Term Paper on "Marketing Analysis for the Olde Distillerie"

Term Paper 13 pages (3530 words) Sources: 30 Style: Harvard

[EXCERPT] . . . .

Marketing Analysis for the Olde Distillerie

The spirits industry the world over has been faced with some tough challenges in recent years as more and more consumers make the switch to wine and beer. The Olde Distillerie has not been immune to these trends either. This company is a small independent Scotch whisky distillery based in Dumfrieshire, South-west Scotland. As a consequence of the stagnant/declining UK market, the company has decided to investigate the sales potential overseas. The purpose of this study is to provide the first stage (secondary data) of a comprehensive research program by identifying one market that can subsequently be explored in greater depth through primary research. The market environment for four potential countries is provided to this end (i.e., Eire the Republic of Ireland, Sweden, Italy and Czech Republic), a comparative market attractiveness analysis for these four countries including relevant demographic and economic metrics is followed by a proposed market entry strategy in the concluding chapter.

Review and Analysis

Part a: Market Environment Study:

An analysis of the respective environments of the four markets under consideration is provided below. As will be noted below, because across-the-board comparison are difficult to make based on differences in drinking patterns and frequency of consumption, there are some valuable insights that can be gained from the various studies to date concerning these issues as they relate to these individual countries. Some of the common metrics available that were used for this purpose included per capita income levels, population, median age and excise tax considerations.

Republic of Ireland.

According to Sheridan (2003), "The Irish are more associated with alcohol than most other nations. Tourist advertisements encouraging visitors to Ireland almost always figure a pint or two as part of the campaign. A country with such a reputation, one might expect, would have the most liberal of laws for the consumption of alcohol" (p. 28). In response to this hard-drinking image, the Irish government has taken a number of steps in recent years designed to reduce overall alcohol consumption rates, and these initiatives appear to be increasing in both frequency and level of oversight involved. In this regard, while England and Wales appear to have encouraged more "civilized" alcohol consumption through relaxed licensing laws, Ireland is headed in the other direction because of the continuing high consumption rates. According to Sheridan, "Ireland has a love-hate relationship with alcohol. The Irish enjoy a reputation for cordiality: pub culture is the centre of social life and, according to some reports, per capita alcohol consumption is one of the highest in Europe. On the other hand, up to 25 per cent of cases in accident and emergency units in Irish hospitals are alcohol-related, and assaults related to drinking have increased dramatically in recent years" (2003 p. 28). Indeed, Irish president Mary McAleese characterized the Irish attitude to drink as "unhealthy" and "sinister'" (quoted in Sheridan at p. 28).

This perspective is not surprising given the alarming alcohol-related statistics. For instance, in 2000, Ireland experienced nearly 15,000 cases of reported public intoxication and a comparable number for abusive or insulting behaviour (Sheridan, 2003). According to this author, "In an attempt to stem the huge growth of these offences, the government updated the Intoxicating Liquor Act that year. The hope was that if opening hours were extended and the drinking regime liberalised, people would moderate consumption. The government underestimated the strength of Ireland's alcohol culture. Consumption increased, as did incidences of violent behaviour. A commission was set up to look into the problem, taking submissions from all sectors related to the drinks industry" (Sheidan, 2003 p. 29).

In February 2000, the Commission on Liquor Licensing released its final report containing several recommendations that the government intends to implement in coming years. Among these:

The legal age of consumption will remain 18 but endemic under-age drinking will be tackled by requiring everyone under 21 to show proof of their age on licensed premises.

Under-15-year-olds will be banned from pubs after 8 p.m. The ID requirement is intended to catch out older-looking 16-year-olds.

The government will also back-pedal on provisions in the 2000 act that allowed premises to remain open until 12.30am on Thursdays (in addition to Fridays and Saturdays).

Police may start recording customers on video camera as they leave premises, using the tapes as evidence if people are subsequently charged for being drunk. With 40 per cent of fatal road accidents being drink-related and an average of 25 alcohol-spurred assaults per night, the government sees such enforcement as the solution.

These measures are largely pragmatic measures designed to address the enormous costs associated with alcohol abuse in Ireland, believed to cost the Irish economy almost two billion euros in lost productivity (Sheridan, 2003). Interestingly, the Irish are even responsible for the "e" being added to the word, "whiskey" (Eckert, 1998).

Sweden.

According to Kurzer (1998), the Swedish people have a global reputation for enjoying their alcohol, something the Swedish government apparently despises and has taken steps to address it. Likewise, as Heath (1995) reports, "The Swedes are reputed to be heavy drinkers. Sweden is known as one of the countries in the 'vodka belt' across northeastern Europe. However, when looking at the total consumption of alcohol in Sweden in 1990, and comparing it with thirty other countries, Sweden is number 28" (p. 280). In this regard, Kurzer reports that, "Whatever the original explanation for Swedish people appear to have an unhealthy attitude towards drinking, social reformers in the early 20th century clamored for strong restrictions on drinking. After 1945, Sweden created state monopoly systems to control every aspect of the alcohol trade. State retail stores sold liquor to consumers and a state production company manufactured distilled spirits and imported alcoholic beverages from abroad" (1998 p. 2). At the time, Systembolaget was the only legal seller of strong beer, wine, and spirits in Sweden and Vin och Sprit produced and marketed distilled spirits, imports, and established prices for all alcoholic beverages throughout the country (Kurzer, 1998).

During the 1960s, though, these efforts lost their momentum in the wake of consumer resistance, and Swedish authorities resorted to two fundamental approaches to discouraging excessive drinking among their population while promoting light alcoholic beverages. According to Kurzer, "A restricted number of retail outlets with limited opening hours inhibited spur of the moment shopping trips and extraordinarily high excise taxes discouraged unplanned purchases" (1998, p. 2). The author also emphasizes that, "By all accounts, Swedish alcohol control policies have been a great success. In 1988 alcohol consumption in Sweden stood at 5.3 liters of pure alcohol per person. Moreover, most Swedish consumers have abandoned distilled spirits. In 1990, spirits accounted for 33% of total consumption of 100% alcohol in Sweden. Beer became the most popular alcoholic drink sometime around the mid-1970s in Sweden" (emphasis added) (Kurzer, 1998 p. 3).

The popular perception of Swedes being heavy drinkers is perhaps related to the manner in which many of them drink. Compared to many other countries where people may consume alcohol in private at home or with friends, people in Sweden enjoy consuming their alcohol in public and in large quantities when they do: "In Sweden, drinking frequently takes place outside of the home, and alcohol is consumed in such quantities that people frequently are drunk. This pattern often occurs on holidays. The Swedish drinking pattern has ancient cultural roots" (Heath, 1995 p. 280). While the percentage share for wine continues to decline in France, the demand for wine has increased in the majority of other Western countries; for instance, the demand for wine has more than tripled in the last 40 years for Sweden (Selvanathan & Selvanathan, 2005a).

In addition, in the majority of Western nations, the allocation of alcohol expenditure on spirits has decreased during the same 40-year period and this decline in market share has been assumed by wine for the most part but also by beer to some extent. According to Selvanathan and Selvanathan (2005a), "Overall, in the 1950s the Australians and the British were the heaviest beer drinkers and have been beaten by the Japanese in recent years. With respect to wine, throughout the last five decades, the French continue to lead all the other nine nations. With regard to spirits, within alcohol, consumers in Canada, Finland, France, Norway, Sweden and the U.S. continue to dominate all other countries" (emphasis added) (Selvanathan & Selvanathan, 2005 p. 128). Indeed, wine has assumed the same status as gasoline or other inelastic consumer products in Sweden today: "Wine is a luxury in Australia, Canada, Finland, Norway and the U.S. And a necessity in France, New Zealand, Sweden and the UK" (Selvanathan & Selvanathan, 2005a p. 128).

Italy.

According to Heath (1995), while the annual per capita alcohol consumption rate in liters of absolute alcohol has been declining for some time now, alcohol production remains an important industry in Italy today. "Trade in alcoholic beverages represents approximately 10% of the gross national product," Heath notes, and "vineyards cover fully 10% of Italy's total… READ MORE

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