Economic Analysis of a Sustainable Beer Company.

Bc. Grygor Orbelyants

Master's thesis

Abstract:

One of the most significant products Czech Republic is famous for is its beer. For last 30 years, beer producers flourished and extended their presence in foreign markets. This industry is now contributing not only to economy but also to environment, society and culture inside and outside of Czech Republic. Sustainability became a desired goal for every actor in the market. Budweiser Budvar is one of the few beer producers that was not been privatized and has stayed in the public ownership run by government, yet, it is the biggest among them. This company is highly concerned with its public look and pays exceptional attention to such issues as water resources usage, pollution or waste disposal. One of the keys to the sustainability could be Reverse Logistics process improvement, which “never stopped” throughout the long history of the brewery but flourished in last 2 decades. “Despite of the small pause during 2008-2010 it is a constant process of processes improvement and optimization,” said Budweiser Budvar employee in May 2016. By collecting statistical data regarding Budweiser Budvar, Carlsberg Group and AB InBev performance in the period of 2006-2016, current research examines the effect of different factors on the EBT (see list of abbreviations) of Budweiser Budvar. The main goal is to define which factors affect the EBT of Budweiser Budvar and whether there is a relation between RL improvement effect and EBT. The data was analysed by GRETL 2017b-git, which provides us with opportunity to estimate econometric model and define significance of factors, which can influence EBT as well as help us to measure that effect. Regardless of the result of simple model, the simultaneous model has shown that the effect of Reverse logistics is not significant for the final EBT. However, it has shown significance of Reverse logistics effect of the level of production for Budweiser Budvar. This can be also explained by the massive technological improvements and upgrades of the whole facilities system conducted at the same time and almost on the same rate, which could not affect EBT due to large expenses on such investments. Keywords: reverse logistics, return process, beer production, sustainability, costs, profit, loss, profitability, econometric model, earnings before tax.Goals: The aim of the thesis is a formulation of practical recommendations for improving of the company reverse logistics and methods of its visualization and define what financial and social opportunities can be gained or lost by the company while managing its returns process. Hence, characterizing the current state of reverse logistics process in Budweiser Budvar as well as factors that affect the process.Research question: What financial, environmental and social opportunities are gained or lost by the company while managing its returns process? Does reverse logistics process effect company’s performance? How? At the end of the research, there would be clarity on the impact of following points: •Waste management, recycling, reuse, reprocessing, and materials recovery design on the example of keg return process. Regressions to determine if these six reverse logistics practices considered as reverse logistics effect contribute to 3 performance implications (Operational, Financial and Environmental (+social)). Probable result: operational and financial gains but no social benefit. •Highlight trends in reverse logistics practices. Provide evidence on the business value of reverse logistics adoption •Show reverse logistics as a path to efficiency and/or competitiveness. This research is based on providing the access the explanation of theoretical ideas and show the process from a different point of view with econometric analysis and visualization effort as a consistent base. It is important to mention that this dissertation take into considerations prior researches on reverse logistics in business, supply chain management, product life cycle and product

Abstract:

recovery management.Methodology: In the thesis, will be used different research methods with an aim to reach balance between quantitative and qualitative methods. It this thesis mainly secondary data will be used. Other methods are theoretical generalization, deduction and induction, analysis and synthesis, modelling and formalization, logic simulation, benchmarking etc.One part of this thesis deals with a theoretical overview of the whole process of development and evolution of ideas of reverse logistics. Another part of the analysis of social impact of reverse logistics will be based on logic simulation inducting a visual interpretation of keg return process. This include collation and interpretation of information; causal and system analysis; comparative and qualitative methods of analysis summarized by SWOT analysis. Except that, mainly secondary data will be used in the research process. Deduction will be used to specify data essential for the research. This will help to synthesize a sufficient data set for creation of an econometric model, which will be analysed, and results would be interpreted to conduct a proper theoretical generalization. Software used: Microsoft Excel, Gretl.Achieved results: Based on technical analysis and Fair Value evaluation, it is revealed that the growth potential of IBP shares is negative, and largely overvalued.To summarise, based on the company’s analysis it can be stated that the company has a disproportionate debt to equity that carries high risks. Also, the huge ROE that is partly attractive, but at the same time carries risks due to the debt to equity. The margin is lower than the main competitors have, which makes the shares less attractive. Indicators relative to the stock price, relative earnings and sales are lower than in the industry, book value higher than in the industry. Price to earnings are also less than average.Conclusions: By collecting statistical data regarding Budweiser Budvar, Carlsberg Group and AB InBev performance in the period of 2006-2016, current research examines the effect of different factors on the EBT of Budweiser Budvar. The main goal is to define which factors affect the EBT of Budweiser Budvar and whether there is a relation between RL improvement effect and EBT. The data was analyzed by GRETL 2017b-git, which provides us with opportunity to estimate econometric model and define significance of factors, which can influence EBT as well as help us to measure that effect. Regardless of the result of simple model, the simultaneous model has shown that the effect of Reverse logistics is not significant for the final EBT. However, it has shown significance of Reverse logistics effect of the level of production for Budweiser Budvar. This can be also explained by the massive technological improvements and upgrades of the whole facilities system conducted at the same time and almost on the same rate, which could not affect EBT due to large expenses on such investments. To make RL more efficient from the profit-making perspective, the precise planning and control are fundamental. Without exceptionally precise data, planning and controlling can't be as efficient as in forward logistics. Utilizing advanced RFID technology, producers can acquire some helpful data that is very important for institutionalizing and planning closed loop supply chain. The gathered data helps the reverse logistics supply chain to decrease the vulnerabilities (uncertainties). Once these vulnerabilities decreased, a more precise production, inventory and distribution planning occur which empowers producers to institutionalize their activities and optimize them.References: Aalhysterforklifts.com.au. (2017). Advantages of Reverse logistics: 5 Reasons it should be Implemented - Part 3 - Logistics & Materials Handling Blog | Adaptalift Hyster. [online] Available at: http://www.aalhysterforklifts.com.au/index.php/about/blog-post/advantages_of_reverse_logistics_5_reasons_it_should_be_implemented [Accessed 28 Aug. 2017]. Ab-inbev.com. (2017). How we manage sustainability | AB InBev. [online] Available at: http://www.ab-inbev.com/better-world/how-we-manage-sustainability.html [Accessed 1 Oct. 2017]. Ab-inbev.com. (2017). A cleaner world | AB InBev. [online] Available at: http://www.ab-inbev.com/better-world/ a-cleaner-world.html [Accessed 1 Oct. 2017]. Barry, J.; Girard, G. & Perras, C. (1993). Logistics planning shifts into reverse. Journal of European Business, Vol. 5, No 1, pp. 34–38. [Accessed 28 Aug. 2017]. Beckley, D. and Logan, W. (1948). The retail salesperson at work. New York: McGraw-Hill, 1948. [Accessed 1 Oct. 2017]. Bloemhof-Ruwaard, Jacqueline, van Beek, Paul, Hordijk, Leen and Van Wassenhove, Luk N., (1995), Interactions between operational research and environmental management, European Journal of Operational Research, 85, issue 2, p. 229-243. [Accessed 28 Aug. 2017]. Budejovickybudvar.cz. (2017). Business achievements - Budějovický Budvar, n.p.. [online] Available at: http://www.budejovickybudvar.cz/en/o-spolecnosti/obchodni-uspechy.html [Accessed 2 Oct. 2017]. Carter, C.R, Ellram, L.M. Reverse Logistics: a review of literature and framework for future investigation. Journal of Business Logistics, Vol. 19, No. 1, 1998. [Accessed 2 Oct. 2017]. Česká Televize. "Budvar Prodal Rekordní Množství Piva, Víc Rostl Vývoz." ČT24. N.p., 2017. [online] Available at: http://www.ceskatelevize.cz/ct24/ekonomika/1651303-budvar-prodal-rekordni-mnozstvi-piva-vic-rostl-vyvoz [Accessed 2 Oct. 2017]. Chengalur, S. (2005) United States Environmental Protection. [online] Available at: http://www.epa.gov/climateleadership/documents/events/may2005/chengalur0505.pdf. [Accessed 2 Oct. 2017]. Prediction of Consumer Behavior Regarding Purchasing Remanufactured Products: A Logistics Regression Model (PDF Download Available). Available from: https://www.researchgate.net/publication/301888344_Prediction_of_Consumer_Behavior_Regarding_Purchasing_Remanufactured_Products_A_Logistics_Regression_Model [accessed Nov 14 2017]. Corrêa, H. and Xavier, L. (2013). Concepts, design and implementation of Reverse Logistics Systems for Sustainable Supply Chains in Brazil. Journal of Operations and Supply Chain Management, 6(1). [Accessed 28 Aug. 2017].

Keywords

beer production, return process, sustainability, reverse logistics, earnings before tax, econometric model

Language used: English

Date on which the thesis was submitted / produced: 29. 3. 2018

Thesis defence

• Supervisor: Ing. Jiří Mach, Ph.D.

Czech University of Life Sciences Prague

Faculty of Economics and Management

Master programme / field:
Economics and Management / Economics and Management