Just Another Beer Not to Those in Laos on a Mission to Create a Global Buzz - Case Study Example

Just another Beer? Not to Those in Laos on a Mission to Create a Global Buzz    Executive Summary  Beerlao is a beer brand which is produced and marketed by Lao Brewery Company (LBC) situated in Vientiane, Laos. Established in 1971, the company is presently owned by the Government of Laos and Carlsberg AS of Denmark, both of whom own half the shares. In 2008, the company has sold 132 million litres of beer and has annual revenue of $145 million. At present LBC sells 99% of its production in the domestic market and just 1% is being exported to the other countries. Now it wants to increase its exports to 10% of the total production. For promoting its products in other countries the company mainly relies on the word of mouth publicity from the foreign tourists who visit Laos. As the company has nearly 99% share in the domestic market, the foreign tourists get plenty of exposure to the product and carry their experience to their home countries, where they help in spreading awareness about the same.     Case Facts  Beerlao has 5% alcohol content and is being sold in 330 ml and 640 ml bottles and 330 ml cans. In 2005, the company has launched two more varieties of beer named, Beerlao Light (2.95 alcohol content) and Beerlao Dark (6.5% alcohol content). This beer is malted from a locally grown rice variety known as the jasmine rice. The company imports certain raw materials from other countries as well, like the Pilsen malt which is imported from France and the yeast which is brought from Germany (General Overview of Items, 2005). This product is now available in North America (USA), in Europe (UK, France, Netherlands and Switzerland) and many other countries of Asia like Vietnam, Cambodia, Thailand, Japan, Hong Kong and some other countries like Australia and New Zealand. LBC exports its products in these foreign markets, which are then marketed by the distributors.   The popularity of Beerlao can be understood from the fact that many tourist guide books advise them to enjoy their journey on the Mekong River along with a bottle of cold Beerlao.  It has been voted as the best beer of Asia by the Times magazine in 2004. This was followed by many other awards and recognitions like the quality summit award in USA in 2005 and medals won in the beer festivals in Russia and Belgium. Riding on the annual growth rate of 10% in domestic consumption, along with ever increasing demand from foreign market, the company has added a new production unit with a capacity of 50 million litres which can be further increased to 200 million liters.    The company believes in the philosophy of keeping the number of brands less, in order to maximise the production efficiency and also to maintain focus on the marketing of the small number of brands. To market its products locally, the company heavily invests in promotional activities and has become the largest sponsor of sports activities in Laos.      Analysis   Laos unlike major beer exporting countries does not have a rich brewing tradition nor can the domestic population of Laos be termed as big time beer drinkers. In fact this company itself was started in 1971 by a French national along with a local businessman to make beer for the Frenchmen residing in Laos, which was once a French colony. Laos happens to be a small communist ruled country with a population of around six million people. The success of the product can be gauged by the fact that notwithstanding the above mentioned difficulties, Lao Brewery has become the largest tax paying company of the country in the state run economy and produces 200 billion litres of beer annually. The marketing efforts of the company in Laos, mainly remains focused on selling their products to the tourists. Since 1990, when the country started opening up for tourism and industry, Laos has become a big tourist destination. This opportunity was grabbed with both hands by the company.        Outside Laos, the success story of Beerlao as a brand can be attributed to the concept of Viral Marketing. Viral fever is contagious and it passes from one person to another when they come in contact with each other. In a similar way, Viral Marketing leads to spread of message about a product from one person to another, when they come in contact with each other. Thus people, who have visited Laos and have tasted the beer, search for the same product back home. They also spread the message about the product among other fellow bear lovers, which leads to further development of interest about the same. Another issue related to this is that, in general people have never heard of Laos and even if they did they are not aware where it is situated. This further develops a curiosity among the foreigners about the country and the beer which has become so synonymous with it. Thus people will either try the product while visiting Laos or would look out for the same in their own country. The company wants to increase its brand value by tapping on this very buzz about the brew.    Much of the credit for the turnaround of the company goes to Sivilay Lasachack. She is the brew master of the company and had been trained in the erstwhile USSR and the Czechoslovakia. After joining the organization, Ms. Lasachack worked towards reducing the dependence of the company on the imported grains and started using local alternatives for the same. She is also credited for using recycling yeast technique, for manufacturing beer, which she had learnt during her stay in Prague. This brought in the resemblance of Beerlao with that of the best quality European Pilsners.    Her efforts in providing the vision for transforming Beerlao into a globally recognized brand are also legendry. She plans to do so by following the footsteps of the Mexican Corona Extra beer. Although this brand of Mexican beer has existed since 1925, its real growth happened in the decade of 1970. This was after the company executives noted that the empty bottles of the beer were not being returned to the distributers by the buyers. On further research it was found that the foreign tourists were taking the bottles away with them so as to be able to purchase the same product in their home countries. The company used this opportunity to build on the brand image and Corona extra is now the fourth largest selling beer in the world. Ms. Sivilay believes that the same thing is now happening for Beerlao as the tourist who gave visited Laos, later went on looking for the same brand in their domestic countries. This has encouraged many foreign distributors to contact the company in order to know about the product. Many of whom later become the official distributors of Beerlao in their respective countries. Also the potential of Beerlao to become a global brand has also received recognition when by looking at the bright future prospects, its partner, Carslberg AS of Denmark had decided to revise its stake in the company to 50% and has decided to use its global distribution chain for the benefit of the product.     In 2005 itself the company for the first time exported its products to the UK (Beerlao heads to European market, 20 July 2005). The marketing team at the Lao brewery company believes that the main reason for the demand of their product has been the word of mouth publicity done by those British tourists, who have visited Laos and have tasted the beer. Beerlao will be distributed in UK by Milestone point whose President, Mr. James Morgen signed the deal with Lao brewery and who himself tasted the magic of this beer while visiting Laos. He also experimented by blind testing Beerlao along with many other brands on the students of London University, who unanimously voted the brand as their favorite one. The marketing strategy of the company for UK will be to target the bars and the South East Asian restaurants first and then to go for marketing its products through the pubs. Many of the foreign distributors of the beer have been the tourists who had seen a great potential in the brand. The product is priced competitively in the foreign market and is in the range of that of its main competitors like the Carlsberg and the Heineken.    The company officials believe, that like the Mexican Corona, Beerlao is also an accidental brand. Accidental brand (Hookway, July 30, 2008) is one which is not creates by heavy promotional activities, rather it gets promoted involuntarily by some or the other reason. Hence the company does not want to promote its products too aggressively in the foreign market and wants to concentrate on the word of mouth appeal instead. As the company wishes to promote its products through the foreign tourists, it spends on heavy promotional activities in Laos. Beerlao is available all over Laos and even in the small shops that have spurted since the blossoming of the tourism industry in the country. The company is believed to have captured 99% (rest is with brands like Heineken and Tiger beer) of the domestic beer market. The brand is also now being recognized in other markets like the US and the UK, where now it is slowly and surely picking up demand. In the US it is now being sold in all the major supermarkets and other stores.  Conclusions   Thus it seems that the company is focused in promoting the brand slowly in the foreign markets. Instead of rushing in with the promotional activities, the company wishes that the curiosity about the brand develops slowly among the patrons but the effect of the same should be long lasting. In the same context it also has to be taken into account that the conditions in the foreign market are largely different from that of the local market. Thus while in Laos, the brand has a whopping 99% market share, the situation is totally different in other markets, where it has to face competition with the well established players. Hence the need is to develop such promotional activities which best suites the country where the product is being marketed. The onus of this will lie on the local distributors, who are well aware of the local conditions. For example in Hong Kong, where the attitude is much more professional, the local distributor does not uses the promotional materials send by the parent company and instead has developed such materials which can best work in the local conditions (Rauhala, May 25, 2009). The company in future can also look forward to setting up production facilities in the foreign countries as the demand for the product increases. Lastly, the aim should be to promote the brand Beerlao in the foreign countries in such a manner that people also become aware of the country of its production. This will go a long way in promoting the brand equity of the product as well as the country itself, so that in future Beerlao gets associated with Laos just like Guinness is being associated with Ireland.          References   1. Beerlao heads to European market (20 July 2005), available at: “http://www.beer-lao.com/contents/show_news.php?subaction=showfull&id=1143424038&archive=&template= ” accessed on June 22, 2008 2. General Overview of Items (2005), WIPO, available at: “http://www.wipo.int/ip-development/en/pdf/asean/lao_pdr.pdf” accessed on June 22, 2008. 3. Hookway, J. (July 30, 2008). “Brewer Aims to Put Laos on the Map”, Media and Marketing, Wall Street Journal, available at: “http://online.wsj.com/public/article/SB121738190006995479-Cb8v_zDUvd65pmmAdDHYXu5sx3Q_20090730.html?mod=rss_free,” accessed on June 22, 2008. 4. Rauhala, E. (May 25, 2009), “Just Another Beer? Not to Those in Laos on a Mission to Create a Global Buzz”, The New York Times, available at: http://www.nytimes.com/2009/05/26/business/global/26beer.html accessed on June 22, 2008. Read More