Corona Beer Market Position - Case Study Example

? Corona Beer of the Executive Summary Economic power of almost all the individuals in the globe has increased overtime.With the rise in purchasing power, the demand for comfort and luxuries has increased significantly. It is reported by many researchers that at present demand for alcohol, especially beer is growing in both the developed and developing economies in the world. The per capita income levels of almost all the potential consumers of alcohol have increased with time. The rises in the disposable income thresholds have augmented the volume of sales of the alcohol brewing industry. However, it is empirically observed that the aggregate alcohol consumption in Asia, Africa and Latin America is more than that of Western Europe. The cause for unequal demand for alcohol is simply due to recessionary trails in the global economy. The soaring oil prices have caused a price rise for almost all the final goods and services. Though the money income has increased for buyers, the rising consumption expenses are putting downward pressure in the real income level. The beer and alcohol industry not only generates a significant share of many economies national product, but also spawns large employment opportunities. Thus, analysts and researchers are scared that the fall in production capacities of firms due to recession should not render more individuals jobless. At this juncture, it becomes rational to analyze the business of potential alcohol producing firms like Corona Beer. This essay will implicitly discuss the internal and external factors that determine the business of Corona Beer. The context of the research work will enumerate the different marketing strategies Corona beer has adopted to account for higher turnovers in future (DRUGSCOPE, n.d.). Table of Contents Executive Summary 2 Introduction 4 SWOT Analysis 5 Strength 6 Weakness 6 Opportunities 6 Threats 7 Staying in Power 8 Porters Five Force Analysis 9 Bargaining Power of Buyers (low) 9 Bargaining Power of Suppliers (weak) 9 Rivalry in the Industry (high) 9 Threat of New Entrants (weak) 10 Menace of Substitutes (strong) 10 Summary and Conclusions 10 References 12 Introduction Corona Beer or Corona Extra is a famous pale larger that was first manufactured in Mexico by Cerveceria Modelo. The company was founded in the recent past at around 1925 in Mexico, but its unique quality and taste soon made it a famous beverage for a large customer base. Grupo Modelo always intended to extend the market of Corona Beer beyond the territories of Mexico. From its inception in 1925, by 1996 the company gained 32.7% share of the total market demand for alcohol in Mexico. The officials of the company first desired to export Cororna Beer to the prospective economies of United States and then planned to enter the other markets. Europe, Latin America and Asian markets were secondary marketplaces for the company (UFL, n.d.). Figure 1: Words Top Beer Companies (Source: Ashok, 2009) The above table explains the market position of Corona in 2005 and 2006. The values are in terms of million barrels shipped. It is evident from the above schedule that the market performance of Corona was mediocre (1.9 of total market share) till 2006 when compared with the other top beer brands. Carlos Fernandez, the chairman of the company analyzed that what was most crucial for the company was to expand its market outside the domestic borders of Mexico. In 2007 the largest beer producer and manufacturing firm in Mexico (Corona) finally decided to enlarge its production capabilities. The company spends a wholesome amount of $300 million to suffice its growing market demand outside Mexico. The company first emerged in the U.S. market in 1979, its nonrefundable policy, unique packaging style and differential modes of marketing soon made it a potential competitor in the U.S. alcohol industry, especially in the Southern States. Although, the Federal excise tax rates in beer was increased in U.S., but the Modelo Group passed its incidence on the buyers. Figure 2: Total Import of Beer in U.S. (Source: Ashok, 2009) The above schedule clearly shows the best position of the company in terms of total beer imports in U.S. SWOT Analysis The SWOT analysis would help to enumerate various strengths, weaknesses, opportunities and threats of Corona Beer in the market. Strength The principal strength of the company is its global presence. The beer is globally traded in almost 170 nations. It is evident from the above schedule that Corona Extra is the top retailing imported beer in U.S. The rising excise tax has not remitted the growth of the aggregate turnovers of the company. The marketing strategies of the company are not only exclusive but also innovative. The company engages in a lot of sponsorship programs, these events are mainly sports events that are enjoyed by a large pool of spectators. The company generates high brand awareness by spending large sums of finances in such programs. NASCAR Corona Series is one such event sponsored by the company in Mexico. It is a racing event that comprises a 14-race timetable held in oval and round tracks. More than 500000 views witness this sports event. The company has also sponsored the women golf tournaments of LPGA Tour Tournament Corona Championship from 2005 to 2009. The corporation has efficiently used its finances to advertize its beer in the famous black cabs of London. The company attempts to target consumers of all age and income groups. The biggest strength of the brand is its presence in the market. Its high quality product has helped it winning the loyalty of many consumers (Pontinen, 2002). Weakness The firm exports beer to all the countries from Mexico. It does not have brewing units in any other nation apart from Mexico. The price of oil has soared in the current market, thus distribution and transportation costs have increased for most of the companies. Since Corona Beer involves in high distributional functions, the rising cost of distribution has made the company suffer on serious grounds. The revenue and operational scales of the company is smaller than many potential giants in the market. Anheuser-Busch InBev, MillerCoors brewing etc are famous beer producing firms that are larger than Coro Beer Group in terms of scale and scope of operations. Opportunities Anheuser-Busch is an alcohol producing firm that desires to join its business with Modelo. Such mergers or acquisitions would help the company to earn higher revenue and enjoy larger base of customers. The growing middle class consumers in the budding economies are impending Corona Beer drinkers. The customers demanding for beer in Asia and Germany are increasing significantly. Figure 3: Per Capita Beer Consumption (Source: Kuo, 2013) The above bar diagram shows that par person beer consumption is increasing radically with time. The sample considered to make the above estimation includes both developed and developing economies. The company reduces some of its tax burden by passing over its incidences to the several distributors in different nations. Threats State governments in many nations like Australia are becoming suspicious about the social benefits from the growth of alcohol industry. As a result, beer producing firms like Corona Beer Company are facing many state interventions and legal problems. Heineken, Budweiser and Miller are rivals of Corona Beer enjoying higher market shares than the company in many nations. Rise in the oil prices have also increased the price levels of food cereals like rice, corn hops and barley. Beer is produced with such cereals, thus prices rise of cereals are increasing the cost of manufacture of Corona Beer. Staying in Power It is apparently true that the second best market of Corona Beer after Mexico is U.S. The company has parked large pools of consistent buyers in U.S. with its excellent marketing skills and catchy advertisements. In order to stay in the market with power and lead in the industry Modelo has adopted new innovative strategies for advertizing its beer. Consumers in U.S. could resemble the Corona Beer advertisements with a beautiful sea beach. The beach displayed in the advertisement was a real one that comprised of beautiful white sand and blue ocean waves. This commercial made the beer brand famous all across the world. In the recent past, few years back the Chicago based Crown Importing Company that distributes Corona beer in U.S. decided to change the former long existing beach centric advertisement of the brand. The Crown Imports business organization decided that the new advertisement of Corona beer would be more inclined towards human outlook. The company launched the new advertisement with an attractive catchphrase “Find Your Beach”. In the new commercial, it was found that Corona beer drinkers were happily enjoying their drinks in different locations, apart from genuine beaches. The innovative advertisement of the company was modified by the Cramer-Krasselt advertisement agency to specially target the sports clientele. They used the catchphrase “Find Your Beach for the Game” and endorsed their commercials with ESPN commentator Jon Gruden and football coaches. It was believed that in the modern world the individuals are extremely busy in their workplaces. The new commercial would make the consumers believe that anywhere and anytime they can enjoy a drink of Corona Extra, which would make them feel like being in the beach. The advertisement agency Cramer-Krasselt introduced three videos over the net for marketing the beer. The proportion of internet users has increased significantly since the last few years. The new advertisement of the beer proved to be extremely profitable for the Mexican brewing firm and helped it in tapping more potential clients all over. The new caption in the new commercial is widely used in social networking sites Facebook and helps the sports enthusiasts share their preferred football beaches (Bizjournals, 2012). Porters Five Force Analysis The several underlining factors affecting the business of Corona Beer can be enumerated with the help of Porters Five Force industry analysis. Bargaining Power of Buyers (low) Corona Beer is the biggest beer brewing company in Mexico and successfully operates in more than hundred countries across the globe. Thus, the total numbers of buyers that purchase Corona Beer are large in strength. The large pool of buyers of Cororna Beer has no bargaining power to influence the prices set by the company for its beers. Since there are many buyers, the impact on the firm’s aggregate revenue due to loss of a single buyer is insignificant. The whole sellers of beer enjoy less bargaining power because a lot of legal restrictions are imposed on them for the purpose of selling alcohol in the market (Ratneshwar & Mick, 2013). Bargaining Power of Suppliers (weak) The raw inputs used to produce beer in the brewing industry are agricultural products. These products are mostly cereals that are less differentiated in nature, thus the giant alcohol manufacturers may pick any one for inputs. The bargaining power of suppliers is thus very low in the brewing industry. The suppliers of bottles, boxes and cans used for packaging the beer bottles also possess no bargaining power. The giant brewing firms may manipulate their decisions and change the mode of packaging at any moment (Fine & Ellis, 2010). Rivalry in the Industry (high) Anheuser-Busch and Miller are the two beer brewing giants in the industry enjoying almost 55% of the total market share. The policies and advertisement expenditures made by these firms may easily threaten Corona Beer. The companies in the alcohol industry not only compete with each other in terms of commercial investments but also in terms of introducing new product lines (Bell & Lassila, 2009). Threat of New Entrants (weak) It is very difficult for a new firm to enter in the brewing industry and sell its drinks at low average costs because of the existing business firms in the industry. The existing firms enjoy wide customer base and hence exhibit the benefits of economies of scale in production. It is also difficult for the new entrants to enjoy the same brand recognition like that of its rivals. Accumulating huge finances to run such prosperous business also becomes a challenge for the new entrants. Menace of Substitutes (strong) The threat of substitutes in the beer industry is very high; consumers can often change their taste and preference pattern and consume wine or other liquors instead of beer. The consumption of wine mark a symbol of status and class, many alcohol drinkers favor wine than beer. Summary and Conclusions It may be summarized from the learnt of the essay that though Corona Beer is a popular brewing company in the alcohol industry but it still has to travel a long way to become a giant brewing firm like Miller or Anheuser-Busch. The company must try to expand more and increase its clientele to enjoy a wider customer base. Only with the help of high aggregate demand it can enjoy economies of scale in production and reduce its cost. The company should try to expand in emerging economies like China because it has surpassed the U.S. market demand for alcohol in 2003 (NCBI, 2013). It is also found that FEMSA growing beer selling subsidiary company in Mexico, is slowly and steadily taking over the market demand of Modelo. The domestic demand for Corona Beer is falling because FEMSA is capturing the established loyal customers of Modelo. However, the situation is not same in the international market; the business of FEMSA is not very prosperous outside Mexico. Till 2007 Corona has been successful in becoming the best selling beer company in Mexico and top import beer firm in U.S. The company has emphasized in its annual report that about 45.5 million hectoliters of beer was brewed in 2005(Ashok, 2009). Figure 4: Modelo Group Accounts (Source: Ashok, 2009) The above schedule explains the improving accounts of the Modelo group from 2004 to 2005. However, it should also be noticed that the company is experiencing lower sales of its output both in domestic and foreign markets due to increased competition. Thus, in order to maintain its position in the market or in fact to improve it, Modelo group must try to create higher brand value by winning over more valid customers. References Ashok, S. (2009). Corona beer: From a local Mexican player to a global brand. New York City: McGraw Hill. Bell, G. & Lassila, A. (2009). Industry analysis. Retrieved from http://www.d.umn.edu/~ggbell/mgts4481/Sample%20papers/Coors_Industry_3.pdf. Bizjournals. (2012). Corona beer's shift in ad strategy leads to football towns. Retrieved from http://www.bizjournals.com/chicago/news/2012/10/05/corona-beers-shift-in-ad-strategy.html. DRUGSCOPE. (n.d.). Making alcohol a health priority – Opportunities to reduce alcohol harms and rising costs. Retrieved from http://www.drugscope.org.uk/Resources/Drugscope/Documents/PDF/virtuallibrary/Making%20alcohol%20a%20health%20priority.pdf. Fine, A. F. & Ellis, B. (2010). The global grapevine: Why rumors of terrorism, immigration, and trade Matter. Oxford: Oxford University Press. Kuo, L. (2013). In the battle for China’s beer drinkers, the $0.32 brew is still king. Retrieved from http://qz.com/58995/in-the-battle-for-chinas-beer-drinkers-the-0-32-brew-is-still-king/. NCBI. (2013). 'BRICS without straw'? A systematic literature review of newly emerging economies' influence in global. Retrieved from http://www.ncbi.nlm.nih.gov/pubmed/23587342. Pontinen, J. (2002). Industry overview. Retrieved from http://jenniferpontinen.efoliomn.com/Uploads/MBA%20Final%20Project.pdf. Ratneshwar, S. & Mick, D. G. (2013). Inside consumption: Consumer motives, goals, and desires. London: Routledge. UFL. (n.d.). Corona extra. Retrieved from http://iml.jou.ufl.edu/projects/Spring99/Wedington/corona.htm. Read More