Discuss about the .
Coopers Brewery Limited with an increase in sales of 3.3% has reached total sales of 81.5 million litres of beer and is currently the largest brewery with Australian ownership. It also has the distinction of being the leader in home brewing equipment. The company has been witnessing an increase in the sales for the past 23 years with a 9.2% annual growth rate. The total revenue also increased by 4.6% to reach $245.9 million (Ledovskikh, 2017). The company has been producing globally renowned beer brands. “Coopers Original Pale Ale”, one of the prominent beer brands of the company which has in fact won the award for being the Australia’s best full strength beer 8 times in the last 9 years.
The work is currently in progress for the $63 million new malting plant which is capable of producing 54,000 tons of malted barley. This is one of the largest investments by the company compromising of 4 vessels, kin, grain silos and 2 steeps with the facility of overhead gallery. Such ambitious steps are taken to ensure uninterrupted supply of malt of high quality (Annual Report, 2016).
It is important to note that in spite of the fall in the revenue of this industry over the last five years, Coopers has still managed to have positive revenue although there is a decrease in profitability. The main reason behind this industry facing pressure is the decrease in consumption of beer coupled with increase in competition both from the companies operating in Australia and from outside. In case of beer market, customers are shifting focus from the traditional beer to the premium segment. In fact consumers are now looking forward to variants which are healthier and have more options. With the shift of alcohol consuming customers from quantity to quality, there is a fall in per capita consumption of alcohol from 108 to 92 litres per capita within five years. Sparkling Ale, a premium domestic beer from the house of Coopers has been doing exceedingly well in the Australian Market and was subsequently named the “Best Premium Domestic Beer” in the Australian Liquor Industry Award. Such kind of competition has led to domestic players like Coopers exploring foreign markets.
The biggest concern in the Australian beer market is the role of supermarket owners like Woolworth and Coles who have been extensively using their position to promote their personal brand. These trends are supposed to continue over the next 5 years and will incite the retailers to put more pressure on the beer manufacturers for more discounts so that they are in a better position to compete with the private brands. Industry major payers are also facing competition from boutique brewers because of the shift of the preference of the consumer towards European and Australian style which was previously not found in the Australian market.
It is extremely important for established manufacturers like Coopers who have necessary infrastructure and proven products to shift towards internationalization. This is because the Australian Beer Market is gradually reaching towards saturation. Even the night clubs and pub which had preference are now opting for wine or cider. The taps of these places have now cider flowing from it instead of beer. The product life cycle shows that this industry is currently in the advanced mature stage with a forecast of annualized decline at 0.9% in comparison to 2.6% which was the rate of GDP forecasted for the period. Although this is considered as a sign of decline but considering the performance of craft breweries recently entering the market some other indicators hope to see the market growing at a rate of 9%. The pressure in the industry can be gauged with the fact that many successful craft brewers are being acquired by the industry leaders.
Considering the above situation it is financially sensible to venture into a market like Vietnam which backed by its 93 million population and beer drinking culture has recently been attractive to the foreign investors. Alcoholic market in general is growing at a rate of 6.3% as on 2013 with a market value of USD 5.6 billion. Further according to the Vietnam Supply Chain Report 98% of the people who are consuming alcohol is actually consuming beer. This demand can only be altered if wine and spirit becomes more affordable to the people of Vietnam (Beverage Supply Chain, 2015).
According to the Porter’s value chain analysis; there are two activities which are described below:
Primary Activities: The main activities in the value chain of Coopers Brewery Limited can also be termed as primary activities which include:
Inbound Logistics: The inbound logistics are the raw materials which are brought in by the company for the production of the beers in Coopers Brewery Ltd.
Process: This includes all the machineries, human efforts and so on, which are used in order to convert the raw materials into finished goods (Walters and Rainbird, 2004).
Outbound Logistics: The outbound logistics is the process with the help of which, the finished products in the company are carried from the production house to the market for sale and it includes transport facilities, warehousing facilities and so on (Rushton, 2017).
Marketing & Sales: The marketing and sales are the activities with the help of which the beers are made popular among the customers with the help of promotion and advertisement (Stinson, 2008).
Service: The service is the procedure with the help of which the machineries producing beers can be installed in the company and which also needs repairing activities from time to time. There is also training activities which take place in order to train the new employees of the organization.
Support Activities: The support activities are those which provide support to the primary activities of the company which are mentioned below:
Procurement: The procurement is the process of buying or collection of the raw materials for the production purpose (Presutti and Mawhinney, 2013). Also, the machineries are required for the purpose of production which is procured by Coopers Brewery Limited.
Technological Development: Research and development of the company is included under the development of the technology with the help of which new beer composition is developed and also new product development takes place. Also, the design of the product also takes place with the help of technology (Daim, 2016).
Human Resources: The human resource helps in every function of the company starting form production and also looking after the marketing of the company (Bratton, 2017).
Firm infrastructure: The infrastructure of the firm states that the finance that Coopers Brewery Limited have and also the technology department, management and so on.
In fact the sale of beer has beer precisely has been growing at 6% and has reached around 3.6 billion litres by 2015. However the foreign players who have entered the market have actually achieved a growth rate of around 15% IN 2015. The Beer industry is supposed to achieve a volume CAGR of 6%. Vietnam which had the highest consumption of Beer in the South East Asian Region, now ranks 4th in Asia, only after Japan, South Korea and China. The Vietnam Breweries Association in fact has stated that the per capita consumption has risen to 32 litres in 2013 which has increased at a rate of 10% from the previous year (Beverage Supply Chain, 2015).
Signing of Trans Pacific Partnership (TPP) which is a US led free agreement was one of the most significant step towards opening the Beer Market in Vietnam and also make it competitive for the international players. The period prior to the signing many foreign brands falling down in this country due o the high import tax structure. In spite of the high expenditure incurred for promotion and advertisement, many international brands found nearly impossible to penetrate in the domestic market of Vietnam. Post signature of the treaty Vietnam abolished the import tax structure of 35% and hence provided a level playing field for the international players along with the domestic players (Vietnam Briefing News, 2014).
People in Vietnam have ideally considered drinking as a means of socialization. This is one of the fundamental reasons for the phenomenal growth of this industry in Vietnam. Another important aspect is the growth of tourism industry in Vietnam along with the increase in expatriates which has led to the boosting of the drinking culture in Vietnam. The foreign players in Beer industry has specially started doing well after the government started highlighting the negative effects of Beer to the health of the consumers. This is because the people who are actually addicted to drinking beer felt that the negative effect from the consumption of foreign liquor which are made through quality raw material and technology will be much less as compared to the local ones. Moreover unlike many countries beer can be sold very easily in places starting right from coffee shops to full service restaurant and pub. A significant aspect of this market is that the powers of private brands of retailers are insignificant owing to the dominance of big brands. This is unlike Australia where when Coopers even faces tough competition.
When a company tries to sell their old products in the old market with some innovative features implemented in the product, it is known as market penetration (Arkolakis, 2008).
When a company sells their existing products in a new market, it can be said that they are in the phase of market development.
The product development is the phase or strategy when the new products of the company are sold in the existing or old market (Mills and Brooke, 2012).
The diversification is the strategy with the help of which new products are developed for the new markets and this is the most risky strategy among all, as it is uncertain that the new products will get sold in the markets or not (Kenny, 2009).
In this particular assignment, it can be said that the company is following market development strategy as they will be selling their beers in Vietnam, which they previously used to sale in Australia.
BCG Matrix can be used to study the position of the company in the market and with the help of this matrix, it can be understood that the company is in the position of cash cow, as they have low growth in the market of Australia but they are in the position of the market leader with highest selling beer in the country.
Therefore in light of the capabilities of Coopers it is highly probable that the company will be able to perform well in a growing market like Vietnam.
According to Michael Porter, competitive advantages can be gained from three bases with the use of the following strategies (Porter, 2014). The different bases are: Cost leadership, Differentiation and Focus.
Cost Leadership: This is the strategy, where the company produces their products at low cost and sells them in the market at a very low cost as per the average selling price of the industry or even lower than that, in order to earn high market share (Brady and Spence, 2010). A broad market is targeted by the company to sell their products.
Differentiation Strategy: Differentiation strategies aim at producing unique or differentiated product and services for customers who value quality over cost. With the help of the differentiation strategy, the company aims to differentiate their products from that of the rivals of the company.
Focus Strategy: In case of focus strategy, the aim is to produce products & services for a small group of customers (Maritan, 2011). A very narrow segment of customers are the target of the company and with the help of this strategy, a cost advantage can be achieved by the company or differentiation of their products from the rivals.
Coopers Brewery should ideally pursue the differentiation strategy. A successful differentiation strategy should be undertaken only after studying the consumer behavior. This is because differentiation strategy is undertaken with an aim to charge higher prices for the higher quality customize product. As there are various other companies in Vietnam which are producing beers in the market, it is very important to differentiate the products of Coopers Brewery Ltd. In order to serve the customers with different kinds of beer those are available in the market of Vietnam. The customers will be able to indulge themselves in a different taste of beer and as a result, the sale and the revenue of the company; both will increase. When successfully undertaken, it brings in customer loyalty since the customer draws an association with the differentiated product. In case of Coopers, it is currently holding a leadership position in the Australian Market with its brands winning awards in consecutive years. Coopers stepping into Vietnam where there is a growing demand for drinks and consumers consider this habit as a symbol of status and are widely practices for leisure, strategy of differentiation seems to be very relevant. (Porter, M. E. 2008).
As discussed previously, considering the health advisory of the government the people of Vietnam are actually looking for higher priced products of developed countries which they feel will be much safer than the local products. This preconceived notion itself will help Coopers to use differentiation strategy. Secondly Coopers has an impressive international portfolio through which it can give a host of choices to the people of Vietnam to try out as per their taste and preferences. In fact premium beverages of Coopers along with its partner brands have managed to achieve growth continuously for the last 13 years. (Beer in Vietnam, 2016)
A look at the profile of those consuming alcohol will reveal that the maximum demand is coming from those with higher discretionary income. This is supported by the ABS data which reveals that the percentage of household income used for the purpose of consumption of alcohol varies between 5% and 13% and is directly proportional to the income. This also substantiates the use of differentiation strategy with higher quality and pricing. (Beer in Vietnam, 2016)
One of the general disadvantages of using differentiation strategy is that the competitors generally copy the differentiation within a short period of time. That’s why one of the pre-requisites for using this strategy is having a robust coordination between R&D, product development and marketing along with higher intelligence manpower who can always continue to bring out something new. However that should not be a problem with a company like Coopers using advance machinery and techniques which will in fact be quite difficult for the competitors to imitate. The company had developed an automated system called Brew Art after eight years of intense research to facilitate brewing at home. The system through a patented technology can determine the time required for fermentation and Brew Flo which determines the right temperature for dispensing beer. (Annual Report, 2016)
Reference
Annual Report. (2016). [online] Regent Park: Coopers. Available at: https://coopers.com.au/docs/default-source/default-document-library/2016_coopers_annual_report.pdf?sfvrsn=0 [Accessed 1 Apr. 2017].
Beer in Vietnam. (2016). [online] London: Euromonitor International. Available at: https://www.euromonitor.com/beer-in-vietnam/report [Accessed 1 Apr. 2017].
Beverage Supply Chain. (2015). [online] BinhThanh District: Vietnam Supply Chain. Available at: https://vietnamsupplychain.com/assets/files/54bf1207b86eaVSC_BeverageSupplyChain_2015.pdf [Accessed 1 Apr. 2017].
Porter, M. E. (2008). Competitive strategy: Techniques for analyzing industries and competitors. Simon and Schuster.
Ledovskikh, A. (2017). Beer Manufacturing in Australia. IBISWorld Industry Report. [online] Melbourne: IBIS World Pty Ltd. Available at: https://www.ibisworld.com.au/industry-trends/market-research-reports/manufacturing/beverage-tobacco-product/beer-manufacturing.html [Accessed 1 Apr. 2017].
Vietnam Briefing News. (2014). TPP to Drive Competition in Vietnam’s Beer Market – Vietnam Briefing News. [online] Available at: https://www.vietnam-briefing.com/news/tpp-drive-competition-vietnams-beer-market.html/ [Accessed 1 Apr. 2017].
Arkolakis, C., 2008. Market penetration costs and the new consumers margin in international trade. 1st ed. Cambridge, MA: National Bureau of Economic Research.
Brady, D. and Spence, M., 2010. Leadership and growth. 1st ed. Washington, DC: World Bank.
Bratton, J., 2017. Human resource management. 1st ed. [Place of publication not identified]: Palgrave Macmillan.
Daim, T., 2016. Technology development. 1st ed. [S.l.]: Springer International Pu.
Kenny, G., 2009. Diversification strategy. 1st ed. London: Kogan Page.
Maritan, C., 2011. Competitive strategy. 1st ed. Cheltenham [u.a.]: Elgar.
Mills, N. and Brooke, M., 2012. New Product Development. 1st ed. Routledge.
Porter, M., 2014. Competitive strategy. 1st ed. [Place of publication not identified]: Free Press.
Presutti, W. and Mawhinney, J., 2013. Understanding the dynamics of the value chain. 1st ed. New York: Business Expert Press.
Rushton, A., 2017. Handbook of logistics and distribution management. 1st ed. [Place of publication not identified]: Kogan Page.
Stinson, P., 2008. Sales, marketing, business and finance. 1st ed. New York: Ferguson Pub.
Walters, D. and Rainbird, M., 2004. The value chain. 1st ed. [Bradford, England]: Emerald Group Pub.
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