Geographic & Differentiation Strategy
Anheuser-Busch is an old beer company that has survived the prohibition, depression, and many major competitors. The company is a global force controlling hundreds of different brands. Currently, Anheuser-Busch utilizes a geographic and differentiation strategy to enter new markets. This strategy is effective but it also faces challenges due to several forces. The following environmental scan provides a detailed view of this marketing strategy and strategic planning.
Political, Legal, and Regulatory Factors
The retail beer industry has always had some levels of controversy depending upon the country or nation in question. Currently in the United States age restrictions on sales and consumption of beer limit sales and marketing. The beer industry is also subject to a variety of federal, state, and local regulations. Many of these regulations focus on taxation and proper production and handling of alcohol products. There is some concern over the compliance with these regulations especially regarding taxation. In recent decades, bottle taxes and taxes specifically targeting alcohol sales have raised the price on Anheuser-Busch products (GPO, 2013). Despite being heavily regulated and taxed, the beer industry has a favorable outlook in the United States.
Financially, Anheuser-Busch is strong with an annual growth rate more than 5%. The beer industry is projected to achieve globally over a $1.3 trillion by 2017 (Internal Revenue Service, 2016). Anheuser-Busch comprises almost 48% of the US market for beer (Inbev Annual Report, 2016).
Global beer markets is also positive with the growth of beer being strongest in the Asian and Latin markets (Inbev Annual Report, 2016).
Societal and Cultural Factors
There are some concerns in the USA beverage market due to social and cultural changes which have begun causing negative impacts on the beverage industry. The social concern over health, caloric intake, caffeine consumption, and alcohol products has created market impacts which have been negative. The beverage industry continues to come under fire with health and advertising concerns. Currently, this social issue is insignificant in the face of the growing desire for alcohol products.
The Anheuser-Busch business strategy is based on a two-pronged approach including marketing of brands and the use of innovative packaging to drive business. The company uses a variety of brands that target different market segments.
· Global brands: Capitalizing on common values and experiences which appeal to consumers across borders, our global brands of Budweiser, Stella Artois and Beck’s have the strength to be marketed worldwide;
· Multi-country brands: With a strong consumer base in their home market, our multi-country brands of Leffe and Hoegaarden bring international flavor to selected markets, connecting with consumers across continents; and
· Local brands: Offering locally popular tastes, local brands such as Bud Light, Michelob, Skol, Brahma, Antarctica, Quilmes, Jupiler, Hasseroder, Klinskoye, Sibirskaya Korona, Chernigivske, Harbin and Sedrin connect particularly well with consumers in their home markets.
Our strategy is to focus our attention on the core to premium brands. As a result, we undertake clear brand choices and seek to invest in those brands that build deep connections with consumers and meet their needs. We seek to replicate our successful brand initiatives and best practices across geographic markets (Inbev Annual Report, 2016).
This strategy of differentiation allows the company to continuously expand brands that are doing well and remove brands that are doing poorly. There is a distinct advantage in this strategy in that the company is not relying on a single brand to drive business. This offers a large margin of protection if a brand loses sales or is damaged. Due to the large size of Anheuser-Busch and the many different geographic regions that the company services; its branding strategy gives the company significant strength in marketing. Other companies cannot use this method due to their smaller size and lack of market availability. This provides Anheuser-Busch with a dominant edge in marketing.
The second part of the Anheuser-Busch business strategy involves packaging. This use of different and unique forms of packaging such as the bowtie can and different colorful packaging increase sales by enhancing the branding of the products. Each brand is packaged with its unique concept in mind based many different demographic features. This packaging works cohesively with the differentiation of products by providing increased unique value for the customer (Inbev Annual Report, 2016). For example, Michelob is packed and marketed with its specific local markets in mind whereas Beck’s is marketed with it global market in mind.
There are some disadvantages to this business strategy. The largest disadvantage is the cost. Branding products is a large investment in time and in manufacturing. If a brand is performing poorly and needs to be discontinued this can be large waste of money. While market research and intelligence collected from prior brands can afford some insulation to the cost of branding there is still a significant risk of losing money.
A second disadvantage is that brands are often discontinued too soon because they are performing poorly at the start. With the high cost of product creation, there can be a tendency to quickly terminate product lines which seem to be performing poorly. This can be problematic because some brand may take time to become popular. These disadvantages can be seen in the brand value that has reinvigorated Pabst Blue Ribbon beer in recent years.
“Long-neglected PBR had no image,” Walker writes. “It was just there. Scarce and cheap, it had few negative connotations beyond that it was a kind of blank canvas, where brand meaning could be filled in by consumers.”
Since the beginning of this decade, Pabst Blue Ribbon’s audience has changed from old guys with refrigerators in their garages to arty young urbanites. An unexceptional and declining brand, a former top-three beer turned redneck also-ran, Pabst reinvented itself as the coolest of brews in a movement that began in a Portland, Ore., dive bar and spread to indie-rock shows across the country (McClelland, 2008).
The branding scheme used by Anheuser-Busch is expensive but also may discontinue lines that, like Pabst, may lack a solid image but produce satisfactory sales. This highlights the need for a broader based branding system that can consider long-term brand issues and potential opportunities.
Anheuser-Busch uses a global marketing strategy that entails buying smaller breweries throughout Africa and China. With acquisitions in Africa, China, and Grupo Modelo in Brazil, Anheuser-Busch will be able to further expand its robust distribution network into a global scale. This also provides the opportunity to take advantage of new markets. Anheuser Busch continues to expand into China which opens a much larger marketplace (InBev China, 2007). This company continues to invest into breweries in China (InBev China, 2007).
The difficulty in the Asian markets has resulted from the taste and diversity in these markets. The difference in cultures in these countries results in different tastes for beer. For example, Europeans typically think of American beer as watered down. Americans dislike the temperature of European beers (Choi and Stack, 2005). American beers have found a place in the Asian Markets but this has not come easily as the larger populations have more diverse tastes. This has allowed the threat of craft beers and microbreweries in these countries to still maintain a competitive stance (Choi and Stack, 2005).
Financial and efficiency metrics are based on financial data as well as customer and cultural data. In this instance a linkage analysis between financial strength and customer satisfaction, financial performance, or other factors provide a strong metric to determine a product’s viability. In this instance, financials can be measured with sales data and other financial information. These metrics have proven to provide Anheuser-Busch with the ability to expand and dominate the beer market.
Anheuser-Busch continues to be a goliath amongst beer companies. Its method for expansion through the adoption of new brands has proven successful. As the company continues to enter the global market (most notably China) it will need to develop new drivers and performance measures. This will mean the development of a new balanced scorecard as well as metrics attuned to different cultural factors that can measure customer satisfaction.
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Internal Revenue Service. (2016). Food industry overview — accounting principles, information systems, & industry operating procedures. https://www.irs.gov/irm/part4/irm_04-043-001.html
McClelland, E. (2008, August 11). And the next great american beer will be…? . Retrieved from http://www.salon.com/2008/08/11/pabst_blue_ribbon/
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