Aire Valley Breweries plc is a medium - sized United Kingdom brewing company. It manufactures premium bottled beers, lagers and stouts and sells them at premium prices. It has a high cost structure. It sells beers 'off - trade' via supermarkets and 'on - trade' through fashionable, upmarket city-centre bars. It has its headquarters and all its operations in the United Kingdom. The company has not yet invested in a foreign country but it is domestically earning profits. It is a well- known brewery and it would be profitable for it to invest into foreign beer markets.
China beer market has shown an astounding growth in recent years due to massive foreign investments and the rise in the average levels of consumer spending in China due to economic reform policies of the government (Research and Markets 2010).A prominent new trend in beer is increasing consumption of beer with low sugar and low calorie content as consumers' health and wellness concerns are increasing. According to China's National Bureau of Statistics, beer production volume in 2007 reached 39.3 billion litres. In 2007, China was, the sixth time, the number one beer producer in theworld (Euromonitor International 2010). The Chinese Beer Market's compound annual growth rate (CAGR) for the years 2004 - 2008 was 12% and it generated total revenues of $42.8 billion in 2008. By the end of 2013, the market's volume is expected to reach 53.6 billion.
China has a large beer production and consumption market. It ranked first in the world for many years. At present, the beer industry is still in the mid and late integration period. The competition in the beer industry, even after the 2009 financial crisis, is still violent (Research and Markets 2010). As explained in Figure 1, the top competitors in China beer market are Anheuser- Busch Inbev, SABMiller and Tsingtao Brewery Company Limited, which constitute 53.6% of the Chinese beer market. Anheuser- Busch Inbev and SABMiller are international companies. They own a variety of recognised brands and there is a high degree of product differentiation in the market (Datamonitor 2009).
CHINESE MARKET SEGMENTATION
China is home to more than 300 brewers and more than 1500 beer brands. Out these brewers only 20% are turning profits while 32% are on the brink (eChina Cities.com 2008 - 2009). China's beer sector maintained rapid growth in the year 2008. Due to the growing maturity this growth was slightly slower than the previous year. Chinese consumers are becoming more concerned about their health and wellness so the new trend of low - sugar and low - calorie beers is emerging. Premium and standard lagers have become more popular among the consumers as well as the manufacturers (Euromonitor International 2009). Standard lager sales dominated the Chinese beer market and generated 81.2% of the market's overall revenues (Datamonitor 2009)
There has been a rapid increase in the urbanisation of China, with the number of cities in China reaching 655 by the end of 2007 (People's Daily Online ?). The reason for this urbanisation is the increase in population of the country. As this population grows the consumption of beer too increases. In 2008, in context of world - wide beer volume, China accounted for 23%. China's beer market is a geographically focused market. Brands have occupied niche sectors and they hold large areas in these geographies (Beer Universe 2010). In contrast to this, the central part of the country is the most populous and depends upon agricultural output for income. These areas lack good facilities for the necessary transport and communication. Subsequently, China is composed of a variety of regional beer markets with distinct comparative features. These geographical complexities can have a reflective impact on the marketing and product designing (Science Direct 2010).
According to the IMI Consumer Behavious & Lifestyles Yearbook 2002-2003, a demographical survey shows that generally men consume beer beverage more than women. This trend is changing as women are earning better disposable incomes than men, so they are spending this disposable income in the consumer markets. According to this IMI survey, almost 40% consumers of beer in Beijing are women. In Shanghai, 30% of the beer consumers are aged between 30 to 50 years (Industry digest 2005).
Entry into the China beer market will generate strategic opportunities along with challenges for Aire Valley Breweries plc. China beer market will allow the international company to introduce new products or modify its existing products to suit the needs and tastes of the targeted consumers (Science Direct 2010). The company can sign a merger with an established domestic brewery in China. As it is a medium - sized brewery, it will be very expensive for Aire Valley Breweries to establish a production centre in a foreign market. 8. Marketing Mix ( the 4p's)
Aire Valley Breweries has a high cost structure and it manufactures and sells premium bottled beers, lagers and stouts at premium rates. Aire Valley Brewery should price its products customised in competition with the breweries already established in the China beer market. The company should still be sensitive to the price elasticity of its products and overall consumer demand.
The company should target the metropolitan cities of China which include- Shanghai, Beijing, Chongqing, Tianjin, Guangzhou,Chengduand Nanjing. (China.org.cn 2010). Targeting the beer market of metropolitan cities would profitable as the brand will get recognised in the major cities.
PROMOTION- Aire Valley brewery, being an international company, initially needs to massively promote its brand name in the China beer market. This can be done through media sources such as television, radio, magazines, newspapers. Internet can be another effective way of promoting the brand name and its products.
- Tiered distribution network - from PRODUCER to DISTRIBUTOR to RETAILER.
- Demand Management - quickly responding to producers and demands.
- Transhipment and Long haul transportation - long haul trucking is commonly used from beer producers to distributors. It is a faster and reliable method.
- Local Delivery - from transhipment stations to warehouses or from distributors to retailers.
- Inventory Control - beers after being surveyed are held for 3 to 4 days of inventory on average.
- Reverse logistics - the government of China encourages the recycling of bottles for material ans energy saving which is ensured by the allocation of fees for bottle return
In China, beer distribution from producers to distributors is carried out through a set of wholesalers and distributors. This network of distribution varies among regions and brands. Supermarkets and hypermarkets distribute 35.7% of the Chinese beer market's volume.(datamonitor 2009)
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