MODULE TITLE: Marketing for Management
1. INTRODUCTION
The following is a marketing plan of Aire Valley Breweries, UK (AVB) to enter the Chinese beer market. The Chinese beer market is the largest in the world in terms of production and consumption. Like China’s economy, the beer market is also experiencing steady growth. Due to this the beer market is undergoing much consolidation by both foreign and domestic players.
AVB is a very effective company, and China is the right market to enter provided the right implementation of the right marketing plan.
2. ANALYSIS
Following is a PEST analysis on China:
Political:
Foreign Direct Investment is most welcome in China. With the trade barriers and regulations being relaxed by the Chinese government, foreign players are able to invest in China. Though the beer market is dominated by the domestic players, European and US beer makers are making a considerable presence in the industry through joint ventures or mergers and acquisitions with major domestic breweries.
Economical:
China’s growing economy and the rising incomes of the Chinese people are the main drivers of the China’s beer sector. China’s average GDP was around 11% in 2008. Consumer demand has also relatively increased. There has also been a cost increase that has hit the Chinese beer industry in 2008. Rise in energy price have led to the increase in production and transportation costs. In addition, the raw materials for production of beer have also increased in 2008. Central government shifts focus from growth to creation of harmonious society, increasing the rural incomes and consumption
Social:
Due to the soaring economy, rise in income and the resulting increase in disposable income, the spending habits have increased among the Chinese population. The consumers who are well aware of the brands give a lot of importance to brand value and brand loyalty.
Technological:
Chinese beer industry is the most modernized in China, owing to the fact that it is the biggest in the world. Since the transportation infrastructure is poor in China, there is difficulty in having effective distribution which makes the market fragmented.
The Strategic Triangle helps to analyse the company, the market and the potential competitors:
The Company:
The company analysis is portrayed in the form of a SWOT analysis
� Strengths:
AVB is a medium sized effective company where in it manufactures a wide variety of beers from lagers to stouts to dark beer.
� Weaknesses:
The company lacks efficiency. “Off-trade” sales are prominent in China, and the company has its beers priced at premium which can be easily sold “on-trade”. Due to high price and bitter taste, stout and dark beer is less preferred in China. The alcohol content of all the company’s beers are above 4.5% ABV, where as the Chinese beer market is inclined towards a lower alcohol content, like 2.8% – 3.6% ABV
� Opportunities:
Beer market in China is growing at a fast pace, and has now taken over the US to become the largest beer market in the world, especially in terms of production volume. The growing economy and rising incomes are the main driving forces. The brewing industry has been one of those quickest to modernize in China. With all this potential, Aire Valley Breweries has a good market to invest in and reap profits.
� Threats:
Competition is growing at a phenomenal rate from domestic as well as international players. US and European players like Budweiser and Carlsberg are striving to increase their share in the market. About 50 foreign ventures are up and running in the market. However, the China beer market is still dominated by the domestic players which results in a localized and fragmented market. There is still room international investment, but through methods like joint ventures or mergers and acquisitions.
The Market:
Beer market in China is the largest in the world in terms of production volume. The growing economy and rise in income are the main reasons. Due to the rise in disposable income of consumers, the premium and standard lagers have become more popular. The rise in incomes and the resulting spending has led to the development of pubs and bars there by boosting the “on-trade” sales of premium lagers, especially in cities like Beijing and Shanghai. However, “off-trade” sales are still the major channel which accounted to 68% of volume sales in 2008. A major point is that the Chinese beer sector is inclined towards lower alcoholic content beer, which is 2.8% – 3.6% ABV. There is also the increase in the female consumers. Due to the bitter taste and high prices, stout and dark beer is less preferred, which makes the standard lager the most preferred.
The Competitors:
The top three beer companies in China are China Resources Enterprise, Tsingtao Brewery, Beijing Yanjing Brewing Corp. which accounted for 41% of total volume sales in 2007. CRE is the leading one with its main brand Snow. CRE now owns about 60 breweries with a production capacity of about 10 billion litres. International players like InBev and Anheuser-Busch with their acquisition of local players are showing their prominence in the Chinese beer market.
Segmentation of the market:
Geographic:
In China more people are moving into the urban areas. The increasing disposable income pushes people to visit pubs and bars frequently which boosts the “on-trade” distribution. Nevertheless, “off-trade” distribution should be more prominent in rural areas.
Demographic:
In China, men consume more beer than women. Though, the women population in consuming beer is notable and increasing, especially due to better discretional income to spend.
Due to the increasing income and disposable income, most of the young working class visit pubs and bars frequently where in beer is the most ordered drink.
Psychographic:
Majority of the young Chinese being well educated and employed, they follow a very luxurious life style. The spending in the cities is influenced by Western and European cultures when it comes to shopping, dining, drinking etc.
Behavioural:
The user status ranges from occasional to frequent, where in research shows that heavy users for beer outnumber the weak users. Chinese beer consumers are highly brand aware and brand loyal. The switchers account for only a small number. The city dwellers have the urge to enjoy at pubs and bars. Consumption is also seen in social gathering, food enhancement, celebration etc.
3. OBJECTIVES
The top ten beer brands at present accounts for 60.5% of the total market. Aire Valley Breweries, in the next 2 years will try to acquire at least 15% of the market share. It aims at being one of the largest premium beer manufacturers in the country. In order to do this, the company will invest in the sector to enhance its market position, improve competitiveness and develop a platform for future growth. The brewer will strengthen its geographical coverage, increase its production capacity and enhance the operational efficiency in order to capitalise on the growing demand for beer. The company will also have to deal with the pressure on rising costs and intense competition. For consistent development, AVB will pay great attention to improving technology and equipment, strengthening its distribution network and increasing its economic strength.
4. STRATEGY
Targeting:
From the market segmentation, it is clear that AVB will be targeting at the premium customers with its premium lagers. The working class with high level of income level, and disposable income is ready to spend at the high end eat outs and pubs. Hence the AVB premium beers will be available at high end and niche outlets. AVB will also consider the sale through “off-trade” outlets for the customers in the rural areas, as “off-trade” is still the dominant distribution channel in China and AVB cannot afford not to access that geographic segment.
Positioning with the help of the Marketing Mix:
Product:
Aire Valley Breweries is into the sale of premium lagers, stouts and bitters. The Chinese beer sector is not much inclined to stouts and bitters because of the high cost and bitter taste. Hence premium lagers is the sought after beer. The alcoholic content is also an important factor which is usually 2.8 – 3.6% ABV. Hence the alcoholic content should be reduced to suit the consumer preference. The branding should be done in an appealing way as the Chinese consumer is well driven by high quality brands.
Price:
Many people are shifting to the urban areas. The increase in income and disposable income, allows the customers to spend their money on shopping, dining and drinking. The western culture is a major influence. In such a way charging a premium price is possible. By charging this premium price, the company will be able to position itself as a premium product. This will clearly convey the right message to the consumers that it is well competing with other international brands like Budweiser and Carlsberg and domestic brands like Snow Beer.
Place:
The two effective ways of distribution would be “on-trade” and “off-trade”. In cities like Beijing and Shanghai, where the income level is high and the consumer is looking at means to spend, “on-trade” sales through pubs, bars and restaurants will be ideal. Having it sold at a premium and only at select niche outlets would boost its value. Of course in rural areas, “off-trade” is the only best option, but not compromising on its price yet competing with the rest of the international and domestic brands.
Promotion:
Promotion is very crucial to let the Chinese know that Aire Valley Breweries is in town. Aggressive advertising is required through all the media. Sponsoring events, one which was done by Tsingtao, Yanjing and Budweiser for the Beijing Olympic Games in 2008 is also important as the company makes itself loud enough to the consumers. Sales promotion in high end bars, pubs and restaurants will add brownie points. Through the above recommendations, the company will be able to create and communicate the value.
Considering the above said points, Aire Valley Breweries will be able to position itself in the Chinese market, with a premium product, offering the best price which communicates the value, available at the right place where the value seeking consumer comes, where in the product is promoted in the right way.
5. IMPLEMENTATION AND CONTROL
When foreign beer companies decide to enter China, they face two options – one is to import the beer and the second is to brew them locally. AVB should adopt the second option. This can be done through acquisitions and mergers with domestic breweries. AVB should merge with numerous local players in different regions in China which would help to capture more market share.
Brewers face a major obstacle in securing distribution as the market is fragmented. Hence it is difficult for a single brewing company to dominate the entire Chinese market. To add to this, poor transportation infrastructure makes it difficult to have an effective national level distribution network. To overcome all this and penetrate the market and deliver to as many regions as possible, it is best for AVB to form joint ventures and mergers with Chinese breweries. Also the company can access the already existing distribution channels through this.
The company should have a team of top managers sent to China to build up the organizational structure with the local work force comprising of managers to workers. Liaising and working with the local work force would prove beneficial as the company will be able to adapt themselves locally to the industry, as they need to know the industry to play the game.
6. CONCLUSION
With the effective implementation of the above marketing strategy, Aire Valley Breweries will be able to successfully enter the Chinese beer market and there by positioning itself eventually within the stipulated time frame as one of the top beer brands to offer premium beer to its consumers.
REFERENCES
Books:
1. KOTLER, P., G. ARMSTRONG, V. WONG, J. SAUNDERS. 2008. Principles of Marketing. Essex: Pearson Education Limited
Internet Sources:
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2. CARLSBERG GROUP 2009. Carlsberg in China [online]. [Accessed 29 December 2009]. Available from: http://www.carlsberggroup.com/Investor/DownloadCentre/Documents/Other%20Presentations/27.11.06%20Carlsberg%20in%20China%20.pdf
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