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EE Vignette 2: Spendrups, Swedish alcohol regulations, and a blockbuster novel

In the late 1970s, the Swedish beer market was heavily regulated and dominated by state-owned giant Pripps. Most small, independent brewers, which once existed, were gone. One of the few exceptions was Grängesberg’s brewery, a company close to bankruptcy located far out in the less populated parts of the country, which twin brothers Ulf and Jens Spendrup inherited when both their grandfather and father passed away within a year or so. Thanks in part to external enablement, Grängesberg’s brewery became in a few years a significant challenger under the new name ‘Spendrups’ and it has remained a major force in the Swedish beverages industry ever since.7
Behind the turnaround were some clever decisions, but also fortuitous external enablement. The Spendrup brothers spent much of the little money they had—or pretended to have—at the takeover on recruiting the country’s top marketer as a board member and putting a German brew master in charge of production. While these actions proved to be wise, the Spendrup brothers were also lucky. At the takeover, the company was about to acquire the license to brew the German full-strength beer Löwenbräu. However, this brand—which claims 1383 as its birth year—was little known among Swedes at the time, and full-strength beer could only be sold in the state monopoly shops—Systembolaget—so it was not obvious that this deal would be of much help. The volume market at that time was the 3.6% (by weight, as was the measurement custom at the time; 4.5 % by volume) mid-strength beer, which could be sold in regular grocery stores.

Two external events gave Spendrups a huge boost. First, author Ulf Lundell’s debut novel Jack and its ensuing movie version—which were strongly influenced by and had a similar cultural resonance as Jack Kerouac’s “On the Road” in the USA decades earlier—repeatedly featured sessions of heavy Löwenbräu drinking. The release of the novel and movie markedly increased the popularity of the Löwenbräu brand, especially among those young people who tended to consume beer much in the same fashion as the book’s characters.
Second, a year later the national government changed the legislation, so that mid-strength beer sold in grocery stores could have no more than 2.8/3.5% alcohol by weight/volume, which is below optimal for taste and barely sufficient for purposes of intoxication. The result was a marked shift of demand to full-strength beer—not least Löwenbräu—among those who had the required age (20 years) or social means to buy from the Systembolaget. Not only that, Spendrups also managed to take a strong position in the new, weaker mid-strength market through some clever marketing, including initially selling the beer only at the country’s most in vogue nightclub at the time—Café Opera in central Stockholm—and only in bottles with a foiled neck à la champagne bottles, giving it a premium flair in a product category otherwise despised by disappointed lovers of the old 3.6% mid-strength beer. Moreover, the new regulation’s killing of the old mid-strength market drove a competitor located nearby to bankruptcy, which helped Spendrups solve capacity problems they were experiencing because of their growth. In fact, the demise of the local competitor allowed them to significantly increase capacity by taking over the facilities for 1 Swedish Krona (about USD 0.20 at the time) while at the same time becoming local heroes for saving local jobs that would otherwise have been lost.

This case illustrates a combination of sociocultural and regulatory enablement providing three distinct EE mechanisms—demand expansion/substitution, resource expansion, and resource-conservation (the latter two in the form of the SEK 1 acquisition of physical and human capital). The regulatory change was clearly a trigger and shaper of Spendrups’ premium, mid-strength beer, and both EEs were also markedly outcome-enhancing. Further, the case illustrates the interplay of strategic agency and external enablement. EEs do not create or turn around businesses all by themselves—Spendrups set themselves up for success through strategic investments in human capital and skillful leverage of the changes that luck brought them. However, co-owner Ulf Spendrup admitted that the clever-looking decisions regarding the premium new mid-strength beer were largely forced by an initial lack of sufficient capacity to produce for delivery to grocery stores and a lack of machinery to tap the new mid-strength beer also on (more pedestrian-looking) cans. Only in hindsight, when grocery chains in Stockholm and later around the country came begging for delivery of the premium mid-strength beer, did they realize the brilliance of these early decisions

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