Question Case Study of Anadolu Efes Transshipment Problem

25 May Question Case Study of Anadolu Efes Transshipment Problem

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Case Study of Anadolu Efes Transshipment Problem
Adapted from: Kksalan, M., & Salman, F. S. (2003). Beer in the Classroom: A Case Study of Location
and Distribution Decisions. INFORMS Transactions on Education, 4(1), 65-77.
Anadolu Efes has dominated the Turkish beer market in the last two decades as a result of careful
planning and successful strategies in distribution, pricing and marketing. Consequently, Efes has become synonymous with beer in Turkey and has reached an impressive 78% market share in 2000 (Exhibit 1).
The company has also extended its business line by buying the right to bottle Coca-Cola in Turkey in
1998, and has been transforming into a multinational identity by building up international brewing
operations mostly in Eastern Europe, Russia and Central Asia. The two main challenges faced by the
company in the new millennium are to succeed in its business diversification efforts and to maintain its
market position in its core Turkish brewing business.
Emre Yaman, who was hired as the Chief Executive Officer of Efes nearly one year ago, has a couple of
major issues in mind as he shapes the business plan of the company for the years to come. In terms of
domestic operations, an immediate issue is that the anticipated increase in beer demand will surpass
Efes’ total production capacity in a couple of years. A capacity expansion plan has to be prepared
carefully to address this problem. Such a plan will also prove useful to deter any foreign entries to the
attractive Turkish beer market. In fact, increasing competition is the other major issue in Emre Yaman’s
agenda. He has already seen the first signs of pressure when Efes’ main competitor Turk Tuborg was
acquired by the Danish Carlsberg Breweries in September 2001 and subsequently launched the
"Carlsberg" branded beer against Efes’ own "Miller Genuine Draft". Although Emre knows that Efes’
long-time brand "Efes Pilsen" has a very loyal customer base, he believes that the strength of Efes’
production-distribution network will play a key role in the competition.
Emre Yaman mentions some of his concerns to Ali Yurtoglu, the Vice President for Logistics and Defne
Kutay, the Vice President for Marketing over a game of golf by the Bosphorus.
Emre Yaman (CEO): "The latest figures in the annual activity report show that our distribution costs
constitute about 25% of our cost of goods sold. I wonder if we can do better."
Ali Yurtoglu (Vice President for Logistics): "I have also been looking into this recently and assigned
our new employee Selin Baydar to analyze our distribution system. She thinks that there is room for cost
reduction if we optimize our malt and beer shipment plan."
Defne Kutay (Vice President for Marketing): "If we aim to lower costs, we may have to compromise
from the efficiency of our supply chain. Our breweries may be reluctant to damage the loyalties that they
have worked hard to develop. Ankara brewery has been supplying all the beer for the distributor in
Bursa and Istanbul brewery has been supplying all the demand of the distributor in Antalya for a long
time. Both of these breweries and distributors have built strong relationships and would prefer to keep
the existing relationships."
Emre: "Why don’t we first look into the potential savings and decide later whether it is worth making
any changes."
Ali: "Actually, we already have most of the data to make this analysis. We have estimates of the costs of
malt and beer shipments between various locations. We know all malt plant and brewery capacities and
can obtain projected beer demand figures for the next year."
Emre: "That sounds great. Once you obtain the results of the analysis, we can meet and decide on how to proceed.&
Company Background
Efes Beverage Group is the largest business unit of Anadolu Holding, which was founded in 1969 in
Istanbul and named after the Turkish peninsula Anatolia. The two founding families who still hold 55%
of the shares control the holding. The remaining 45% of the shares are traded on the Istanbul Stock
Exchange. In addition to the beverage sector, Anadolu has diversified interests in the automotive, office
supplies, packaging and financial sectors and has joint ventures with international companies such as
Honda, Isuzu, Itochu and Faber-Castell.
The principal activities of Efes Beverage Group are in the production and distribution of malt, beer and
plastic crates. Beer sales accounted for 96% of 2000 gross revenues; the remaining 4% came from malt,
plastics and other. Efes Beverage Group operates nine breweries and four malteries in five countries and
also conducts Coca-Cola operations in five CIS countries. Efes Beverage Group, together with its parent,
Anadolu Holding, is the largest local shareholder in the Turkish Coca-Cola franchise, controlling 40% of
the shares. In June 2000, the production companies of Efes Beverage Group merged into a single entity:
Anadolu Efes Brewery and Malt Industry Corporation. According to Finansinvest Research Group of
Istanbul, the value of Anadolu Efes was $1.143 million in November 2001. As of May 2002, the
company was the eighth largest Turkish company by market capitalization.
Efes has an annual beer production capacity of around 1.4 billion liters. The company owns five
breweries and two malt plants in Turkey. The domestic plants have an annual total production capacity
of 910 million liters of beer and 97,500 tons of malt. The marketing and distribution company of the
group is responsible for the direct distribution of Efes Pilsen, Efes Light, Efes Dark, Efes Extra, Everest,
Miller and Beck’s products in six main regions of Turkey, and works through distributors in 300
districts. In 2000, Efes’ share in the Turkish beer market has reached a record high of 78%. Turk Tuborg
is its only significant competitor (Exhibit 2). The third player in the market is the state monopoly, Tekel
with nearly 1% share. Imported high premium brands do not even constitute 1% of the market.
Efes sells its products in more than 30 countries worldwide (Exhibit 3). While a few shipping containers
make their way to the U.S. every year, Efes has seen outstanding consumer response in Russia, Eastern
Europe, the Caucasus and Central Asia. The company has been active in these markets via its subsidiary
Efes Breweries International after the construction of breweries in the Romanian city of Ploiesti and
Moscow, and the acquisition of breweries in Kazakhistan and Ukraine in late 1990s. The sales volume of
Efes Breweries International almost tripled in 2000, during which the Moscow brewery became fully
operational, and has increased its sales volume to 23% of total beer sales of the Efes Beverage Group.

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