Perceived Market Risks and Strategic Risk Management of Food Manufactures: Empirical Results from the German Brewing Industry

Ludwig Theuvsen and Christoph Niederhut-Bollmann 353

Table 1. Strategic Risk Management

2 Sample

The empirical resultsdata detailed here on market risks and strategic risk management stem
from a large-scale empirical study in of the German brewing industry. This industry is charac-
terized by many developments contributing to growing market risks, such as the market entry
of large multinational competitors, shrinking demand, overcapacities, the emergence of more
aggressive competitive strategies and growing concentration ratios. Furthermore, the industry
consists of a large number of small, medium-sized and large national as well as international
companies, all of which may perceive risks very differently and can be expected to pursue so-
mewhat diverse risk management strategies. Therefore, the brewing industry is an excellent re-
search object to better understand strategic risk management in the food industry.

Between January and April of 2005, 1,260 German breweries, i.e. —nearly the whole industry,
—were sent an extensive, 14- pages questionnaire. Of these 281 breweries participated in the
survey, contributing to an overall response rate of 22 %percent. Completed questionnaires were
returned by 11.5 % percent of the micro-breweries (up to 5,000 hl p.a.), 39.2 % percent of the
medium-sized breweries (10,000 to 100,000 hl p.a.), 55.26 % percent of the large breweries
(100,000 to 500,000 hl p.a.) and 18 % percent of the very large breweries (more than 500,000
hl p.a.) sent back a filled-in questionnaire. Due to the high response rate, the survey allows de-
tailed insights into the perception of risks and strategic risk management in the brewing indu-
stry.

3 Perceived Market Risks in the German Brewing Industry

In this study market risks are categorized in accordance with Porter’s (1980) five forces concept.
According to this framework, market risks stem from the degree of rivalry among existing com-
petitors, the threat of substitutes, the bargaining power of suppliers and buyers, and the threat
of market entry of new competitors entering the market. Referring to the five forces framework
reveals the assumption that market risks are mainly associated with competitive pressures in an
industry.

In the survey 82 % percent of respondents declared stated that they consider intensity of rivalry
between competitors in their core market high or even very high. Nevertheless, there are remar-
kable differences between breweries of different size since this opinion is shared by only 66 %
percent of the micro-breweries (up to 5,000 hl p.a.) but as opposed to 87 % percent of the bre-
weries with an annual output up to 100,000 hl and without exception all the breweries producing
more than 100,000 hl p.a. share this opinion. Obviously, around one -third of the micro-brewe-
ries were are able to successfully reduce their firm’s risks by finding a protected market niche,

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