BEER INDUSTRY IN COLOMBIA

Project report submitted to

Prof. Chetna Chauhan

Universidad de los Andes

by
Saumya Srivastava
Jairo Alejandro Sánchez Galvis
Ana María Rodríguez Sandoval
Jesse Louis Gabriel Correa Vargas

2022
 CONTENT
ACKNOWLEDGEMENT........................................................................................................3
DECLARATION.....................................................................................................................4
EXECUTIVE SUMMARY.......................................................................................................5
CHAPTER 1: INTRODUCTION............................................................................................6
CHAPTER 2: THEORETICAL BACKGROUND....................................................................7
2.1 Hypotheses development.............................................................................................................8

CHAPTER 3: RESEARCH DESIGN......................................................................................8

3.1 Business Research.......................................................................................................................8
3.2 Data..............................................................................................................................................9
3.3 Population and Sample................................................................................................................9
3.4 Data analysis................................................................................................................................9
3.4.1 Cluster Analysis...........................................................................................................................................9
3.4.2 ANOVA......................................................................................................................................................10
3.4.3 Multivariate Analysis................................................................................................................................13
3.4.4 Logistic Regression...................................................................................................................................14

CHAPTER 4: RESULTS OF DATA ANALYSIS AND FINDINGS/ DISCUSSION..............16

CHAPTER 5: IMPLICATIONS OF THE RESULTS AND RECOMMENDATIONS............16
CHAPTER 6: LIMITATIONS AND DIRECTIONS FOR FUTURE RESEARCH................17
REFERENCES.....................................................................................................................18
APPENDIX...........................................................................................................................18
 ACKNOWLEDGEMENT

This work is the result of our hard work this summer in the Decision-Making Tools I class.
Getting to this point has meant a great collection of learning, setbacks and achievements that
have helped shape us as future professionals.

We would firstly like to thank Professor Chetna Chauhan for her guidance through each of the
topics and her research support.

We also want to thank Juan Diego, our teacher-assistant in class, for his ever-present help and
support throughout the course.

Finally, to Colombia and its brewing industry that inspired us to do this research.
 DECLARATION

We certify that

1. The study in the present project is original and has been done by the group.
2. The work has not been submitted anywhere else.
3. We have followed the guidelines provided by the faculty in writing the present report.
4. We have conformed to the Ethical Code of Conduct of the university.
5. In case I have used the materials (data, theories, and text etc.) from other sources, I have
given them credit by citing in the text and giving details in the references.

Saumya Srivastava
Alejandro Sánchez Galvis
Ana María Rodríguez Sandoval
Jesse Louis Gabriel Correa Vargas
 EXECUTIVE SUMMARY

As a team, we saw that in the population group of millennial women, beer consumption may be
lower compared to other population groups. Therefore, we decided to investigate this population
and those factors that can make them consume beer. In this research we decided on the factors of
price and socioeconomic status, we will analyze the level of significance and influence of these
factors on the consumption of millennial women using class tools such as Cluster Analysis,
ANOVA, Multivariate Analysis and Logit Model. Through this analysis we resolve that in
Colombia the socioeconomic stratum has no influence on the consumption of beer by millennial
women while the price of the product does. These findings are important for companies in the
beer industry of Colombia as it guides their strategic positioning in the market.
 CHAPTER 1: INTRODUCTION

The intention of this business research is to apply the tools learned in class to a case of a real
industry. We seek to know the reasons why women of the millennial generation consume less
beer than other population groups. We focus on two key aspects, the price of the beer and the
social stratum. For this analysis, we focused on a main objective that was already mentioned and
several specific objectives. Our approach is that the answers to the specific objectives are found
through the surveys carried out.

Objectives:
- To analyze how price and socioeconomic status affect beer consumption in the
population of millennial women.
- To identify market trends of Colombia millennial women, for better understanding of this
group in the beer market and increase its sales.
- To analyze the incidence of certain control variables in beer consumption in the
population of millennial women, the factors are marital status, age, completion of high
school, completion of university studies, recommendation to consume beer and gender.

Our research question is defined as:

Do the price of beer and socioeconomic status have an influence on the consumption of beer
by millennial women?
 CHAPTER 2: THEORETICAL BACKGROUND

Although there are many factors such as taste, product image, brand image and sales channels.
We focus on price and socioeconomic status as these are the most general factors that apply to
the entire industry. Currently there are no previous investigations for the Colombian beer market
that have this same objective, to have a clearer vision of the industry we first read the Passport
and Euromonitor reports that gave us the annual beer consumption data, the companies with the
highest market share and the types of alcoholic beverages that Colombians drink the most.

2.1 Hypotheses development

For the analysis we know that tools such as Cluster Analysis and ANOVA give us results on the
correlations between the factors but not on the dependency, we took the decision of maintain
these analyzes as previous phases that allow us to discover the market facing the analysis that
shows us these dependencies that are the Multivariate Analysis and the Logit Model. After all
this process and based on our objectives and the research question, we define two hypotheses
that with the analysis will be approved or denied.

Hypothesis:
- The price has a direct relationship with consumption, at a lower price the purchase of
beer increases.

The social stratum has an influence on the consumption of beer, the higher the social stratum,
the higher the person's income and therefore the greater their beer consumption.
 CHAPTER 3: RESEARCH DESIGN

3.1 Business Research

We chose to make exploratory research to have a better understanding of the relation of price and
social status with beer consumption in women who belong to millennian group. This can be used
to collect feedback about the beer consumption metrics from women as well as other drinks
women rather than beer. This helps the different beer market segment to create new products that
will gain a larger women costumer of their beer products.

3.2 Data

We made use of primary research to obtain information directly from the subject and to explore
women consumption. Therefore, we used a survey which was realized at early 2022 to gather
information from women beer consumption. Most questions were nonmetric data. (Survey
questions are on appendix).

3.3 Population and Sample

The population select was Colombian Women who are approximately between 18 and 41, that
correspond to 10 million of Colombians. Nevertheless, the sample size was 101 beer consumers,
with 95 women distributed in the main cities of Colombia: Bogotá, Medellín, Cali, Manizales,
Pereira and Barranquilla within a 95% confidence level and a simple random sampling method.

3.4 Data analysis

After que identify the business question, collect, and clean the data to prepare it for analysis, we
manipulated the data using various data analysis tools and techniques, with the reason to start to
finding trends, correlations, outliers, and variations in women beer consumption.

3.4.1 Cluster Analysis

Cluster analysis is a statistical method for processing data. It works by organizing items into
groups, or clusters, based on how closely associated they are. The objective of cluster analysis is
to find similar groups of subjects, where “similarity” between each pair of subjects means some
global measure over the whole set of characteristics.
 To process data, we used hierarchical clustering with linked weighted average in stata. In
both cases, the data was grouped into 2, 21 that consume more beer and 78 that consume few
beers or only in special occasions.

Frequency of beer consumption and Social Class

The mean of the social class in both groups is approximately the same, so we can assume that
frequency of consumer does not depend on social class.

Frequency of beer consumption and Price

We grouped the prices of beer in interval data to make this cluster analysis, being 1 the lowest
price and 5 the highest price. We assume, that frequency of consumption does depend on how
much is the beer as the mean of the prices in both groups is different.
3.4.2 ANOVA

The full form of ANOVA is Analysis of Variance. This statistical test is used to determine
whether there is a difference between them means of categories of the independent variable with
respect to the dependent variable. We chose the dependent variable as the frequency of
consumption. The independent variable has to be categorical, so we have chosen the variable
social class or stratus and price. In addition, there are other assumptions of ANOVA like normal
distribution of the dependent variable and the homoscedasticity of variance which have checked
with the results.

Firstly, we checked the normal distribution of the frequency of the consumption of beer using a
histogram.

Secondly, we performed one-way ANOVA between social class and frequency of the
consumption of beer. The results are the following.
The p-value of the Bartlett test is 0.270 which is greater than 0.05 (our alpha), so we can accept
the null hypothesis that the variances of the groups is equal and there is homoscedasticity. In
addition, the p-value of ANOVA is 0.7076 which is also greater than 0.05, therefore, we can
accept the null hypothesis there is no difference in the means of the groups in the social class
with respect to the consumption.

Thirdly, we performed one-way ANOVA between price and frequency of the consumption of
beer. The results are the following.

The p-value of the Bartlett test is 0.341 which is greater than 0.05 (our alpha), meaning that we
can accept the null hypothesis that the variances of the groups is equal and there is
homoscedasticity. In addition, the p-value of ANOVA is 0.0015 which is smaller than 0.05,
therefore, we can reject the null hypothesis and accept the alternate hypothesis that there is a
difference in the means of the groups of price with respect to the consumption.

3.4.3 Multivariate Analysis

Considering the previous results of the cluster analysis and the ANOVA, we apply the multiple
linear regression method, which takes the database and establishes statistical relationships with
the OLS method to be able to predict the behavior of the dependent variable with respect to the
independent variables and some controls that help refine and understand the way in which the
variables are related and how they are affecting our variable to explain.

That is why it must be considered that for our regression analysis to be valid, some assumptions
must first be met that will give robustness and validity to the proposed model, such as: 1. A
linear relationship between the dependent and independent variables, 2. The independent
variables are not highly correlated with each other, 3. The variance of the residuals is constant 4.
Independence of observation and, 5. Multivariate normality.
gender

married
Price

Frequency controls age

Stratus
education

*Diagram 1.It explains how we stablish the relationship between the variables

The following model will be carried out in order to again find correlations and deepen the
results.

 Dependent variable is “Frecuencia” which mean show often do you consume beer.
 Independent variables:
o Pago: How much are you willing to pay for one beer.
o Estrato: What is your social strata according with your public services.
- Control variables:
1. Dgenero: Dummy that is 1 if female and 0 if is male.
2. Dconsume: Dummy that is 1 if consumes beer 0 on the contrary.
 3. Dcasada: Dummy that is 1 if is in marriage 0 if is single.
4. Edad18,25: Is 1 if the person is in a range of 18 to 25 years old.
5. Edad 26,35: is 1 if the person is in a range of 26 to 35 years old.
6. Secundaria: If the person studied till high school.
7. Universitario: if the person studied till bachelor’s degree.
8. Drecomienda: 1 if recommends to drink beer 0 on the contrary.

Multivariate Analysis Results:

Now, this model allows us to find a negative relationship between the price variable and the
frequency of a millennial woman consumes beer or not. Also, it shows a positive relation
between Strata and frequency higher stratus means more consumption, as the cluster analysis and
the ANOVA showed. However, in this case we must show that any of the variables used in this
model shows a significance taken alpha value as 15%, as well as in this case, it is found that the
model has global significance. However, it has a low R2 of 41.3%. However, this model is not
made to obtain a deterministic truth.

3.4.4 Logistic Regression

Looking for better results we made a change using a Logit model regression to understand the
how the beer consumption could be affected by other variables. So we used the categorical
dummy variable of consumption and the other variables as independent variables and controls.
This is the equation of the logit regression.

- Dependent variable is “Dconsume” which is a Dummy that is 1 if consumes beer 0 on

the contrary.
- Independent variables:
o Pago: How much are you willing to pay for one beer.
o Estrato: What are your social strata according with your public services.
- Control variables:
1. Dgenero: Dummy that is 1 if female and 0 if is male.
2. Frecuencia: which mean show often do you consume beer.
3. Dcasada: Dummy that is 1 if is in marriage 0 if is single.
4. Edad18,25: Is 1 if the person is in a range of 18 to 25 years old.
5. Edad 26,35: is 1 if the person is in a range of 26 to 35 years old.
6. Secundaria: If the person studied till high school.
7. Universitario: if the person studied till bachelor’s degree.
8. Drecomienda: 1 if recommends to drink beer 0 on the contrary.

Logit Regression Analysis Results:

In this case, it is found that the model has global significance. Also, it has a LR Chi2 of 81.43%,
which is very good for the prediction power of the model. However, this model just allows us to
interpret the sign of the coefficients of the regression meaning for example that higher stratus
means more possible is to drink beer, or people with higher education in university probably
drink lees beer because of the negative relationship in the coefficient.

Like in the multiple regression model we most f the variables are not significant with an alpha
value of 15% just “RecomiendaCerveza” and the frequency of consumption are significant.

Because of the nature of the model, we have to use the command “mfx” to calculate the marginal
effects and we can conclude that as in the previous analysis of previous analysis, stratus has not a
big impact on the consumption, and on the contrary the price could affect directly the frequency
of drinking beer for millennial women in a very small way despite that the variables remained
not significant at 15%. The interpretation of the marginal effects of the stratus is that 1%
increases in the social status could increase the consumption of beer in 0,07% in millennial
women.
 CHAPTER 4: RESULTS OF DATA ANALYSIS AND FINDINGS/ DISCUSSION

Based on the hypothesis, and after the analysis of the different techniques that we applied in our
research based on the statistical results cluster analysis, ANOVA, Multivariate Analysis and
Logit Model. The following conclusions were reached based on the hypotheses defined at the
beginning:

- Social class doesn't influence the consumption of beer in millennial women.

- Price does influence the consumption of beer in millennial women.

Therefore, our hypothesis number 2 turned out to be true as expected, since we know that some
non-essential consumer goods have a very high price elasticity of demand and a slight increase in
price can significantly reduce demand. However, our hypothesis number 1 must be rejected since
statistically no evidence was found that social class can determine the beer consumption of
millennial women in Colombia.
 CHAPTER 5: IMPLICATIONS OF THE RESULTS AND RECOMMENDATIONS

The beer industry in Colombia must be aware of the great sensitivity that the market has to the
price of the product, in a market like beer, the best strategy is to obtain profits from the number
of sales. With high sensitivity it is preferable to sacrifice a bit of high quality in order to have a
low price. The only way in which the price stops being a factor of such high sensitivity is that the
positioning of the brand allows it, brands such as Club Colombia and Stella Artois are known for
their high quality and their higher price.

Thanks to the research we can give to the industry the information that socioeconomic status
doesn't have a serious influence on the consumption of beer by millennial women. This is good
since it allows each brand in the industry to carry out its respective positioning in the market
without any concern that this positioning by socioeconomic status may affect the level of
consumption of its brand.
 CHAPTER 6: LIMITATIONS AND DIRECTIONS FOR FUTURE RESEARCH

- The dependent variable in ANOVA only has a normal distribution in the histogram, this
is not desirable since we want the dependent variable to have a normal distribution in all
scenarios, giving robustness and significance to our statistical analysis.
- The responses can be biased because in the survey the demographic information was
asked first (status, perception etc.). It would be much better to design the survey so that
these types of questions are at the end.
- By using such a small sample of only 100 observations, the significance of the model is
affected for both the regression and the logit model, which prevents us from making
accurate and robust conclusions that strengthen the findings of this research work. It
would be much better to increase the base of respondents to at least a thousand people to
obtain a much more significant sample of our study population, which in this case is
estimated as 10 million millennial women in Colombia.
- The questions of the Likert scale allow us to understand how identified the interviewees
feel with the statements, but quantitatively they lack validity when applying these data in
a regression, for which they were omitted in the statistical analysis, reducing the number
of variables used.
- This research is aimed at the industry in general, but if a specific brand decides to use this
research as a basis, it can focus on the impact of the other factors not analyzed here, have
on the consumption of beer of the specific brand, such as the flavor of the beer, the level
of involvement with the brand, the design of the bottle and the moments of consumption.
- It is very important to keep in mind that this research cannot be used as a basis for
research in other regions, it may work in other Hispanic countries, but it is very difficult
to have a high level of confidence for other regions due to cultural factors. The incidence
of cultural factors on consumption can be an investigation, but to believe that an
investigation of one country can applied to another country is wrong.
 CHAPTER 7: CONCLUSION

- First, we can determine that one of our hypotheses was proven correct while the other
was proven false. Although it is true that many more variables can be analyzed that can
affect beer consumption, we decided to focus on these two for the study.
- The price of the drink does affect its consumption in the population of millennial women,
that is, at a lower price, consumption is higher, while a rise in price does reduce beer
consumption. It is important for the industry to choose its market positioning strategy
well, since if it decides to sell its product at a high price, it will have to convince
millennial women through other factors.
- The social stratum does not influence the consumption of beer, it does not have a high
significance according to the statistical analysis. This is curious but there is a logic to it in
the market thanks to the wide variety of brands found in Colombia and the variety in
prices. Thanks to this variety we can explain this statistical result in which a social
stratum does not influence consumption.
 REFERENCES

- Passport, 2021. BEER IN COLOMBIA - DATAGRAPHICS. Euromonitor International.

- Passport, 2021. BEER IN COLOMBIA - CONTEXT. Euromonitor International.
- Passport, 2022. BEER IN COLOMBIA - ANALYSIS. Euromonitor International.
- Euromonitor International, 2021. SECTOR CAPSULE: BEER IN COLOMBIA.
Euromonitor International.
- Passport, 2021. ALCOHOLIC DRINKS IN COLOMBIA - DATAGRAPHICS.
Euromonitor International.
- Passport, 2021. ALCOHOLIC DRINKS IN COLOMBIA - ANALYSIS. Euromonitor
International.
- Departamento Administrativo Nacional de Estadística. 2018. Censo Nacional de
Población y Vivienda 2018. [online] Available at:
<https://www.dane.gov.co/index.php/estadisticas-portema/demografia-y-poblacion/
censo-nacional-de-poblacion-y-vivenda-2018> [Accessed 1 July 2022].
 APPENDIX

To carry out this work, a survey was sent whose questions are found below and the tabulation of
the results can be found in the attached document.

Questionnaire

Procedure for Selecting the Sample: Non-probabilistic for convenience.

Survey Introduction: The following survey aims to understand the psychological, social, and
behavioral behavior of millennial women in the alcoholic beverage market. The foregoing to
evaluate the launch of a new product to this market.

Cooperation Request: This is a study whose purpose is to know the different personal,
psychological, and emotional aspects in decision-making regarding the alcoholic beverage
market. We politely request that your responses be as honest as possible to achieve favorable
results. In accordance with the Habeas Data Law provided in Law 1581 of 2012 and its
Regulatory Decree 1377 of 2013, we request your authorization and consent to collect, treat,
store, archive, copy and analyze your responses to the following survey. The data is collected by
students from the Universidad de Los Andes for the purpose of an academic study of the
alcoholic beverage market in Colombia.

Classification data
· Age: age ranges to get millennials
· Gender
· Stratum
· City
· Do you usually drink beer?
· Frequency in which you consume
· What brands of beer do you regularly drink?
· What is the place where you most frequently drink beer?
· What is the place where you most often buy beer?
Level of involvement

· On a scale of 1 to 7, for you the beers are: (Ex: in the first box it would be 1 not very
important, 5 moderately important or 7 important)
· Less important? Important?
· Bored? Interesting?
· Irrelevant? Relevant?
· Not necessary? Necessary?
· What are your favorite characteristics in a beer? (Multiple choice)
· Do you have a monthly budget to buy beer?
· What would be the most you would be willing to pay for a beer?
· In general, what is the main factor why you choose one beer over another?