percentage of young population, the high concentration of the population in urban areas, the low
consumption per capita, etc.
• It is subject to three types of tax, which are the General Sales Tax.
16% IGV on the sale value, the 2% Municipal Promotion Tax (IPM), and the
Selective Consumption Tax (ISC).
• Peruvian companies still appear small compared to their Latin American peers,
since, for example, while the Peruvian industry has a sales level of
approximately US$ 262MM annually, the largest company in Brazil has a revenue of
US$ 2,685MM (see attached table).
• The consumption of imported beer maintains a low penetration level, reaching
represent less than 2% of national sales.
• The national market is protected by high barriers to entry for new entrants.
competitors, among these, the strong investment required to implement an entire
distribution and production system, the hightariffs, and the important investment for
introduce a new brand. Likewise, the Backus Group has a high capacity to compete
with a potential foreign competitor thanks to its idle installed capacity, its reduced
operating costs and their important vertical integration
 1. Intervention and Regulation of
Government

In the Peruvian beer industry, the government

intervenes through theadoptionof a tax
Consumption Selective which is managed by
according to the collection requirementsfiscal
of theState, which represents approximately the

57% of the average ex-plant value. This is

perceived as a factor ofRiskfor the
industry every time it raises the price to
consumer. The following table displays the
evolution of said tax since 2001.

2. Market Growth

The difficulties of excess capacity and reduction ofprofitabilitythat they have been experiencing the
large multinational groups due to the stagnation in beer consumption in the markets
North American and European due to the increase in the consumption of higher alcohol content beverages, has
fostered its expansion into emerging markets, especially towards Latin America. This
market represents more than 12% of the world's production of this product.

Indeed, large breweries have acquired significant stakes in Latin American companies.
those that in turn are strengthening in their internal markets and even venturing into others
markets. In Latin America, the eight largest manufacturers account for about 85%
of the market, with a marked dominance of the Brazilian AmBev (American Beverage Company)
and the Grupo Modelo from Mexico (Corona Beer) which holds over 60% of the total.

Thus, they have formedstructuresoligopolistic in many Latin American markets. In Peru this
the process is being materialized through the formation of strategic alliances and participation
it would act as it has happened with the participation of Cervecería Polar in Unión de Cervecerías
Peruvian Backus & Johnston and subsequently with the recent acquisition of the Colombian brewery
Bavaria with approximately 49% control of this company. This confirms the process of
consolidation in the brewing industry, as well as this company's plans to become one of
the main companies in the Latin American market.

The fact that Peru has a per capita consumption level of 22.8 liters is considered
one of the lowest in Latin America, supports the expectations of growth opportunities.
Additionally, this operation gives Backus the ability to diversify sales in the market.
externally since as of now, 98% of sales are directed to the local market. In this way, it
it would counteract the structural problem of relying on the fluctuations of domestic demand.

Recent evolution of the market:

The following table shows the mainindicatorsstrategic industry:

The 14% growth in beer production in 2002 was based on a

shift of demand for higher alcohol beverages towards beer and stimulated
due to the price reduction. The reduction of the ISC from S/. 1.45 to S/. 1.16 per liter also contributed
implanting from November 2001 to August 2002, as well as the launch of
promotions.

In addition, by 2003, a production growth of 4% is expected, determined by the

recovery in domestic consumption and greater orientation towards the external market. Likewise,
There are favorable expectations for a better per capita consumption level from 22.8 to 23.7 liters.
driven by the largest sales promotions, although it will still remain one of the lowest in
Latin America.

The following table shows the per capita consumption of beer in some South American countries:

Additionally, we can mention the per capita consumption of some countries in Europe such as Spain.
70 lt., England 99 lt and Germany 128 lt.

Regarding exports, the following tables show the details of sales by company:

Between January and September 2002, beer exports fell by 6.6% compared to
similar period of the previous year, determined by the lower dynamism of the Latin American economy
and the greater competition in the external market that caused the contraction of shipments to Chile and
Bolivia, which countered the positive effect of higher sales to the U.S. (58.9% of the total)
exported). This last place was favored by demand coming from the Peruvian colonies.
located in New York, California, Los Angeles, and Florida.

The main exporter from January to September 2002 was the company of the Group, UCPB&J, to
concentrate 55.2% of the total, despite the reduction of its sales to Colombia (-32.7%) and Japan
(-65.6%), which contrast with shipments to the US (+14.9%). However, for this year the
Greater penetration into the US and Europe should encourage a rebound (+2.3%).

Regarding theimportsThe following charts show the countries of origin and the main ones.
brands marketed in the local market:

Between January and September 2002, beer imports grew by 74% encouraged by the
lower average prices ofimportationDuring that period, the main country of origin of
Imports were Netherlands. It is expected that this year, imports will grow by 3.7%.
based on the higher demand coming from supermarket chains and minimarkets,
places where imported beers are mainly sold.

6. Identification of opportunities and threats

Opportunities

The main opportunities for Backus are:

• Recovery of the purchasing power of the population, reflected in the projection of the Product
Gross Domestic Product.

• Possibility of penetration in external markets.

• National and Latin American market with low per capita consumption, which can be
increased.
• Support in its shareholder, Bavaria business group of Colombia and Polar from Venezuela, with the
purpose of penetrating Latin American markets.
• Utilization of the current idle installed capacity.

2. Threats

The main threats to Backus are:

• Smuggling of products across the southern border of Peru.

• Greater penetration of imported products through retail channels.
• Maintenance of low tax burden on beverages with higher alcohol content.
• Changes in tax policies. High sensitivity to changes in the ISC (Excise Tax)
Selective Consumption in the domestic market
• There are no tariff barriers for the entry of imported products.
• Oligopolies in Latin American markets, with positioning of regional brands.
• Close substitutes.
7. Proposal for Sustainable Competitive Strategies

1. Identification of Options
Strategic

To present our strategic proposals, an analysis of key capabilities has been conducted.
in order to assess whether they provide a sustainable competitive advantage over time.
(ANNEX 5). With this we have identified two types of strategic options, one focused on
local market and another for the international market:

1.1 Mercado Local

• Redirect the definition ofconcept"beer" from an emotional drink to a functional one,

in order to change consumption habits and thereby achieve an increase in per-consumption
current per capita (22.8 liters per year); supported bysegmentationfrom the regional brands and in a
price reduction in order to make the product more accessible to consumers
• Diversify into the non-alcoholic beverage market such as juices and sodas.
• Achieve strategic alliances with large global breweries in order to bottle and
distributing foreign beers, to offer them in the local market; given that there is
idle installed capacity of 39%, which will allow for future growth. Similarly, it will
count on our key distribution capability.

International market

• Expand exports, mainly at the Latin American level, supported by the group.
Bavaria business, partner of the company that has managed to penetrate the Ecuadorian markets,
Panamanian and Colombian.
• Achieve strategic alliances with the major global breweries, so that they
bottle and distribute the drinks of the Backus Group, outside of Peru.
• Acquisition of foreign breweries of a regional nature (small and medium-sized) in order to go
penetrating international markets and expanding its coverage.

1. New Position of Company A

Short and Medium Term

Based on the key capabilities, the distribution system and defined production process
as sustainable competitive advantages (ANNEX 5) we can choose the following strategies,
which may guide the company towards a business positioning that consolidates it as a
beverage company.

Local Market

We consider that the short and medium-term strategies in the local market for the Group should be:

a) Diversify into new markets by entering non-alcoholic beverages such as soft drinks
(sodas) and juices, which is supported by the following:

• The Group already had an experience in soft drinks in the 90s, which it neglected by prioritizing its
objectives to increase market share in the beer business; therefore not
It will be difficult to resume this line of business.

• By diversifying, it would be able to add value to its clients, as it would be satisfying the
need to quench your "thirst" because it would offer a complete line of beverages.
• You can leverage the know-how of your shareholder, Bavaria, for juice production.
natural and soft drinks, which has a long history in these businesses and is one of the
main leaders of the Colombian market.
 • Taking advantage of the key distribution capability, these new lines can be marketed.
of products.
• It has available idle installed capacity for future growth.
• Currently, the company is manufacturing and selling mineral water (with and without
gaswhich has managed to position withsuccess.

This strategy would allow the Group to consolidate itself as a complete beverage industry.

b) Strategic alliances to manufacture beers from globally positioned brands, supported by:

• It has cutting-edge technology (considered one of the best in Latin America), processes
standardized (certified withISO9000), and idle capacity to be able to produce and
market their brands in the Peruvian market.
• Given the difficulties that multinational groups are experiencing due to the
stagnation of beer consumption in the North American and European markets, is
attractive the Latin American market. (See in Environment Analysis - Market Growth).
• There is market potential due to the low per-capita consumption in the region.
• A recovery of the country's economy is expected at approximately 4%.

This strategy would allow for greater options to be offered to the market and to reach the segments that enjoy it.
from globally recognized brands.

International Market
The short- and medium-term strategies towards the international market would be:
a) Expand exports through:

• Increase its penetration into the North American market by expanding its strategy of
innovation and creativity in the presentations of its various brands, as it is doing
with Cusqueña beer, as mentioned in the topic of Current Competitive Strategy.
• Establish itself in both Latin American and European countries as a premium brand,
should adapt to the context of each country with the local experience of its key capability
distribution.
• Leverage Bavaria's distribution channels in the Ecuadorian and Panamanian markets
where it has a participation (90% and 72%, respectively), in addition to the Colombian market where
is a leader.

b) To establish strategic alliances with the world's major breweries, with the aim of:

• Foreign companies produce and market the Group's beverages outside of Peru
thanks to the quality of the products and image of the Backus Group.

It is important to reach foreign markets to position brands as part of a

same group (Bavaria - Backus), and thus repel the large brewing groups given the trend
global expansion through acquisitions.

To summarize and demonstrate more clearly how the selected strategies are related and
they complement the key competencies / capabilities of Backus identified earlier in the
part II, we show the followingmatrix:

Capabilities Mercado Local International Market

Key
Diversification Strategic Alliances Exportation Strategic Alliances

Distribution Use of the same Utilization of the Transfer and Agreements with partners
 channels for all the same channels of adaptation of the strategies for
the drinks distribution for knowledge exchange
take to the market towards others knowledge.
other brands. countries.

Production Use of Use of the Production of

part of the idle capacity and products
capacity, and for the manufacturing of Premium and
transfer of Know - other brands. innovators.
How

Unselected strategies:

The strategy towards the LOCAL MARKET of redirecting the definition of the concept 'beer' from
an emotional drink to a functional one, was not selected due to the change in consumption habits
it is a very slow and difficult process to achieve, also that they are closely related to the
purchasing power of the population.

Likewise, the strategy towards the INTERNATIONAL MARKET for the acquisition of breweries.
foreign ones of regional order (small and medium) we believe requires a capacity
financial and/or considerable indebtedness, it is a higher risk investment given the situation
the region's economy and the strong competition.

Therefore, these strategies are not directly supported by the current key capabilities of the
company, but they depend on external factors such as a market response.

8. Dynamic Competitive Strategies

The following details the actions taken to build layers of competitive advantage that
developed by the Backus Group, in addition to proposing the following layers that will support the
proposed strategies.

These stages have been proposed based on the theoretical framework of Dynamic Competitive Strategies.
developed by the Wharton Group

1. Developed stages:

• First Layer: Prioritization of quality and positioning of your brand in the market.
Development of distribution channels at the national level. In this first layer, the company focused
to improve their production capacity according to international quality standards, with the
the purpose of gaining positioning, and for that it had to invest in cutting-edge equipment and technology.

The result of this first layer was to become one of the best plants at the local level and
regional (South American), according to specialized magazines.

• Second Layer: Competitor acquisition strategy after a markedwarof

prices, process improvement, and implementation of cost reduction programs. A
the strategy that was followed in light of globalization and to avoid direct competition was the
purchase of its main competitors, and for this it had to finance itself with external resources
(local and international loans).

The result of this second layer was the leadership of the local market, concentrating 98% of
beer market, when purchasing from the companies Pilsen Callao and Cervesur.
 • Third Layer: Consolidation of its distribution channels. Entry into the market
international. Having achieved dominance in the local market, the next goal was to focus on
to strengthen and achieve a better relationship with its distribution channels, in order to
attend to all points of sale and at the time they require.

As a result of this strategy, Backus was able to consolidate this capability and turn it into a
key competitiveness process, having one of the bestsystemsmarket distribution
local, reaching to encompass the entiregeographyfrom Peru.

1. Stages to be Developed:

• Fourth Layer: Expansion of its product range to beverages in general (juices, waters
minerals, soft drinks). Given the experience and capabilities developed in the early stages,
just as the opportunities we have identified for Backus, we consider that the first point
the incursion into production, distribution of these new strategic layers to be developed
and marketing of all types of beverages aimed at all market segments.
• Fifth Cover: Another objective that we consider Backus should carry out is the
consolidation at the Latin American level, through its capacity and experience in the systems of
distribution, and apply it to the new markets where it will venture, taking into account
said realities.
• Sixth Cover: Use of the presence of its partner-shareholder Bavaria in countries such as
Ecuador, Colombia, and Panama to aggressively venture into these markets. The strategy is
take advantage of the distribution structure and market knowledge to be able to carry out the
Backus products to these countries. This strategy will also be attractive to Bavaria because it
will allow gaining market share with other products of the Group.
• Seventh Layer: Positioning brands in Latin American and global markets, in those
segments where they are less vulnerable (Example: Premium beers), emphasizing one
constant innovation to satisfy consumer tastes in increasingly
demanding, complemented by possible strategic alliances with other brewing companies
to utilize idle capacity and vice versa.

Annex 1
Annex 2
Main Exported Brands
Annex 2
(January-September 2002)
Comentarios:

a) Distribution System

• We consider it a valuable system because the company controls the channels of

distribution and allows it to neutralize the entry of competitors.
• The system allows you to reach all points of sale within your reach.
consumers.
• We consider that the system is unique because it has 53 distribution centers of
related companies and 143 wholesalers at the national level. Compared to companies that sell
and they market mass consumer products, they do not achieve the geographic reach or point of
sale, nor the supply time that Backus has. Likewise, the competing brands
(imported) only arrive through supermarkets and some retailers, serving some
areas of the capital.
• We consider it to be a system difficult to imitate because the structure created has a long
trajectory and experience gained over more than a century of operations.
 • We believe that it is irreplaceable because the functioning of the system relies on its
strategic partners (distribution centers and wholesalers).

b) Production Process

• We believe that the process is valuable because it has quality standards.

• It is a unique process as it features cutting-edge technology in beer manufacturing, the
the process is certified with ISO 9000.
• It is a difficult process to imitate and not substitutable since the company has achieved a curve of
experience having achieved the development of products with their own characteristics (flavor, body).