Decline of Sales of Regular Beer - Essay Example

Product Assessment: Decline of sales of beer Product Assessment: Decline of Sales of Regular Beer Product decline is a part of the product cycle that indicates the product has reached its final stage after maturity. At this stage, SABMiller Beer notices sudden drop of a demand for regular beer so that it will be a time for its business to map out new strategies to stimulate another demand either in the present market or in a new environment. It has not reached obsolescence because there is hope for its survival in another market. Doing so would need an assessment to define the product’s weaknesses and strength in order to survive. This topic tries to analyze why sale of beer has dropped, and tries to design alternative strategies to power growth once again. Discussion of the product in relation to its current TARGET market demographics USING US CENSUS DATA Beer is one of the products that saw a sales decline in developed country but showed growth and development in the emerging economies. An overview of the beer growth trend shows North America and Western Europe trailing behind the emerging countries and Africa leading in terms of sales volume. Fig. 1 at left demonstrates the strength of beer sales by region. ` Fig. 1 Forecast five-year compound annual growth rate (CAGR) by region 2012-16 Source: Canadean cited in SABmillers According to an independent industry analyst cited in SABmiller’s report, China is considered as the biggest market for beer followed by other emerging markets. However, same report shows that although China is a big market, profit is so slim because of its very low beer pricing. In contrast, beer sales in South America remain profitable and show both growth and profitability. As indicated, there is a greater opportunity in beer sales in Brazil, Peru, and Argentina. According to a study done by the USDA Foreign Agricultural Service on July 23, 2010, China has imported 17,433 liters of beer from the United States. U.S comes only as the number eight beer supplier to China. Meanwhile, according to same USDA report Germany is the beer exporter to China. (see Fig 2). According to this report the annual per capita consumption of beer in China is estimated at 36.8 kg, per year and supply does not match consumption. This equation is a clear opportunity for beer manufacturers, or SABMillers to intensify their exports to China. Fig. 2 China’s beer imports 2007-2009 Why is the product declining? Volume of beer sales declined in USA because of change of taste preferences, unemployment of drinking men, and change of consumer tastes. Stockdale, Charles and Sauter, Michael in an article published in Wall St. (April 19, 2012) said that beer is one of the products that the face book generation is not buying. As it is, this is an argument for the change of drinking preferences of the young generation that has to be considered by beer manufacturers. Accordingly, the young generation prefers light beer than regular beers which was the choice of beer drinkers before. Very few among the young drinkers have tasted regular beers, and those young drinkers today is considered as the heavy market for light beers, source stated. In UK, decline, according to Akwagiram, Alexis, a writer of BBC News who gathered opinion of experts, was due to many causes, health consciousness of people is but one of them. Beer to them has an image problem because of the notion that it adds to weight problem. Another thing is the change of preference to wine particularly ordered as part of food entrees in restaurants. Beer is considered as a drink for men; but with the entrants of female’s preference for wine in dining, wine has affected beer sales. Culture has also something to do with beer drinking, as it argued in the news report that people from the higher socio-economic groups tend to prefer wine while those in the lower income are more likely not to drink wine. The decline of manual labor and “change of social habits” are also pointed out as causes of beer sales decline. Gone are the days when men would gather to socialize and drink pints of beer every night. It is observed that the trend is to stay at home where it is more fun and cheaper. The increasing amount of choices when one is in the pub or restaurant is also a cause, report says. It is said that drinking wine is more fashionable. Recommendations In as much as declining sales of beer affects profitability of operation; it is about time that Beer manufacturers look for new markets for its products. Many companies have already considered selling their products to new frontiers. These new frontiers are the emerging economies such as Brazil, Russia, India and China (BRIC). These countries are barely unscathed by global recession but have emerged strong competition to the developed nations. Expanding to these countries is supported by new technologies, fast communication and reliable transportations make selling worldwide viable. Second, is to consider shifting to the demands of the younger generation. There is a need to change to light beers and craft beers if this is the market’s demand. The younger generation is proving to be a big business opportunity in the beer market. Competition with wine is out of the question because it requires a different manufacturing procedure. Target market Target market is China because of the magnitude of its population. According to the CIA World Factbook, its population as of 2011 is 1,343,239,293. Out of this figure, 61% belongs to the 15-64 age group, unemployment rate is 6.5% and GDP per capita is $8,500. According to Applebalm Benyamin, in an article that appeared in the New York Times on October 23, 2010, that by 2007 Chinese were drinking almost 103 bottles a year. Extrapolating it, suggests a figure that makes China a most attractive market even it if it is said before that the profit is very thin. Unemployment rate is almost comparable with Brazil which is very low at 6%. It will be recalled that unemployment in US is mentioned as one of the causes for decline, and it is expected this will not be a problem in China. Product segmentation and positioning ideas for this product or service in its debut in the new country. Product segmentation Entry in a new market needs focus on a particular target market. First, we have to define the definite target. Our definite target here will be middle income working group, who has disposable income to spend for drinking. Reason for this, is because according to a study cited by Applebaum, Benyamin (April 25, 2011) drinking habits change as income goes higher. Rationale is that “when a person’s income rises, and he assumes more responsibilities, there is less opportunity to drink.” 61% of the Chinese population as a working group is a great target to start with. Positioning Positioning ideas is by creating a sales plan that defines how you go about the sales activities, and target accounts. Sales plan includes advertising and promotion; sales activities are how to reach target accounts, this will include strategies like franchising, partnerhips and other business structures. References Akwagiram, Alexis. 20 November 2007. Five reasons beer sales have slumped. BBC News. Retrieved 20 October 2012 http://news.bbc.co.uk/2/hi/7103268.stm Applebaum, Benyamin. April 25, 2011. Beer Drinking and what it says about China’s Economy. Economix.New York Times. Retrieved 23 October 2012 http://economix.blogs.nytimes.com/2011/04/23/beer-drinking-and-what-it-says-about- chinas-economy/ CIA World Factbook. Updated 04 October 2012. China. Retrieved 23 October 2012 https://www.cia.gov/library/publications/the-world-factbook/geos/ch.html SABMiller. May 2012. Global beer market trends. Retrieved 23 October 2012. http://www.sabmiller.com/index.asp?pageid=39 Stockdale, Charles. B and Sauter, Michael B. 19 April 2012. 24/7 Wall St. Yahoo Finance Retrieved 23 October 2012 http://finance.yahoo.com/news/eight-products-the-facebook- generation-will-not-buy.html Growth and development trends in the global beer market were generally unchanged in 2011. Emerging markets were still the principal source of volume growth while developed markets faced weak consumer demand as a result of difficult economic conditions and shifting consumer trends. The better performing markets, regardless of their stage of development, continued to be those in which industry leaders used brand development, innovation and partnerships to capture latent opportunities and stay ahead of changing consumer trends. The biggest beer market, China, accounted for 43% of the world’s volume growth and nearly 37% of the volume growth from emerging markets. China’s top five brewers accounted for 63% of total industry volumes. However, beer pricing remains low in China and profit margins are thin. Consolidation of the fragmented Chinese beer industry remains an important long-term trend and one that will lead eventually to greater industry profitability. 1. Determine why you believe the product or service is declining in popularity. Be sure to include information on social, demographic, and ethnic markets; economic and technological factors; political and legal factors; and competitive factors. Many products decline because of changing preferences, economic costs, and beer is among them. Several reasons were forwarded by various researches and studies. Akwagiram. Alexis of BBC NEWS (20 November 2007) said that there is a 20% drop of beer sales in UK as compared to 1979, during its peak. He ascribed this drop to health consciousness; the shift from beer to wine as more people now go to pub instead of restaurants; show of fashion, and for cultural reasons. He cited that because of “generation shifts in the way people work and socialize mean they are less likely to drink beer” (Akigram). He pointed out in his article, that the decline of manual labor in UK is one of the main reasons for decline of beer sales, followed by the changing drinking habits of men. Today, he said, men would rather stay at home, drink in supermarkets where it is much cheaper than rink in pubs. http://news.bbc.co.uk/2/hi/7103268.stm Five reasons, beer sales have slumped. BBC NEWS. SAB MILLER (2012) Charles B. Stockdale and Michael B. Sauter | 24/7 Wall St – Thu, Apr 19, 2012 12:56 PM EDTEight Products the Facebook Generation Will Not Buy The changing taste of the youth generation is held responsible by by Stockdale for the decline of sales of regular beer in favor of light beers while Sab Millers cited the weak economic of developed markets. Region – 2012-16 Volume*% Africa 4.6 Asia 3.8 Australia 0.0 Eastern Europe 2.0 Latin America 3.5 Middle East & North Africa 2.9 North America -0.6 Western Europe -0.5 Global 2.4 Read More