Appendix 1 - Value-Added Chain in Alcoholic Beverages

Summary

This Appendix provides the general characteristics of each beverage – beer, spirits, and wines – and of the value-added chain. By linking the strategically relevant stages that make up the production and marketing sequence from the raw materials to the final consumer, the value-added chain helps explain the changing boundaries of firms in alcoholic beverages, including their mergers and acquisitions and alliances.

Characteristics of the Beverages

Beer is made from fermented malt, water, and yeast, and is flavored with hops. It can, however, be fabricated from a variety of raw materials such as millet, maize, sorghum, barley, wheat, and rice. These raw materials can be grown in most fertile regions, making it relatively easy to produce similar beer in different locations. Thus, although Bass Brewery once claimed that the water from Burton-on-Trent gave it a distinctive character, and Coors Brewery still makes such claims for Rocky Mountain water, the location of the breweries today has more to do with the location of consumers than with the location of raw materials. Nonetheless, in some countries – Germany in particular – beer remains remarkably “local.”

Spirits are made from concentrating ethyl alcohol by distilling an already fermented product. The term spirit includes many types of beverages such as whisky, rum, brandy, gin, vodka, and aquavit. The most evident difference is in color. While whisky, rum, and brandy vary in shade from straw-colored to the deepest brown, gin and vodka normally are colorless.