Establishing a New Market to Expand a Beer Products - Case Study Example

Business Report of Beer Products Table of Contents France alcohol market 3 Alcohol trends in France 4 Legal consideration 5 Cultural considerations 6 Competition 7 Financial considerations 8 Target market 9 Market analysis 10 Market segmentation 10 Geographical segmentation 10 Demographic segmentation 11 Psychological segmentation 11 Behavioural segmentation 12 Marketing mix 12 Product 12 Price 13 Place 13 Promotion 14 Positioning 15 Market entry strategies 17 Sprinkler strategy 17 Waterfall strategy 17 Recommendation 18 Conclusion 18 Work Cited 19 Introduction It is apparent that beer products have been there and have been brewed for numerous decades. The contemporary society however has modified early modes of brewing due to technological growth (Van and Nico 22-23). There has also been a noted increase in beer brands currently. The present society is characterized by brewing industries which produce beer products both for local consumption and for exports. Generally, this has been enabled by globalization which has brought with it increased competition both within and outside in almost all industries. The need for seeking a global market is therefore important as it is assisting industries to meet their set goals and objectives. Such objectives include increasing sales which as a result leads to increased revenues and profit margins. According to research, different countries are ranked different as far as beer consumption is concerned (Van, and Nico 22-23). Statistics have revealed that Germans are the most beer drinkers and comparing this to per capital income; they consume the most beer per person every year. This may be linked to cultural beliefs and lack of regulations to control the beer consumption (Van and Nico 22-23). Furthermore, children start drinking as young as fourteen years old. United States on the other hand rank fourteenth globally with the American breweries producing around 157,000 million barrels of beer each year (O’Malley and Wagenaar, pp 450). Other countries such as the United Kingdom and France also rank high in terms of per capital as far as beer consumption is concerned. This report seeks to establish a new market to expand a company’s products which have now saturated in the domestic market (Anderson, and Coughlan, par 71-82). In this case, the chosen market is France, with which we would market the product internationally. The beer market consists of the sale of ales, stouts and bitters, low/no alcohol beers, specialty beers, premium lager and standard lager. The report will include the macro environment, target market, objectives, legal, cultural and competitive factors and financial considerations; assessment and selection of the market entry strategies and recommendation to the senior management on the best entry mode. The significance of this report is that it will enable the company’s management to have adequate knowledge regarding the target market and the competitors, and thus they will be able to choose the best strategies which will help the company outdo its competitors and emerge successful in the new market. As such, the company will be able to meet its set goals and objectives. The company produces and markets beer products such as stouts and bitters, standard lager, specialty beers, low and no alcohol beer, ales and premium beer. It has been marketing its products locally and the local market is now considered saturated. The company therefore seeks to expand its operations to the global markets, and in this case, it wants to make an entry to the French beer market. Considering the fact that the company’s products are affordable, both the high and low income earners of the legal drinking age will therefore be targeted France alcohol market France is one of the leading wine producers in the universe. In France both the imported specialty and local beer are consumed (Todd, par, 1, and 2). It is evident that this has given ample support to the Royal Unibrew's subsidiary Centre Nordique (CNA) to a significant position that has enabled them to sell their products such as Faxe, Thor, Giraf and Red Erik in selected areas, e.g. the Rhône-Alpes region and Brittany (Royal Unibrew, 1, 2, 3). The beer customers are not only in retail but HoReCa- Sector as well. France beer brands are usually offered in line with the Appellation d'Origine Contrôlée which serves as a reference to the worldwide renowned quality principles which exist in the wine industry as well as providing adequate information to the esteemed customers that the Royal Unibrew’s products present in the French market are trustworthy and that they are tapped and brewed in Denmark (Royal Unibrew, 1, 2, 3). In addition the beer market in France is piloted in close cooperation with the local as well as the regional distributors who play a vital role of delivering the products as well as servicing businesses and bars in conjunction with Cooperation Nordique (Royal Unibrew, 1, 2, 3). However, French beer consumption per capital is half of the average beer consumption of Western Europe. According to Les Brasseurs de France brewers’ trade association, beer consumption in France dropped by 8.2% during the first quarter of 2008 (Todd, par, 1 and 2). It was reported that this drop was probably as a result of the ban imposed at the start of the year on smoking in public places in France as well as the cold weather whereby a one degree centigrade triggers consumption levels by 3 to 4%. Beer consumption however rose in 2009 by 2% (Todd, par, 1, and 2). This increase is linked the change of beer by brewers not only to cater as a drink for quenching thirst. More flavour and taste has been added and this has increased the consumption numbers. Alcohol trends in France Business analysts document that the overall consumption of alcohol has greatly reduced, a fact that is attributed to numerous factors. One of the key factors is the overall awareness of the health related effects that accompany the consumption of alcoholic products. Indeed there has been a general global awareness of the adverse effects caused by excessive intake of alcohol. The other factor is the stringent government laws that limit the amount of alcohol an individual is supposed to take as well as the manner in which such products could be accessed. Therefore, most companies are now experiencing a fall in the sale of such products due to the fall in the consumption of the products. The beer companies are now faced with the challenge of devising effective marketing strategies that will enable them market their products, regardless of the identified challenges. The Business Insight reports that the key drivers of growth for the beer companies in include the rapidly increasing youth population, increase in disposable income among the middle class generation and the consumer’s desire to buy premium products. Therefore, the beer companies need to consider these key factors while devising their marketing strategies. Legal consideration Generally, France has been having a rather liberal approach to alcohol for quite some time. The country recognizes two drinking ages; at the age of 16, an individual can purchase or drink beer and wine, and at the age of 18 the individual can purchase and drink hard liquor (Hughes and Dodder, 1992, p. 51). However, most shopkeepers and bartenders don not consider the identification details of their customers. However, in July 2009, the Government of France adopted new laws that were aimed at addressing the widespread crisis of binge drinking among the youth populations. The newly introduced laws discourage the sale of alcohol to individuals below the age of 18 years, anywhere within the country (Hughes and Dodder, 1992, p. 52). Selling alcoholic beverages to minors or rather to individuals below the age of 18 years attracts a fine of 7500 Euros. However, the law allows minors to consume alcohol in private places, but providing them with alcoholic beverages that can lead to intoxication is illegal. The bill also bans open bar promotions which encourage customers to consume as much alcohol as they want for a specific fixed price. This trend is particularly popular among the college students who organize parties and students are made to consume as much alcohol as they want for just a small fee. It is documented that the number of young adults hospitalized as a result of alcohol intoxication rose by 50 per cent between the years 2004-2007. Consumption of alcohol especially in public areas near schools is also considered illegal. In addition, the law forbids the sale of alcohol in petrol stations. This is aimed at discouraging drunk driving. However, the previous laws allowed the sale of alcohol in petrol stations from 10 pm to 6 am. The French laws do not allow alcohol companies to post their advertisements on the internet. The existing law that was enacted in 1991 restricted television advertisement. The company needs to therefore take keen consideration of the above outlined key considerations in order to ensure it maintains a good relationship with the alcohol governing authorities in this country. Cultural considerations With regard to the overwhelming evidence for the essential role the socio-cultural factors take in influencing the drinking patterns of the population as well as their consequences, it is apparent that ethnographic research results regarding the cultural and social roles of alcohol contain significant implications for the policy makers as well as for the companies (O’Malley and Wagenaar, pp. 450). This specifically applies in areas such as France where both the political and economic convergence have considerable effects on the drinking cultures and lifestyles. The engagement party in France is normally considered a more boisterous and protracted event that the final wedding. This also applies to the hen and stag parties that often come after the wedding party. A special type of wine is served during such parties since there are certain cultural meanings that are associated with the wines that are served. Each stage of the wedding party is marked by alcohol consumption and sometimes differentiated by the diverse patterns in which the drink is served (O’Malley and Wagenaar, pp. 450). Generally, France is a country that is highly associated with the consumption of wine. The country has been producing wine for more than 2 millennia, and the wine has played a significant role in the French culture, as it determines the population’s dietary habits as well as the country’s economy. There is a part of this country where the consumption of beer was traditionally considered booze of choice and from the pre-historic times to the present era, beer culture is still prevailing. This is in Northern France, a place known as Nord-Pas de Calais, and is considered a brewing area. The region still believes in the traditional modes of beer brewing is slow in adopting the scientific modes of beer production. This traditional wine is often served together with meals. Competition The issue about local breweries in this part of the world is a common one since the country has given license to the certain companies to produce beer for the country. However, in the previous years, there existed a large number of beer producing companies in France, but this number has greatly reduced as a result of various factors, among the key factors is the stringent government laws that make it hard for the companies to make profits in this market. For instance, in the year 1939, research documents that the number of breweries that were operational in France were about one thousand, but the number has greatly reduced since it is now said that the number of beer producing companies operation in this country are less than fifty. Most of them have even turned into establishing micros. The French beer market is basically controlled by three multi-nationals since they own approximately 90 per cent of the total beer market. It is therefore apparent that the company will have to devise more effective and influential marketing strategies that will enable it thrive in this highly competitive market. Besides, the citizens have a general preference of their local beer and this may present challenges for the company in its efforts to explore into this market (Van and Nico, 1992, pp. 22-23). When it comes to targeting, the company has to be also innovative since it has to come up with strategies that will ensure the target population is reached, considering the fact that the beer producing companies are well spread across the entire country and therefore making it difficult for the company to segment a specific population that it will target with its products. Some of the breweries in France include the Kronenbourg brewery, Fischer brewery and the Brasserie Adelshoffen (O’Malley and Wagenaar, 1991, p. 450). The company is therefore likely to face stiff competition from these companies that have already established their products in the French market. The company will therefore need to invest a lot of resources into promotions in order to be able to influence the customers to purchase their products. Besides, the company needs to conduct some research in order to identify the target customers’ preference so that the products the company produces matches with the tastes and preference of the consumers. Basically the company has a major challenge of devising effective strategies in order to make an entry into this market. Financial considerations The company has to put some funds aside for the expansion exercise. The funds will be used for different operations such as purchasing delivering the products to the market, considering the fact that the company will have to increase the volume of its production in order to be able to supply the products to the new market. The table below displays the various fund allocations the company will have to factor in its expansion exercise. Funds allocation Amount in Euros Labour 8 million Distribution and delivery of the of products 1 0million Purchase additional raw materials 12 million Promotion 15 million Target market Typically, target marketing entails subdividing the esteemed customers into groups. This makes it possible for the company to reach out to these groups effectively. This kind of target marketing is deemed right for marketing the beer products to the targeted group since it is the most efficient. A number of ways based on market segmentation exist. For the targeted group in France the company will use psychological and demographic segmentation to group the consumers. In demographic segmentation, the consumers are subdivided based on their social status, age, their personal needs as well as their level of income. These company’s beer products are to target both the high income earners who include the different genders that is the elite in the society who highly appreciate their life’s and who feel good to be associated with good beer as well as the low income earners who live according to what they earn but also like enjoying life. Further the company will also target selling their beer products to only the allowed by the law which is eighteen years. The strategies deemed to be used by the company will mainly focus on availing the right beer products to the targeted group. Moreover, the company will ensure that adequate information about their products is made available to their esteemed customers. The information should include the introduction of a new product, the existent of their products as well as how and where to get them. The company will ensure to maintain a competitive advantage over its competitors by ensuring that in every publication and advertisement, quality and market strategy are clearly expressed. Market analysis Market segmentation Market segmentation involves dividing the target market into addressable groups (Weinstein, 2004, pp.1-5). There are four constraints in which the market can be segmented. These include demographic, psychological, geographical and behavioural segmentation. Most companies tend to subdivide their target markets into the above groups as this assist them to attain their set objectives as they are able to know their customers better (Weinstein, 2004, pp.1-5). In addition, the employment of these segments allows an organization to drive unified product measures which are considered harmonious with the client messaging and outreach. For the company to emerge successful in its new market, it has to employ these segmentation techniques. Geographical segmentation This entails subdividing the market based on location, city size, region, and metropolitan area (McDonald and Dunbar, 2004, pp.10-15). In this case, the company will subdivide its targeted clients in terms of their location. This is based on the fact that, the buying power of the clients depends with their location (Weinstein, 2004, pp. 7- 10). For instance, customers living in urban areas are deemed to buy more compared to those living in rural areas, and furthermore, the former are high income earners. In this case, the company will target the urban dwellers more. However, in order to meet their target customers fully and meet their set objectives, the company will use pricing strategies which will enable charge lower prices to the rural dwellers. As a result, the company may attain its set objectives of increasing sales and profit margins. Demographic segmentation Customers in this constraint are grouped in terms of age, income earnings, gender, needs and social standing (McDonald and Dunbar, 2004, pp. 10-15). It is apparent that a company which considers these aspects in segmenting its target market will typically emerge successful both in its local markets and in the international market. The company beer products will target individuals aged eighteen years and over. This is based on the fact that there are law and regulations in France which only allow beer consumption to persons over eighteen. Furthermore, the company will target individuals who earn a substantial amount of income. These persons include the working class who in most cases are urban dwellers. These persons are also deemed to appreciate good beer, and they are also aware of their image and reputation. Nevertheless, through the utilization of applicable pricing strategies, the company will also target the rural dwellers and the low income earners. Through the application of this type of segmentation, the company will be able to increase its sales which as a result will lead to increase in revenues and profit margins (McDonald and Dunbar, 2004, pp.10-15). The bar graph below shows a comparison of low and high income earners of both genders who are eighteen years and over. Psychological segmentation This type of segmentation considers the lifestyles and the general habits of the clienteles. It is apparent that the behaviours and customer lifestyles vary from one place to another and from time to time (Weinstein, 2004, pp. 7- 10). For instance during holidays and weekends, customers tend to buy more of a product compared to other times of the year. Like any other market, the company’s beer products will increase during these special times. Behavioural segmentation Behavioural segmentation subdivides the market based on the general behaviours of clienteles. It is evident that the behaviours of consumers vary from one place to the other (McDonald and Dunbar, 2004, pp.10-15). To facilitate the building up of customer loyalty in the France market, the company must make certain that it produces high quality products compared to those of its competitors. In many cases, customers prefer quality products irrespective of the prices. Also, based on the fact that the company is targeting corporate and working class who are conscious of their image and reputation, it has to make sure that its products are also of high quality. Marketing mix Marketing mix is delineated as the incorporation of various marketing instruments that are employed with the aim of satisfying the customer needs at the same time meeting the company’s objectives. Marketing mix is basically controlled by various marketing strategies. However the application of pricing strategies, product, promotion strategies and distribution channels are the most applicable and popular with most companies (Lamb et al., 2011, PP.7-11). Studies have proved that a mixture of these elements turn out to be more effective than solely depending on one element. It is evident that companies employing these marketing mix elements have a capacity of reaching a wider target market. Product The company produces and sells a variety of alcoholic and non-alcoholic products including stouts and bitters, sale of ales, low/no alcohol beer, specialty beers, premium lager and standard lager. According to market research, these products have saturated in the domestic market and this is the reason behind the company’s need to enter into a new international market. This may be linked with the company’s objective of increasing its sales. However, production of high quality products is a prerequisite for the company to attain a competitive advantage over its rivals, and moreover, it will allow the company to emerge successful in its new chosen market bearing the fact that individuals value locally produced products more compared to the imports as the former are fairly cheap. Price Pricing is a major strategy that all companies should consider in order to ensure efficient marketing of their products (Lamb et al., 2011, PP.7-11). Basically, before setting up a price for a particular product, a company should do market research in order to attain adequate information regarding various essential factors. Such factors include the pricing responses of major competitors, and the targeted revenue levels and profit margins putting in mind the company expenses which may include promotion expenses and other general expenses (Cadogan, 2009, pp. 10-15). Generally, pricing encompasses discounts, the lists price and the company’s financing amongst others. In order to emerge successful in the market, the company should use good pricing strategies which will match the customers’ needs. These encompass charging lower prices compared to those of the competitors, or producing quality products to compensate the same. Place Place is basically the location in which the target customers can obtain the company’s products. These include physical stores such as the retailers, wholesalers, or resellers (Cadogan, 2009, pp. 10-15). The company will distribute its products through these mediums which will ensure that the products reach a wider geographical area of the target market. In addition, the company can establish a Branch in France which will assist it in reaching its consumers directly. Furthermore, an establishment of virtual store in the internet can also do the company a great favour. However, in France beer advertising in the internet is not allowed and this is a law which all beer companies have to abide in which failure can cost such a company a great deal. Promotion Companies usually employ a number of promotion mediums with an aim of reaching a wider geographical area of the target customers (Cadogan, 2009, pp. 10-15). Such mediums which include advertising, personal selling, public relations and sale promotions are developed in order to make customers aware of the existence of the company’s products and where to obtain them. A mixture of these promotion mediums can make the company successful in its new market as more people will have awareness regarding such products (Lamb et al., 2011, pp.7-11). Furthermore, advertising tends to focus more on the positive benefits and impacts of a product and good advertising easily wins customer attention and need to try the advertised product. However, the company is limited in the application of advertising mediums as internet beer advertising is not allowed in France. This means that the use of social mediums such as You Tube, Face Book and Twitter among others cannot be used. This is a major disadvantage as many people especially in the current society have turned out to the internet as a way of sharing information. Through proper advertising, the company will be able to enter the new market and emerge successful both in short and long run. Some of the promotion costs which the company will incur in its efforts to expand into the new market are as follows. Medium Costs in million dollars Campaigns and advertising 3.3 Television 3.1 Radio 1.9 Print press 1.7 TOTAL COSTS 10.0 Positioning Product positioning is a very significant process in all companies (Keller, 2009, pp. 5-10). It is evident that through product positioning, customers are able to find out much regarding the products produced by the company and why they should purchase such products rather than those from the company’s competitors (Keller, 2009, pp. 5-10). Product positioning is what retains potential and loyal customers of a company. In definition, product positioning involves how companies differentiate their products and positions themselves in the market (Keller, 2009, pp. 5-10). In our case, the company should position itself effectively in the France market if it has to emerge successful. This is based on the fact that French people have a high preference of wine compared to beer. The company will position itself both to the blue and white collar drinkers. It can use pricing strategies that favour both of these two groups of individuals. The company may position itself in terms of producing quality products which will enable the company to charge varying prices, and promotions which encompass campaign practices and advertising. Advantages of the product The laws governing the production and distribution of alcoholic drinks, the legal drinking age is 18years (Hughes and Dodder, 1992, p 52). Also the laws necessitates that alcohol is sold only in the designated areas which includes cafés, restaurants and bars. This is an advantage to the company if it uses the advantage to maximize its sales in the country since its potential market is already defined. In addition the company is also able to reach its targeted group efficiently without having to be in problems with the country. The fact that France is a wine commonplace and that wine drinking does not portrays any social status, the company will have an advantage in selling its beer if the country since the young and elite are turning to imported beer in order to belong to a social group (Todd, par, 1, and 2). It is therefore upon the company to use employ market strategy that will help them reach out to the group in such of social class. Further, another advantage is within the fact that beer is not hard liquor and so it can quickly penetrate in the France market (Hughes and Dodder, 1992, p. 52). Since the company deals with its production, then it can derive a marketing strategy that will enable it maintain a competitive advantage over its competitors. In addition this will better place the company compared that its targeted group well understands the harmful effects of irresponsible consumption of alcohol. Disadvantages of the product Basically the product can face rejection. This is because in France, the elite or highly educated have the tendency of only taking or consuming the new of their region and it is evident that in France the region beverage is wine and not beer (O’Malley and Wagenaar, pp450). It is therefore necessary that the company studies its customers before venturing into this market to ensure it delivers according to its consumers preferences. Further, the disadvantage of the product is that it would have to be sold at the same or slightly above the price of wine. It is apparent that France is a wine producing country and that this wine is sold at a very low price (Todd, par, 1, and 2). This could mean that if the company if the company has to match this prices then it could incur losses. Market entry strategies Basically the ability to plan as well as effect the distribution of goods and services into a new target market internationally is referred to as global market entry strategy. The global market entry strategy states that in the global market, management contracts establishment is of paramount. It is apparent that though most companies focus on improving and expanding their companies by venturing into new markets, increasing their sales as well as ensuring business stability, others choose to operate without putting into consideration the alternative of expanding their markets internationally. The companies that choose to expand their business may employ the market entry strategies established from the Innovation Diffusion Model theories such as sprinkler strategy and waterfall strategy. These strategies mainly rely on the product type as well as product life cycle. Sprinkler strategy The strategy allows for a simultaneous approach to the market. It is best suited for products that have a short life cycle (Anderson, and Coughlan, par 71-82). The companies that are aiming at expanding their markets are advised to use this strategy since it will be appropriate in marketing their products. Waterfall strategy The strategy necessitates that before entering a new market, the company should first carry out a survey on the market size, revenue details, identify the possible distribution channels, and advertise its products as well as determine the kind of distribution strategy it’s going to use. After so doing, it becomes so easy for the company to enter a new market of its choice. This kind of market strategy only applies to the products with long life cycles or those that are already at the maturity stage. In addition this kind of market strategy allows for a company to spread its businesses to the global market one after the other. Recommendation It is recommended that for the company to successfully enter the France market, it should put into consideration the needs and preferences of its target group, the size of the market, the possible distribution channels as well as the prices of existing beers. The company should therefore use the waterfall market entry strategy since it allows for this. The strategy is also deemed suitable because the company can market can its products consistently. Further, by studying the needs and preferences of its customers will enable the company sell its products at a price that will enable it maintains its competitive advantage. Conclusion The general exercise of expansion is a major undertaking that the company should lay greater emphasis. The fat that the local market is saturated with the company’s products does not imply that the company will thrive in the internal market. The company therefore needs to devise more effective strategies to reach the target market. Considering the fact that this is a country that contains stringent laws governing its beer industry, a fact that has kept other interested out of this market then the company needs to be more considerate of such laws. In addition, the company needs to take keen consideration of the cultural matters of this population. Finally, the company needs to allocate a side some funds that will be used to carry out the expansion exercise just to ensure that the exercise becomes a success. Work Cited Cadogan, John. Marketing Strategy: Marketing-mix strategies. London: SAGE, 2009. Hughes, S. P. and R. A. Dodder. Changing the legal minimum drinking age: results of longitudinal study. Journal of Studies on Alcohol 1992, 53(6). Keller, Frank. Market Positioning & Framing Market Research. London: Oxford University Press, 2009. Lamb, Charles., Hair, Joseph, and McDaniel, Carl. Essential of Marketing, 7th Ed. London: Cengage Learning, 2011. McDonald, Malcolm, and Dunbar, Ian. 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