Beer

Wolverhampton and Dudley Breweries (W&BD) is an independent brewing and pub retailing business. Currently, it operates three breweries – Park Brewery in Wolverhampton (brewing Hanson’s, Banks’s and Mansfield beers), Marston’s brewery at Burton-on-Trent and Jennings Brewery at Cockermouth in the Lake District. The company brews some of the UK’s leading real ale brands including Marston’s Pedigree, Banks’s Bitter, and Banks’s Original. Supporting its leading range the company also brews a selection of local beers including Hanson’s Mild, and Mansfield Bitter.

In addition to its breweries, W;DB has two traditional floor maltings at Langley and Lichfield. The company also packages products in kegs, cans and bottles and sells a full range of wines, spirits and minerals. According to their company website, key developments in the last decade have enabled The Wolverhampton ; Dudley Breweries, Plc to position itself as the UK’s premier regional brewer (W;BD Website). The WB;D company estate extends to around 1,630 pubs – a mixture of both tenancies and managed pubs.

A selection of the venues are modern bars of the Pitcher and Piano brand. Located in town or city centres, they have a target market of ages 22 to 36. Although the company faced a stiff competition in the alcoholic drinks market in the UK, Wolverhampton and Dudley Breweries acquired steady market figures last year. Total volumes brewed, excluding non-owned brands, increased by 5. 2%, including a 14. 8% increase in premium ale. This strong performance was driven by growth in free trade, in sales to other pub companies and in sales to the off trade.

Within premium ale, Marston’s Pedigree and Old Empire contributed to their strong performance, whilst standard ale – Marston’s, Mansfield, Jennings and Banks’s beers – also performed satisfactorily (W;BD Annual Report 2005, p. 14). Although sales of alcoholic drinks are expected to remain virtually static in total volume terms and to grow by just under 3% in total current value terms in 2005, growth in the off trade is expected to be 2% in volume terms and this will make up for the 1% drop in on-trade volume sales in the UK.

Also, the rising living costs and the “big night in” trend saw drinkers shun the pub in favour of drinking at home. This trend was particularly evident in the largest alcoholic drinks, namely beer. The move to off-trade consumption was driven by a combination of consumers finding other ways to spend their leisure time, other than in the pub, and by heavy retailer price discounting championed by supermarkets/hypermarkets such as Asda and Tesco.

The expected ban on smoking in public places is only likely to intensify this trend, with many consumers voting with their feet and staying at home, as they did in Ireland after a similar ban was introduced in 2004 (Euromonitor International, April 2006). In this case, Wolverhampton and Dudley Breweries need to identify a strategic plan/focus in order for them to effectively market their alcoholic products despite the bleak trend in the beer/ale sales. INDUSTRY PROFILE As beer has become popular and categorically drunk all over the world, beer is the great drink of relaxation—and moderation.

It is consumed in bars, clubs, sports grounds—in fact anywhere where adults congregate (Bamforth, 2003, p. 7). Historically, beer production had flourished in the regions of northern Europe, where the vine did not thrive. Malt, best made from the finest barley grains and the making of which is a skill in itself, was mixed with hot water to convert its starches into fermentable sugars. The resulting liquor or ‘wort’ from which the spent malt grains had been removed (and subsequently used for livestock fattening) was then boiled with hops.

The latter were introduced to beer making in Germany around AD 1000 and spread universally in the next five or six centuries. The Germans introduced a delicacy of flavour and aroma; they improved the keeping qualities of beer. After the hops were removed and the boiled wort cooled, yeast was added to achieve fermentation. Not until Pasteur’s findings in the 1860s and Hansen’s work on pure yeast at the Carlsberg brewery in the 1880s was the biochemistry of fermentation largely understood (Crompton, 1998, p. 2).

Through the years, the burgeoning beer industries came to hold important niches in national economies around the world. Previously, although brewing had always been recognised as a major prop of agriculture and of government revenue, the scattered part-domestic nature of the industry and its lack of much of an export profile meant that, in comparison with textiles or coal mining for example, its impact went largely unrecognised. In the late nineteenth century as production grew rapidly, and the scale of enterprises altered, brewers pressed the industry’s claim to recognition.

At present, with the upsurge of globalisation in world trade, beer continuously strives to maintain loyalties of drinkers by re-creating certain beer styles and local brands and the penetration of mass-marketed products and imported beers, such as Guinness, Carlsberg, Beck and Heineken, which have secured an increasing niche market (Crompton, 1998, p. 11). According to Datamonitor (October 2005), the beer market consists of ales, stouts ; bitters, low/no alcohol beers, premium lager, specialty beer and standard lager. This market is valued according to retail selling price (RSP) and includes any applicable taxes.

The global market for beer generated total revenues of $331. 8 billion in 2004, representing a compound annual growth rate (CAGR) of 1% for the five-year period pning 2000-2004. In terms of volume, China’s Tsingtao Brewery Company was the leading player in the Asia-Pacific beer market in 2004, with a 10. 5% share, a slight increase on the previous year. Tsingtao’s brands include Dragon, Phoenix and Premium, several of which are also exported, making the company gripping for more than 80% of China’s beer exports. Tsingtao also has a joint venture with Japan’s Asahi Breweries, called Shenzhen Tsingtao Beer Asahi Co.

Ltd, producing bottled Tsingtao beer for the South Chinese market. On the other hand, the leading player globally and in the US beer market is Anheuser-Busch Companies, Inc, which the company holds a 50. 2% market share. Anheuser-Busch Companies’ leading product is the Budweiser brand. As of 7 March 2006, the Datamonitor International has ranked the top ten beer companies worldwide as follows: 1. Anheuser-Busch Companies, Inc. 2. Asahi Breweries, Ltd. 3. Heineken N. V. 4. Scottish ; Newcastle 5. Inbev 6. Carlsberg 7. FEMSA 8. SABMiller 9. Sapporo Holdings Ltd. 10.

Molson Coors Brewing Company For the last five years, the global beer market has realized a marginal expansion. Strong performances were seen in Mexico and Canada, and also in Russia and Poland, while the large Chinese market showed considerable dynamism during the period. On the other hand, large country markets such as the UK, the US, and Germany showed slow growth or even contraction. This limited the overall growth of the global market. Looking forward, the recovery of the US, European and Asia-Pacific markets will lead to an overall increase in the global market’s value by 2009.

In addition, the sales of standard lager form the leading segment in the market, generating total revenues of $ 160. 2 billion in 2004, equivalent to 48. 3% of the market’s value. In comparison, the premium lager sector was worth $106. 9 billion, which represented a 32. 2% share of the market’s value. Viewing Figure 1. 4, the leading region in the global beer market is Europe, which accounts for 41. 3% of the global market’s value. In Europe, the principal distribution channel is on-trade, which in 2004 was responsible for distributing 40. 5% of the market’s volumes, only slightly down from 40.

7% in 2003. Supermarkets and hypermarkets accounted for 20. 9% and specialist retailers for 15. 6% of the market volume sales. Europe’s leading brewery is Scottish & Newcastle Plc (S&N), which is also UK’s leading brewery and has extensive operations across Europe. The company recorded revenues of over $10 billion during the fiscal year ended December, 2003, an increase of 17. 1% over 2002. The company has a presence in 14 countries in Europe and Asia and exports to more than 60 countries across the world. S&N is headquartered in Edinburgh, UK.

1. What is Mountain Man Brewing Company’s positioning relative to its competitors? Mountain Man Brewing Company (MMBC) is a 2nd tier domestic beer manufacturer based out of West Virginia. MMBC is positioned as a leader among local brewers in the East Central region, being one of the four regional breweries still operational in West Virginia. MMBC brews only one type of beer – the , a dark bitter tasting beer. Target market for the product is middle aged men from the blue collared working class. Branding includes an image of coal miners on the bottle suggesting a strong taste and reinforcing target market segments to a niche.

The beer sells mainly in off-premise locations. There is no variant of Mountain Man Lager available. Although MMBC is a local brewer it really competes against national brands such as Anheuser Busch and Coors. Priced at the same level as national brands, MMBC’s product is a legacy brew and enjoys high brand awareness in the regions it sells the beer. The brand also enjoys high brand loyalty in its target market segment against national brands. MMBC has been able to achieve this brand equity without significant spending on traditional advertising but rather pursuing on grass-roots advertising.

The company however is losing market share and revenues in line with the lager market. Since MMBC does not manufacture a light variant of its lager product the company has not been able to maintain its profits over the past few years. All its competitors are invested in the light beer segment given this scenario. MMBC has also seen shifting market segments due to an aging initial target market segment. The company is also at the risk of losing distributor loyalty thanks to increasing pressure on distributor margins.

Summing it up, MMBC is losing market share due to changes in market dynamics while still seeing significant brand loyalty and awareness in its home turf. 2. What factors have contributed to making MMBC a strong brand? Factors contributing to MMBC’s strong brand image are as follows a. Brand awareness and loyalty Mountain Man lager has a high level of awareness among consumers in its target segments. Being positioned as a strong, bitter tasting beer it resonates with the values of hard working blue collar workers. The brand has seen high consumer loyalty over several years. b. Pin point target market

MMBC has been able to target the Mountain Man Lager brand towards specific market segments and been successful at it. Targeted towards middle aged, low to medium income working men, the brand has been able to deliver value to its consumers. c. Grass-roots marketing MMBC has been able to achieve the brand awareness without spending less than 3% of its revenues on advertising. The sales team has been able to create grass root level awareness by positioning the beer as an off-premises brand and by word of mouth advertising as opposed to traditional advertising. This has enabled MMBC to reap greater brand commitment from its consumers. . What factors have contributed to the decline of MMBC? Although successful, MMBC has seen a decline in sales in the recent years. The main factors contributing to this decline in sales are a. Shifting market segment Mountain Man Lager’s market segment has started to age and new market segments are beginning to form, especially a younger market segment. This has allowed other brands to target the new younger population with “light” variants of beers which MMBC has not. Mountain Man Lager does not resonate with the younger population’s tastes as it is a strong, dark beer. . Emerging product segmentation The lager segment has been on the decline for a few years, mostly losing to the “light beer” segment. Given the rapid growth of the light segment of beer the lager market has been steadily losing market share. The light beer segment has grown 4% annually at the cost of the lager market’s share. MMBC has not been able to capitalize on this trend as it does not currently offer a light beer. c. Ineffective advertising Given the younger market segment’s preference to consume beer on-premises, MMBC has been unable to promote its products effectively.

National beer brands have been able to splurge on advertising and use lifestyle based advertising apart from on-premises advertising to attract new customers. Given MMBC’s small advertising budget it is an uphill task to promote their brand to newer consumer segments. 4. Assuming the company introduces Mountain Man light. Conduct a 1 year and 2 year analysis for the brand? Calculation of Break Even Volumes Required – First Year Breakeven|  | Year 1| Current Revenues of MM Beer| 50,440,000. 00| Projected Revenues of MM Beer Next Year| 49,431,200. 00|

Projected Contribution from MM Beer| 15,323,672. 00| Projected Loss of Sales from Introduction of MM Light| 2,471,560. 00| Projected Loss of Contribution from Launch of MM Light| 766,183. 60| # Barrels of MM Light Needed to recover Loss of Contribution | 30,188. 48| Cost of Advertising MM Light| 750,000. 00| Incremental SG&A cost| 900,000. 00| # Barrels of MM Light Needed to recover new Advertising Costs + SG&A| 65,011. 82|  |  | # Barrels of MM Light Needed to Break-Even in First Year| 95,200. 30|  |  | Compared to forecast sales in the first year of | 48,735. 19|  |  |

Calculation of Year 2 Volumes (Needed to Calculate the 2-year Breakeven|  |  | Year 2| |  | Projected Revenues of MM Beer Next Year| 48,442,576. 00| Projected Contribution from MM Beer| 15,017,198. 56| Projected Loss of Sales from Introduction of MM Light| 2,422,128. 80| Projected Loss of Contribution from Launch of MM Light| 750,859. 93| # Barrels of MM Light Needed to recover Loss of Contribution | 29,584. 71| Cost of Advertising MM Light| 0. 00| Incremental SG&A cost| 900,000. 00| # Barrels of MM Light Needed to recover new Advertising Costs + SG&A| 35,460. 99|  |  | Forecast Sales in Year 2| 101,369. 19|  | Calculation of Break Even Volumes Required – Two Year Breakeven|  |  | Two Years of Lost Contribution | 1,517,043. 53| Initial Advertising Costs (One Time only)| 750,000. 00| Two Years of Incremental SG&A| 1,800,000. 00| Contribution per Barrel of MM Light| 25. 38| # Barrels of MM Light Needed to Break-Even in Two Years| 160,246. 00|  |  | Compared to forecast sales over the first two years of | 150,104. 38|  |  | | | 5. Should MMBC introduce Mountain Man Light? Options Grid| | Option 1| Option 2| Description of Option| Launch Mountain Man Light| Do not launch Mountain Man Light| Benefits of Option| a.

Tap into a growing market b. Introduce brand to new market segments c. Retain current distribution network| a. Maintain brand image of Mountain Man Lager b. Risk losing market share further c. Lose out on shelf space in distributor network| Strategic Fit| a. Better long term strategic fit b. Ability to turn things around for the brand c. Will help brand position itself among younger consumer segments d. May induce lower brand alienation in the short term| a. No changes to current fit b. Slowing revenues from product segment c.

High brand loyalty| Financial Attractive ness| a. Break even in just over 2 years b. High contribution margins (51%) over the long term compared to main brand c. Exposure to new product segments will ensure continues revenues| a. Falling market share (falling by 2% per annum) b. Long term losses imminent c. Long term advertising budget has to be increased drastically| Noteworthy Risks| a. Revenues fall at 2% per annum for the Mountain Man Lager brand b. No significant changes in market dynamics b. Cannibalization is at 5% c. Growth in market share is at 0. 25% for light brand a. Fall in market share not higher than 4% per annum b. Investment in advertising not increased beyond current levels| Final summary MMBC has to introduce Mountain Man Light to capture market share in the light segment. Without doing that the company runs the risk of losing market share almost in a guaranteed manner over a period of time if not in an accelerated fashion. MMBC has to capture market share by using traditional advertising although it will lose money over 2 years. However since the contribution margins are larger for the Light brand the losses can be made up from year 3.

Define your target audience. What are some characteristics associated with your target audience? One of the main drivers of Anheuser-Busch’s success over the past 150 years has been its ingenuity and innovation in advertising and marketing. As times changed, Anheuser-Busch always has created new ways to connect beer drinkers with its products (Marketing and Advertising, 2011). With the merge between Anheuser-Busch and Grupo Modelo we want to appeal to a broader range of people. Combined we hope to be the number one beer company in the world.

Our goal is to appeal to the energetic young crowd and the business savvy older crowd. In the U. S. , beer is generally marketed to adult males. It is also closely associated with sporting events in which men represent over 80% of total US beer sales. Here at Anheuser-Busch and Grupo Modelo we do not want to alienate our broader consumer base. We will be sure to capitalize on the consumers that each company can bring individually but put our main focus on obtaining new consumers. Right now our target audience would consist of men and women between the ages 21 to 44 that are all over America and Spanish countries.

Although our range is quite large there are separate target audiences with different characteristics for different beers. We are glad that we can target different ages and types of people through different beers. We feel it is important that we have a different types of beers for any palette. Our consumers are the ones that keep us alive and we make sure we conduct all our market research to give them what they want. The characteristics of our audience are very different for each beer. Budweiser is a very popular beer amongst males between the ages 21-34.

Young adult males that are die hard sports fans are the largest population of beer drinkers. Budweiser serves their needs by providing them with top quality beer they enjoy as well as providing products such as apparel that intertwines with their sports team / person they enjoy (Quincy, S. , 2010). Corona is a very popular beer amongst males ages 21-35, and more now then ever before, females are becoming avid beer drinkers with the likings of Corona Lime. They are confident, fun people who don’t take life too seriously. They are past needing their buddies’ approval of the beer they drink.

They believe that the mainstream beers everyone else is drinking don’t match the person they are–or the person they want to be. They’re open to change. They want a beer that reflects their personality. And they appreciate what Corona offers: an escape from the ordinary (Corona Extra: Miles Away From Ordinary. , 2006). Stella Artois is another popular beer, but it is popular amongst the older crowd. The consumer age range for this beer is 25-44. Beer drinkers age 25-34 are eighty-one percent more likely to drink Stella than other consumers in the projected population.

Those between the ages 35-44 were eighteen percent more likely than the projected population to drink Stella Artois. Education seems to be a large factor in the Stella consumer. Data shows that the higher education a person has, the more likely they are to drink Stella. The typical Stella consumer is most often well educated with at least a college degree, if not a Masters Degree or higher. This audience consists of professionals such as doctors, lawyers, bankers, etc. (Ali, A. , & Smith, K. (2011). Appealing to so many different types of people is one aspect that we feel will make us successful in the long run.

References Marketing and Advertising. (2011). Retrieved July 15, 2012, from http://anheuser-busch. com/s/ index. php/our-heritage/history/marketing-and-advertising/ Quincy, S. (2010). Budweiser: A Marketing Analysis. Retrieved from http://www. rantrave. com/Rave/ Budweiser-A-Marketing-Analysis. aspx Corona Extra: Miles Away From Ordinary. (2006). Retrieved 2012, from http://s3. amazonaws. com/ effie_assets/2006/367/2006_367_pdf_1. pdf Ali, A. , & Smith, K. (2011). Stella Artois Campaign [Powerpoint slides]. Retrieved July 15, 2012, from http://www. slideshare. net/KDSdesign/stella-campaign