Marketing Plan for Heineken UK - Case Study Example

Marketing Plan for Heineken UK Table of Contents Marketing Plan for Heineken UK 2.0 Heineken International 3 3.0 Industry analysis 5 3 PESTEL analysis for Heineken UK 6 3.1.1 Political factors 6 3.1.2 Economic factors 7 3.1.3 Social-cultural factor 8 3.1.4 Technological factor 9 3.1.5 Environmental factor 9 3.1.6 Legal factors 10 4.0 Competitor’s analysis 10 5.0 Justification for the re-launch of Heineken UK’s non-alcoholic drink 11 6.0 Marketing opportunities for Heineken’s non-alcoholic drink 12 7.0 Recommended strategy based upon segmentation, targeting, and positioning 14 8.0 The applicable marketing mix variables 15 9.0 Promotional plan and optimum promotional mix 16 10. Marketing budget 17 11. Demand forecasts 17 12. Contingency plan 18 13. Conclusion 19 References 20 1.0 Introduction In the present business environment, numerous laws and regulations have been implemented, thereby consequently introducing new challenges in regard to the way in which businesses carry out their day-to-day routine activities. In particular, the food industry, which is made up of different players that engage in the production, distribution, and resale of foods that comprise edible food items and drinks, has experienced increased regulation over the past few years. This is because of the sensitivity of the sector and its direct impact on the economic performance of a country, i.e. a healthy nation is normally posed to be prosperous because it is assumed that the citizens will be very productive in their economic endeavours. On this point, it is important to note that the increased regulations within the market are mostly aimed at protecting the interest of consumers and ensuring that businesses across the world engage only in ethical practices. However, the increased regulation has made it harder to do business and more so, it has interfered with previous channels or modes that businesses utilised in order to generate profits. One particular industry that has been adversely affected by the increased regulation in the market is the beer/ liquor industry, which has experienced increased regulation over the past few years owing to the documented negative effects of alcoholic products. The regulations that have been introduced into the industry are widely viewed as trying to limit the negative impacts of alcohol-intake on the wider society and ensuring that people below the statutory age limit of eighteen years have limited access to alcoholic drinks. The regulations have had a far-reaching impact on the industry players since the contents of their products, advertisement messages, and even location of bars and other resellers are highly regulated. The resulting impact of the increased regulation in the beer/liquor industry is limited options for generating profits. This is because alcohol processing companies and re-sellers cannot use certain catchy advisements to attract customers; they cannot operate for twenty-four hours; they cannot open branch locations near schools or even in certain residential areas; and they can only sell their products to persons above the statutory age limit. This paper is written from the standpoint of the marketing manager of Heineken, United Kingdom, which is a subsidiary of Heineken International, a widely known manufacturer of lager beer. In this paper, the marketing manager will present a marketing plan that has been developed for implementation during the re-launch of the company’s non-alcoholic drink, which is to be used to venture into the soft drink industry. The paper will commence with a brief background discussion of Heineken International. Secondly, it will present an analysis of the beer/ alcohol industry and the competitors within the industry. Thirdly, the paper will present a discussion of the justification for the re-launch of a non-alcoholic drink by the company. The fourth section of the paper will outline the major marketing opportunities that are available to promote the re-launched non-alcoholic drink. The fifth section will present a recommended marketing strategy based on segmentation, targeting, and positioning criterion. The other subsequent sections will address various issues pertaining to the recommended marketing strategy for the new non-alcoholic drink to be re-launched by Heineken-UK. 2.0 Heineken International The country of origin for Heineken International is Netherlands, where the first Heineken brand beer was first brewed in 1975 at Zoeterwoude, in Netherlands. Gerald Adriaan first brewed the Heineken lager brand beer in 1873 and presently, it is among the most popular brands of the company. According to the Heineken fact sheet (2012), the Heineken beer brand is one of the most popular beer brands in the world and it is aided with its global presence in all the continents where it operates over 180 branch locations. Heineken International has been aggressive in its expansion programme, which it commenced in 1874 by establishing a brand in Rotterdam and the hallmark of the expansion programme was marked when the company became the first foreign-owned company to imports its alcoholic products into the United States. The expansion programme has been characterised with acquisition and mergers with other beer companies, and this has resulted in the company becoming the 3rd largest brewer in the world, after SAB Miller and Anheuser-Busch InBev, which individually surpasses the company’s volume of production. The expansion programme has also resulted in diversification and expansion of the company’s product portfolio of which presently, it is noted that the company owns a global portfolio that is made up of over 170 beer brands. With reference to the Heineken fact sheet (2012), it can be stated that the wide expansion of the company was attained after it acquired the brewery subsidiary of Fomento Económico Mexicano, S.A.B. de C.V (FEMSA), which was considered to be the largest brewer and bottler in Latin America. This acquisition led to Heineken International instantly gaining a larger market share of the Latin American beer market, but it led to a significant change in the ownership structure of the company. This is because FEMSA had to acquire 20% of the company’s ownership and this resulted in it becoming the second largest shareholder of Heineken International right after the Heineken family, which has a 50.005% ownership of the company (Heineken fact sheet, 2012). In the present moment, it is widely evident that Heineken International is engaged in aggressive expansion programme that have resulted into the company focusing on establishing solid presence in emerging markets. For example, in the past year the company established a branch location in the Republic of Kenya to act as a regional base for the implementation of the expansion programme in the East African market. Based on the fact that the company has strategically positioned itself to become the largest brewer in the world, it is highly essential to explore the condition of the industry, which it operates in and even the status of competition within the industry. These analyses will be critical in formulating a strategic promotional/ marketing campaign that can be used to popularize and increases the sales of the company’s non-alcoholic beverage. 3.0 Industry analysis In the writings by Porter (1980), he stated that the most appropriate tool for analysing the macro-environment of a particular industry is through the application of the PESTEL analytical tool, which looks into six critical factors that normally determine the suitability of a particular industry/ business environment. These critical factors comprise of political factors, economic factors, social factors, technological factors, environmental factors, and legal factors. The analysis will focus on exploring how these six factors affect the business operations of Heineken UK and their likely impact on the company’s bottom line as well as the impact these factors might have on the planned re-launch of the non-alcoholic drink. The diagram below demonstrates how the six factors are interrelated and how they operate in the external environment of any business, which means that individual businesses cannot be able to tame or influence these factors to favor their interests (Porter, 1980). However, Kaplan and Norton (2008) stated that businesses could guarantee their sustained profitability and growth if they re-align themselves in a similar direction with these six factors. In a separate study conducted by Yip (2004), he wrote that at times big companies gain a position that can influence the direction of these six factors more so by using political influence i.e. using politicians to protect their business interest. Figure 1: The framework of PESTEL Source: http://www.whatmakesagoodleader.com/image-files/pestel 3.1 PESTEL analysis for Heineken UK 3.1.1 Political factors In the writings by Yip (2004), he noted that political factors normally relate to legislations, parliamentary proceedings, and the general political mood within a country, which has a great impact or influence on the operations of businesses as well as institutions within the country. For example, the current political situation in Syria is unfavorable for businesses as well as other institutions but the political stability in the UK tends to promote the smooth running of businesses and other institutions. This therefore, means that political factor has the potential of creating opportunities for businesses if it is favorable but it will create threats to businesses if it is unfavorable. It is important to note that the political situation within a country has the potential of affecting the status of businesses in other foreign countries. For example, Yip (2004) stated that in case of political instability in the United States, it is highly likely that this will affect the performance of businesses in other countries that rely on the US as their trading partner. The political factor in the UK has in many ways tended to be unfavorable to Heineken UK because the political class has increasingly imposed new regulations in the beer/ liquor industry, thus in many ways making it hard for them to conduct their operations. Among the unfavorable factors, arising from the UK political factors that have negatively affected the business of Heineken UK is the tight regulation of advertisements, and the limitation of operating hours for bars. However, it is important to note that political factors in the UK favor the business of non-alcoholic drinks and therefore, the soon-to- be launched non-alcoholic drink by the Heineken UK will not encounter any major hurdle that could arise from political factors. 3.1.2 Economic factors In the context of business environment, it can be stated that economic factors largely determine the demand and supply of goods and services. This is because the economic condition within a country normally dictates the disposable income that every consumer or household has and this will subsequently dictate the demand of various goods and services as well as their pricing (Kaplan and Norton, 2008). Therefore, it is correct to state that for a business to record good financial performance, there has to be a favorable economic condition within the country. In the years from 2008 to 2010, the UK economy had witnessed a downturn, which was largely attributed to the global economic recession. However, statistics released by the Office for National Statistics indicated that the country has been recording an improved performance since the year 2012. For example, the UK’s gross domestic product expanded by 1.5 % within the third quarter of 2013 and the rate of unemployment decreased to 7.4% by the end of 2013 (Berry, 2013). This collectively indicates that presently the UK is experiencing an improved economic performance, which means that many consumers in the UK have a high disposable income that can allow them to indulge in leisure activities such as frequenting entertainment spots. Moreover, this indicates that the re-introduction of a non-alcoholic drink by Heineken UK is likely to result in increased profitability for the company since there will be adequate demand in the market. 3.1.3 Social-cultural factor The British culture promotes indulgence in various social activities that include watching sports and in particular, watching soccer whilst drinking beer. The numerous beer-drinking festivals that are regularly held within the country affirms this social-cultural perspective of the British people and it is for this reason that beer manufacturers such as Heineken International ventured into the UK market, since there is a high demand for alcoholic products more so during the sporting season. However, it is important to note that besides the fact that drinking beer is part of the British culture, there are also those Britons who do not indulge in alcohol consumption. These conservative Britons create a high demand for non-alcoholic drinks and therefore, it is expected that the presence of these conservative Britons is likely to result in a high demand for the soon-to-be re-launched non-alcoholic drink by Heineken UK. However, the fact that it is produced by a beer manufacture will put off consumers who are very judgmental and inclined towards strong religious beliefs that dictate that they should not associate themselves with products and services that have direct association with a company that is purportedly considered to be contributing to the sins of this world. 3.1.4 Technological factor Technological factor comes into play only while considering the modern technology that will be applied by the company in the production process. This infers that technology will only be used to add value to the products during the production process and even to make the process more efficient and cost-effective. Given the fact that the company has been in the brewing business from as early as the ninth century, it means that it has already developed or installed modern technologies that can be efficiently used in the production of beverages. Therefore, the production of the non-alcoholic drink by Heineken UK will receive a boost from the technology that is already available in the company. 3.1.5 Environmental factor For companies such Heineken UK that undertake the production processes they are normally affected by environmental factors since they tend to use a lot of energy and even produce large amounts of carbon emissions. This means that they are faced with lots of regulations and restrictions that are mainly aimed at ensuring their operations do not result into environmental pollution. For this reason, environmental laws and regulations will require Heineken UK to apply production processes that are energy efficient and emit minimal carbon waste in the new plant, which will be used to manufacture the non-alcoholic drink. 3.1.6 Legal factors According to the writings by Yip (2004), he noted that legal factors bear similarities to political factors since legal factors, which infer to applicable laws are devised by law makers/ politicians. Legal factors in the business context are mainly aimed at guiding businesses in the manner in which they should conduct their operations. Legal factors have a direct impact on the profitability of any business, since an increase in tax rate will definitely result to a reduction in the level of profitability and in a scenario where legislations are passed to cap the selling prices, this will result to a stagnated growth and profitability for the affected businesses. In regards to non-alcoholic drinks, it is noted that they are not faced with stiff legal regulations as compared to alcoholic drinks and therefore, Heineken UK will not face any major legal hurdle whilst re-launching its non-alcoholic beverage brand. 4.0 Competitor’s analysis The re-launch of a non-alcoholic drink by Heineken UK will mark the beginning of an aggressive competition in the UK’s non-alcoholic drink sector, which is dominated by the world-renowned Coca-Cola Company that has 22% market share. Other soft drink companies that already operate in the UK include the PepsiCO UK, Britvic Soft Drinks Limited, Elopak, Frutarom, Gerber, HYET Sweet, Purity Soft Drinks Limited,Refresco, and Tropicana Limited, among others. The existence of numerous players indicates that Heineken UK will engage in an aggressive competition for a significant share of the UK’s soft drink market. The competition will present itself as an uphill task for Heineken UK since other players in the industry have the advantage of specialization since they only produce soft drinks while Heineken UK has more specialization and competitive advantage in the liquor industry. Moreover, the existence of the Coca Cola Company and the PepsiCO UK in the UK’s soft drink will present a major challenge for the new non-alcoholic drink from Heineken to capture a significant market share since competing with such renowned brands will require the development of distinct and tasteful soft drink as well as aggressive marketing campaigns. Coca Cola and Pepsi’ years of experience in the global soft drink industry has provided them with various tactics they can employ in order to wade off competition and capture a significant market share. However, the Coca-Cola Company can rely on its expertise that it has applied in the liquor industry in order to respond to the competition in the market. 5.0 Justification for the re-launch of Heineken UK’s non-alcoholic drink The re-launch of the non-alcoholic drink by Heineken UK is justified by two major factors that include exploiting an available market opportunity and seek to diversify further the product portfolio. The availability of numerous players in the global soft drink industry indicates that the UK has a vibrant soft drink industry that has a lot of potential since if the market was less attractive i.e offering low returns then it means that the numerous players of which some have been listed above would not have dominated it. Therefore, Heineken UK bid to venture into the UK’s soft drink industry is justified on the fact that the company will be exploring a viable market opportunity that promise handsome return, which means that the company is poised to increase its level of profitability by re-launching the non-alcoholic drink. The re-launch of the non-alcoholic drink by Heineken UK is additionally justified by the fact that it will enable the company to diversify its product portfolio and even expand its overall market share. With reference to the writings by Krajewski et al. (2009), the diversification is further justified on the basis that it acts as risk mitigation tactic. This is to mean that incase the alcohol sector is adversely affected by one of the external factors listed above or internal factors within the company, then the soft drink business will act as a cushion for fall back. The re-launch itself is justified because of the fact that the external environment has various factors that promote the business of soft drinks, for example, the economic condition in the UK accords consumers with high disposable income that can enable them to afford luxurious food items such as soft drinks or non-alcoholic beverages. Secondly, the social-cultural factor also promotes the consumption of soft drinks since conservative people or those who do not prefer alcoholic drinks and people below the age of eighteen years will normally prefer to consumer non-alcoholic drinks. Thirdly, legal factors that restrict seem to restrict the consumption of alcohol drinks tend to promote the consumption of soft drinks. 6.0 Marketing opportunities for Heineken’s non-alcoholic drink In the writings by Zarrella (2010), she stated that globally the internet and social media sites have created new opportunities for marketing of which various companies can utilize. This is because both have massive audiences i.e. millions of people who use them across the world on a daily basis for different purposes. Therefore, the greatest marketing opportunity that Heineken can utilize while seeking to market or promote its newly re-launched non-alcoholic drink is the internet and in particular the social media sites. The internet provide various avenues for conducting marketing activities such as companies’ websites, and blogs, but the most popular are in social media sites. The figure below the most popular social media sites of which facebook takes the lead with over 955 million active users globally. The second most popular social sites is twitter, which has over 170 million active users, while google plus has over 100 million active users. Therefore, by placing a marketing message on facebook alone, Heineken UK will be guaranteed that at least 955 million users on face are aware about the newly re-launched non-alcoholic drink by the company. Moreover, if the company places an advert on the three social media sites then more than 1225 users who access these sites on a regular basis will guarantee it of viewership. In the context of the UK, market it can be stated that this marketing opportunity is real since many people in the UK have access to the internet and majority of the population is technologically aversed to an extent they can easily utilize the Internet and social media. In the writings by Zarrella (2010), she added that the internet and social media sites presents perfect marketing opportunity because of the low marketing cost that is associated with them. Sporting competition, and matches especially for soccer also present a perfect marketing opportunity that Heineken UK can utilize while on its pursuit to popularize its newly re-launched non-alcoholic drink. For example, during soccer matches of popular teams such as Arsenal and Manchester United, the company can buy Television time on local channels that are airing the match. This will guarantee the company wide viewership of their adverts and immediate awareness amongst a large percentage of the population that love soccer, which is part of the British culture. Besides soccer, the company can buy television time when popular television programs in the UK are being aimed in order for the marketing message to reach a wide audience. Figure: Global active users of facebook, twitter, and Google plus Source: https://www.google.com/search?q=social+media+users 7.0 Recommended strategy based upon segmentation, targeting, and positioning With reference to the studies that was conducted by Krajewski et al. (2009), it is noted that the marketing process starts by first segmenting the market based on three broad criteria that comprise of the behavioral characteristics, personal characteristics, and benefits sought after by individual consumers. The segmentation criteria for the non-alcoholic drink results in an outlook of the entire population since non-alcoholic drinks can be consume by persons from all ages, races, financial backgrounds, and even for different purposes. Because of the fact that the new drink will be for consumption by everyone and there will be no specialized drinks for any particular consumer segment, it means that the marketing campaign as well as the product itself will target the entire population in the UK. In terms of positioning, the soon-to-be re-launched non-alcoholic drink by Heineken UK should be positioned as a distinct product and it should therefore be delinked from any association with the alcoholic drinks that are being manufactured by the company. This is to say that the positioning strategy should ensure that consumers do not relate the new non-alcoholic drink with the Heineken-brand since some consumers who are against the consumption of alcohol will definitely repel against such soft drink. Therefore, based upon segmentation and targeting, it is recommended that the best possible way to market the newly re-launched non-alcoholic drink by Heineken UK is to carry out mass media marketing campaigns since everyone in the market is a target. Mass media marketing will require use of common messages across all the marketing avenues of which the internet and specifically the social media sites will be heavily utilized in the marketing of the new product. In terms of positioning, it is recommended that the strategy to be applied will involve marketing the newly re-launched product as a distinct non-alcoholic drink with no direct affiliation with Heineken UK. This strategy will require branding the product itself and the marketing messages with colors, images, and words that are not normally associated with other alcoholic brands of Heineken. 8.0 The applicable marketing mix variables In terms of product, the non-alcoholic drink should not contain any ingredients used to make alcoholic drinks and it should have a distinct taste from other soft drinks that are available in the market. Moreover, the packaging including the bottle should be designed in a unique manner to ensure that they do not have any similarities with other Heineken brands. In terms of the place element, the company should ensure that the new newly re-launched non-alcoholic drink is available in all major retail shops and even in entertainment spots. In other words, it should be made available in every location where soft drinks are also being sold. In terms of pricing, the re-launched non-alcoholic drink should be priced with reference to external prices i.e. the prices of other soft drinks should be used to set its price. For example, it could be slightly cheaper than Coca- Cola products. In terms of promotion, it has been noted above that there is a pre-existing marketing opportunity on the internet, social media sites, and even on television stations during soccer matches or when there is poised to be wide viewership. Therefore, in terms of promotion the company will place adverts on the internet, social media sites, and televisions in order to create awareness about the new product. 9.0 Promotional plan and optimum promotional mix Prior to the launch of the new non-alcoholic drink, billboard advertisements will be placed along major roads within major cities in the UK in order to create awareness to the public about the soon-to-be re-launched non-alcoholic drink. On the official launch date, road shows will be conducted whereby the public will be shown the new drink and they will equally have a chance to taste it. Later on that day a musical festival will be organized for the official launch of the new drink whereby the attendees will be freely issued with the new drink as they dance and sing to tunes from UK top musical artists. After, the official launch the promotion for the new drink will continue through point of sales displays in major retail stores. Secondly, marketing campaigns will continue via the social media whereby an official page for the new non-alcoholic drink will be created so that consumers can interact and offer their reviews about the new drink. Additional, marketing will also be conducted via the old media that include popular television stations and radio stations. 10. Marketing budget Cost (GBP) Prior to the launch Billboard advertisements 1000 billboards (Sheet-66ft x 10ft) across major rounds in cities (1000*500) £500,000 On the date of the launch Road shows 10 rental buses to transverse the city of London (10*750) £7,500 Musical festival £700,000 Post launch marketing Facebook advertisements for 3 months £25,000 Twitter advertisements for 3 months £20,000 TV adverts £100,000 Radio adverts £75,000 Total budget cost £ 1,427,500 Based on this budget the company is poised to used £ 1,427,500 to market the new non-alcoholic drink. 11. Demand forecasts In the writings by Chase (2013), he stated that the calculation of demand forecast or the total market demand is calculated from the multiplication of the number of buyers in the market, the quantity purchased by an average buyer per year and the estimated selling price. According to the 2013, UK soft drink report it is noted that 99% of the total population in the UK (99% of 63,230,000=62,597,770) are likely to consume a soft drink within a year and the average bottle per year for each person is 12 bottles. The estimated selling price for the new non-alcoholic drink by Heineken UK is expected to be £ 1.15, which is slightly lower than Coca-Cola drinks. Therefore, the total market demand for the new drink in its first year after launch is expected to be; 62, 597,770*12*1.15=863,849,226 Therefore, the total market demand for the new non-alcoholic drink will be 863.85 million 12. Contingency plan In case this promotional plan does not work, then the company can switch the promotional strategy and aim at promoting the re-launched product as a Heineken brand that is meant for consumption by ladies who are not do not like the taste of liquor or spirits. Hyping, it as a ladies’ drink when they are having fun or out in an entertainment spot is posed to create a lot of buzz for the product amongst female consumers. The buzz will lead to an immediate demand for the new drink and based on the general observation that women do not prefer the taste of like this contingency play is likely to work but the sales will be low since it only targets a small niche of the market. 13. Conclusion Based on the industry analysis that was performed it was noted that Heineken UK operates in an environment where political and legal factors are deemed to be creating constraints to the business while economical and socio-cultural factors indirectly promote their business of alcohol production. On the other hand, it is noted that the industry factors all in a greater extent seem to favor the soft drinks businesses and based on the competitors analysis it was noted that numerous players including two of the World’s largest soft drinks companies already dominate this sector. However, Heineken UK is expected to successfully penetrate the soft drinks market because of its expertise and experience in the competitive liquor industry. Whilst devising the marketing strategy it was evident that the target market does not require segmentation since the non-alcoholic product that is set for re-launch will be a family consumable product i.e. everyone in the market regardless of other factors will be a potential customer. Therefore, marketing messages will be coded for easy understanding of every member of the public and the appropriate marketing avenues include the internet, social media sites, and old media (television and radio stations). From the marketing and promotional marketing strategies that have been devised it is expected that the re-launched non-alcoholic drink will record an impressive success in the market, based on the demand forecast. References Chase, C. 2013. Demand-driven forecasting: a structured approach to forecasting. Hoboken, New Jersey : John Wiley & Sons, Inc Berry, F. 2013. UK economy set for fastest growth in seven years in 2014 – BBC. Retrieved from: http://uk.reuters.com/article/2013/12/12/uk-economy-growth-idUKBRE9BB00O20131212. Accessed on [19.01.2014] Heineken fact sheet. 2012. Retrieved from: www.heinekeninternational.com. Heineken International. Accessed on [18.01.2013] Kaplan, R. and Norton, D. 2008. The Execution Premium: Linking Strategy to Operations for Competitive Advantage. Boston, MA. Harvard Business School Press Krajewski, L. Ritzman, L. and Malhotra, M. 2009. Operations Management (9th Edition). New Jersey; Prentice Hall Porter M. 1980. 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