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2.0 Environment Analysis:
The project work concerned with beer market analysis, therefore, considering the current environment is essential. According to Dibb and Simkin (1996, P24)" marketing environment is made up of the external forces that directly and indirectly influence an organization's acquisitions of inputs and generation of outputs." In order to estimate the influences of external and internal environment for marketing, the PRESTCOM will be suitable framework to explain the situation of the current beer market in the UK (Masterson and Pickton, 2004).
2.1 Political Factor
In order to tackle binge drinking, the British government has executed a policy to raise the beer tax by approximately 26% since 2008 which can increase the additional taxes by about 761 million pounds (The British Beer and Pub Association, 2010). Last year, over 2,000 pubs were closed due to the intensive impact of tax policy which axed the 20,000 job opportunities (Smithers, 2009). Therefore, the British Beer and Pub Association (BBPA) expects the government to freeze the tax this year to avoid the risk to almost 7,000 employees in the beer industry (Cleary, 2010). Another reason of rising tax is that the Chancellors still consider investing more money into the budget and expect brewers and bars can make a greater contribution. Alcohol drink contribute to the tax revenue has been expected for a long time. Thus, it can be forecasted that there will be upcoming tax increase for the beer industry until 2015.
2.2 Regulatory Factor
Except the fundamental regulations for drinking such as age and main media advertising time limitation (after 9pm), in order to reduce alcohol consuming and drinking, the mandatory code has been published which will restrict the on-sales directly. Initially, the irresponsible promotions and drinking games have been banned. Also, premises will be asked by policy to offer free tap water to customers for reducing consuming (Alcohol policy in the UK, 2010). In addition, a super-strength beer which has 18% alcohol content was banned by Portman group which has the authority for preventing drinking abuse (Cameron, 2009). Moreover, banning drink and drive and smoking in all the public places have influenced the drinkers' attitudes for drinking. Although the legislations do not ban drinking directly, it still impacts the drink industry. Alcohol advertising regulatory framework is expected to restrict the promotion which cannot encourage the younger drinkers and binge drinking. Meanwhile, alcohol advertising is considered to prevent the drinking driving and promoting health issue of moderate drinking. However, there are many troublesome issues needed to be dealt with by advertisers. Most of brewers insist that the main purpose of alcohol advertising is to gain the current drinker from another brand not encouraging abstainers drinking. Brand choice seems the vital objective to brewers but government and public still concern about the influence of advertising (White, 2004). Those of current drinking regulations make the beer market face severe situation to promote drinking directly and indirectly.
2.3 Economic factor
Since 2008, UK GDP stopped to grow and decreased in 2009 which showed the current economy to face recession. Although economy signs shown in 2010 would almost be the end of recession, by the forecast, beer industry still needs to face a tough year dealing with raising tax with inflation and low GDP in 2010 (Mintel, 2010). Therefore, consumers have started to reduce the unnecessary expenditure that has altered part of consumers' drinking behaviour from pub to home. In-home drinking has been a new trend for alcohol consuming. Thirty percents of consumers showed that they have switched to drinking at home. Fifteen percents of consumers drink less out and they drink at home instead (Mintel, 2009). Marketers have to accept the main trend of home drinking and adopt the suitable strategy to meet the market.
2.4 Social-culture factor
Evidently, The UK's per capita consumption of alcohol is higher than the global drinking standards and binge drinking has been a common issue in the society. The reasons of higher alcohol consumption in the UK are about the favour of sports, pub culture and nightclubbing lifestyle (keynote, 2008). Beer is still the primary preference for the UK's drinkers. Meanwhile, Britain drinking problems has been noticed an accepted problems which was highlighted by government in 1962. Alcoholism was admitted for an illness and needed to ask medical help to cure it (BBC, 2010). Therefore, moderate drinking and health-related drinking concepts have been gradually conveyed to consumers which are also related with the concepts of tackle binge drinking (Mintel, 2010). It has been advised by NHS that the limit of binge drinking to men and women are eight units and six units in one session respectively. It is supposed that one regular drink is equal to two units. In other words, drinking 3 pints of beer in a session for men is defined to binge drinking (Mintel, 2010). Due to the recession, it was a warning for pub owners. According to CAMRA 2009 Good Beer Guide, 36 pubs are shutting down every week which means that the British drinkers are losing the historical bar culture (Edemariam, 2008). Even though brewers insist that they are still investing over million pounds in each on and off trade for promotion, it cannot denied that the on-trade declining sales made the brewers feel difficult to save the pubs and keep being willing to investing to on-trade (Diageo). However, SABMiller's European Beer Drinkers Survey shows that the British bosses are generous than other countries for bringing their staff from office to the bar after work. Over 97 % British bosses drink with their staff and almost of them are willing to pay for the drink. Even British bosses like to drink with their staff but only 55% of British workers prefer spent their time regularly to drink with their colleagues (Woods, 2010).
2.5 Technology factor
For beer industry, the technology improves the quality of beer by packaging. In 1990s, it was a revolution to produce in-can draught or nitrogen-injected `creamy' ales which keeps the tastes of beers to make the UK brewers expand to global market (Keynote, 2009). In the pub, the draught systems have been improved to provide better quality of storage and "extra cold" has been the new issue for promotion to tempt beer drinkers. In fact, it is also the crucial motivation for lager drinkers (Mintel, 2009). In 2010, Carling announced to launch the new product "Perfect pint" which is the innovation product to provide draught beer in home. It expected to booze the sales of home drinking market and enhance the standard of draught beer quality (The Grocer, 2010).
Thus, the quality of beer in on-trade and off-trade has been enhanced by technical progresses.
2.6 Competitive factor
It has been admitted that alcohol market in the UK is an intensive competitive market.
The major brewers in the UK have to compete intensively to each other from on-trade to off-trade. Meanwhile, promotion is another main field to rival which can be observed by media expenditure of beer (Mintel, 2009). There are different kinds of beers provided by different brands which have the diverse ABV to meet different customer's needs. For instance, larger and dark beers are the two main categories and the anterior takes 60% of market share. Furthermore, cider has been another notable competitor because cider sales still increase in the recession and cider over-ice drinking plays a major role to the younger drinkers. Wine and Whisky are the indirect competitors but attract drinkers shift for consumption sharply. However, more old drinkers have switched to drinking wine that make wine sales increase dramatically in the past few years (Mintel, 2009). Hence, in the recession, the beer sales are declining which makes the competition more intense than before.
2.7 Organization factor
There was a noteworthy acquisition in the UK beer industry in 2008. The largest UK brewer -Scottish and Newcastle was acquired over 85 percents of share by two European beer companies - Heineken of Dutch and Carlsberg of Denmark (Keynote, 2009). Obviously, the global beer market and the UK beer industry have been influenced by this acquisition significantly. It needs to be noticed that Heineken owns brands including Foster's, John Smith's and Newcastle Brown to run the business in the UK market and it becomes the largest supplier to manage the particular market segments (Mintel, 2009).
2.8 Market factor
The UK beer sales have decreased 11 percents of volume sales to £11.4bn from 2004 to 2009 while off- trade sales was a most fall about 3.1pc since 1978 (BBPA, 2009). Comparing with On-trade sales, however, it sales were influence by recession more dramatically. Due to the closing crisis of pubs, the sales decreased 5.2pc in the 2009. Even though the brewers struggled hard for putting more money on advertising budget, it was still difficult to save the declining sales. For example, larger market is the main battleground for beer advertising which highly focus on men and younger adult. The promotion expenditure of larger, the brewers spend approximately £70 million yearly on advertising but it still does not the sinking sales (Mintel, 2009). The influence of promotion to beer consumption seems to be emphasised by brewers, even the topic have been discussing and have not found the provable facts in research. The main promotion expenditure shifted from on-trade to off-trade which based on the increasing sales by the new trend of home drinking and beer marketers have to understand the current market change and pursue the consumers. However, brewers still keep spending money to innovate the on-trade channel. For example, Carling invested extra-cold campaign in the pubs last year and struggled to save the sales (Brownsell, 2010). In addition, sponsorship of sport, art and local events are the popular medium for beer. Due to the growing restrictions of beer promotion, many brewers have noticed the altering of public concern and government supervision to advertising (Mintel, 2006). Sponsorship is an alternative media to keep transferring the commercial message. There are numerous of brewers that haves sponsored different sports and events, especially highlighting on football and rugby. For instance, Carling, Budweiser, and Carlsberg have sponsored particular teams or cups in football for a long time and Guinness has focus on sponsorship to Rugby (Keynote, 2009). It has been claimed that sponsorship takes the global marketing budget about 10 percents and it will raise to 15 percents in 2010 (Millner, 2008). Therefore, beer market in the UK is a highly competitive and promotional market.
2.9 SWOT analysis
By using SWOT analysis, it can clearly define the market situation and brewers' position.
Although after few years decline, part of beer drinkers shifting from beer to other alcohol drinks, beer is still the leader of market share in the alcohol drinks which shows that beer is still the most common drink in the UK. Many famous brands are owned by several historical brewers. The long-term branding strategy has established the trust in consumer's mind. Moreover, beers have targeted men for a long time which means women will be the potential market in the future (Mintel, 2009). Therefore, it can be expected that historical brand image could be a useful tool for brewers to penetrate and create a new female beer market.
In recent years, due do the drinkers prefer drinking at home to pub, supermarkets has been the main channel for consumers to purchase beers and are used to look for the cheapest price of beer in the supermarkets. In order to offer the attractive prices to consumers, supermarkets have asked the brewers to provide the low price of offers. This makes the brewers have to accept the requirement and reduce the profit to fit the main trend. It has been claimed that the low-price offer in the supermarket is another main reason to encourage binge drinking (Poulter, 2009). Hence, Discount pricing has caused the low margin for brewers and negative healthy concern for drinkers. Moreover, the cheap price beer in the supermarket have been accept by consumers which cause the pub have to offer the cheaper price to tempt the consumers coming back to the pubs. Another issue which needs to be noticed is that the beer industry had less innovation to attract consumer attention and it needs to create a "boom" like cider with over-ice which has originated a new trend to compete with other drinks (Mintel, 2009). The market needs the popular subject to interest the younger drinkers. Furthermore, by advertising, the image of beer has been created for male drink and the current common concept is that women are not relative with beer. Therefore, it needs to be considered that how to compete with cider and wine in female market will be a main issue in the future.
As health - related consideration have been advocated by media. Low-alcohol and low-calorie beer have an opportunity to link healthy choice of drinking (Mintel, 2009). Most of brewers still do not emphasise on them and lack of promotion for healthy products. Moreover, the international sport event - world cup took place in South-Africa in 2010. It was an opportunity to promote and builds brand awareness as well as increase demand for beers. Due to beer is easy to relate with football match, it was expected to improve the sales directly and use audience attention on football to link with brand. For example, carling has launched the special edition TV commercial campaign called "scores" in ITV. Basically, it based on the "you know who your mates are" campaign" campaign which has been launched in 2010. The campaign was to emphasis on the friendship of beer drinkers (Cassidy, 2010). The original story was about that a guy trekked through desert to get a round of drink to his mate. It is the main TV commercial in this year of carling and people have had the elementary awareness to this campaign. For the special world cup version, in the end of England against USA world cup match in 2010, Carling launched "score" campaign which showed the same narrative with "you know who your mates are" campaign. Moreover, the guy also crossed the desert and brought the final result of football match to his mates. The creative strategy was to show the result in this TV commercial after match directly (Cassidy, 2010). It integrated the friendship and football with carling and promoted Carling to England football fans by the high attention match.
Home drinking behaviour has taken the consumers from pubs but on-trade is the main outlets for beer. People spend less time and money in the pubs which affect the industry significantly. Smoking ban is another reason to make smokers do not drinking out. Moreover, there are some reasons for consumers choosing wine for home drinking. For example, the image of wine is easy to be linked sharing with friends at home and beer is linked to individual (Mintel, 2009). Therefore, if brewers could switch the image connecting with home drinking, it will be an expectable recovery for sales in the future. However, the end of 2010 has been expected to the end of recession and sales will recover after this year. Unfortunately, there is still not a clear condition and to ensure the recovery happening in 2010. Conversely, according to the survey of GfK NOP, the market research company, recently announced that over half of British are worried about the double-dip recession that will happen before the better economic. The consumers' confidence reflects on the buying behaviour and lifestyle. 20% of British consumers consider putting off their main purchasing like cars or television. Some of the consumers are planning to marry or having a baby after economic recovery (Hall, 2010). It also influence the people expenditure in restaurant, bar or supermarket which affect the beer sales rapidly.
In conclusion, there are various effects from internal and external to the beer industry which has to face the atypical situation. The pattern of drinking which included increasing tax, economic recession, health concern, complex regulations and preventing binge drinking concept is changing. Each element could be the possible reason to alter the current market circumstances and affect the brewers' development.
The expenditure of advertising has not declining with sales. Conversely, more above and under line promotions have been conducting to arouse customer desire to purchase the product. It needs to be noted that stout and ale do not spent the budget as much as lager but it sales decline is not considerable as total alcohol. It has been claimed that public relationship and words of mouth could be the effective promotion to drinkers. Moreover, there are the numerous of alcohol drink competitors in the market which make the future market of beer more complicated as well as the promotion competitions make the consumer feel confused about the message. It needs to be considered how the consumers can be aware of promotion and the attitude to promotion relates purchase intention that will be discussed in this report.
2.10 Literature Reviews:
The relationship between Beer advertising and consumption
In the past studies, the influence of advertising to alcohol consumption has been discussed from different perspectives. In the UK, there is no significant finding about that the relationship between advertising and total alcohol consumptions. The correlation is unclear and weak. Hence, all alcohol demands could not be influenced by advertising (Duffy, 2001) but beer is most significant one in the alcohol categories than others (Wilcox, 2001). According to Johnson and Oksanen (1974), there was the correlation between demands and advertising of beer and wine, but no correlation in spirit. Welsh (1982) claimed that beer demand is affected by advertising significantly but the products are not elastic and the increase consumption grows from the changing of consumers who used to drink wine and spirits. It has been mentioned that the demands beer and spirits are influenced by total advertising but no effect on wine (Duffy 1983). Also, it has been found that advertising has a slight influence to beer consumptions (McGuiness, 1983). Moreover, audiences could have different level of reaction to advertising. Saffer and Dave (2003) claimed that alcohol advertising and price to females are more effective as well as this facts can affect the consumption potentially. Therefore, many different effective facts could influence total alcohol sales more significantly, to conclude the above review, the beer advertising still could be seen the one of possible influences to the beer drinking purchase in the UK.
The influence of advertising to drink choice
The substitute products purchasing can be found in alcohol industry. Drinkers can choose the different category alcohol products when they are purchasing. What is meant by this is that it is the evidential that the beer sales can be influenced by other alcohol categories advertising (Fisher and Cook, 1995). Therefore, consumers could change their mind to choose competitor product in by consumer decision. One of the reason need to note is that reduced price would be the message in the advertising. These advertisements include discount promotion to audience and attract most of drinkers' attention for purchasing (Heimonen and Uusitalo, 2009). From Advertisers point of view, brewers care about the revenue from their brands than the overall beer consumption. Advertising have been playing a roles to build the long term brand image to earn the consumers' contentment (Ambler, 1996). Long- term branding strategies have been conducted in the brewer promotion even though the effect of advertising has not been completely proven. Even thought the brewers' sales is declining in the recession, investments of promotion has still been seen the cure of decreasing sales.
The relationship between Sport and beer promotion
Sport has been seen the important activity for alcohol advertisers. It has been claimed that alcohol TV commercial take the higher percentage of sport TV programs than other beverages. The beer promotion has shown by TV advertisement, sponsorship and stadium signs. In the beer TV commercial, celebrity endorsement and water activities are the main concept to convey to the audiences (Madden and Grube, 1994). It has been claimed that sports enthusiasts show their mind more open to advertising than others who are not very interested in sports (Burnett et al, 1993) Another fact need to be noted is that the people who are interested to sport can be the reason to alter their drinking behaviour. The sport fans in the school are more possible to drink more than non-sport fans. Also, sport fans are influenced effectively by brewers' SP promotion than non sport fans. Meanwhile, sport fans are easy to be attracted by on- trade special low-priced offer (Nelson and Wechsler, 2003). Sponsorship has been the connection between alcohol and sport. Fundamentally, sponsorship is a alternative method to obtain the marketing objective as well as raise brand awareness and image in consumers' mind (Schreiber, 1994). High involvement of participation in the sponsored event or activities can be achieved by sponsors. It could build a long-term consumption relationship in alcohol (Martin, 1995). By sponsorship promotion, consumers can readily allow the advertisers' promotion, even the controversial products - alcohol. For example, audiences are willing to see beer sponsorship in Olympic (McDaniel and Mason, 1999). Moreover, it has been found that between 15 and 24 year old respondents, almost 40 percent show that sponsorship to massive sport event will give them positive attitude to sponsors which is higher than other age group. It reveals that younger consumers are likely to be affected by sponsorship (De Pelsmacker et al, 2004). Moreover, the total expenditure of sponsorship in the world, there was a slight decrease in 2009 and there still is an increase in 2010. The reason is that recession affected the marketer decision to reduce the budget investing in uncertain return of new sponsorship. Moreover, sport has still been the main activity for sponsorship (Precourt, 2010). It has been admitted that the alcohol advertisers have highly focused on the rugby than other sports. Due to male spectators of rugby are considerably more than female, the rugby market has been seen the suitable medium to reach male drinkers (Maher et al. 2006). Nowadays, sport have been extremely focused by brewers which look for the medium to reduce the limitation and built the deep involvement for consumers.
The different attitude to beer promotion
According to Slater et al. (2006) the male show the positive reaction and attitude to the beer advertisements which include sport content. Meanwhile, female adolescents have been found that they do not show the similar attitude to beer advertisements and sport content as male. However, female could be touched by the beer advertising which target the female drinker and use the suitable content (Slater et al. 1997). Due to most of the heavy drinkers of beer are under thirty years-old, brewers must focus on the young adult drinker for main target audience. Although the correlation between advertising expenditure and total consumption is not significant, it still has been claimed that there has a relationship between advertising exposure and heavy consumption (Martin, 1995). Some study was mentioned about the effect and influence of advertising exposure to belief of drinking, even the correlation is not significant and need to consider other variable (Atkin et al. 1984).
The promotion of Carling:
Carling, the historical brewer in the UK, was formed by Thomas Carling in London. Thomas Carling began his brewery career in 1840 and his sons inherited the company after he died. After a stable increase of sales, Carling became the biggest brewer in the UK. In 1988, Carling became the first beer brand which sold 200 million barrel in the UK (Blocker et al., 2003). Today, Carling is operated and owned by Molson Brewery Corporation and is still the leader of sales in beer industry in the UK and spends most expenditure on promotion. According to Nielsen Media Research, during 2007 to July/2009, Carling spent 20 million pound on advertising which TV commercial take the most budget as well as lead the other competitors ( Mintel, 2009). Also, Carling still extends the promotion method to reach the consumers. The main promotion of Carling includes that TV advertising, sponsorship, Web promotion (Lewis and Vickerstaff, 2001). Sponsorship to football and music festival are two main sponsorship promotion. According to Mintel (2009), football is the most popular sport in the UK. Over 65% of respondents watch football regularly or occasionally. The main football audiences is male whose age are between 20 and 54 and living at north of England. The occasional audiences are 16-34 year s-old female. Therefore, Carling based on this information to choose football to reach their target audiences. Carling has sponsored the Carling cup since 2003. Carling cup is based on league cup which consist of different teams from different league. It has been the main annul football cup which is named by the sponsor and attract majority of football fans attention. In 2008, Carling and Football league agreed to extend the sponsorship to 2012. It is a remarkable step which means even in the recession, Carling still keep supporting football to maintain the relationship with fans (BBC, 2008). By the sponsorship, Carling has effectively built the image of football fans beer. However, it need to be noticed that the awareness and attitude between non- football fans or non-sport fans and football fans would be different. It makes positive or negative attitude would be discussed in this report.
The promotion of Guinness:
In 2009, Guinness celebrated its 250 anniversary which is a milestone to prove the leading brand of stout. The brand was created by Arthur Guinness in 1759 in Dublin. During the 250 years, it successfully stared from a Ireland's brand to global brand which can be proved by the celebration around 150 different countries in the world (Julianne Pepitone, 2009). In the UK, Guinness also is the largest market and ad spend leader in the stout. In 2009, Guinness spent 6 million pound in advertising which was 50% of total ad expenditure of stout (Mintel, 2010). Not only leading on the ad expenditure, Guinness has created a numerous remarkable advertising on consumers mind. Since Guinness first ad agency S.H. Benson, Guinness advertising attracted the consumers' attention and built some classic ad cases on the history (Mark Griffiths, 2009). Meanwhile, the rest of promotion have been executing such as sponsorship for rugby. Due to the different age group of customers, Guinness has focused on rugby league for their main sponsorship which includes different regions such as south Africa and Hong Kong. In the UK, the main audiences of rugby are over 35 years- old men. Also, the secondary audiences are men of all age (Mintel, 2009). Moreover, Guinness extended the sponsorship to rugby Premiership in 2009 which show the long- term promotion strategy will relate with rugby. Therefore, the rugby audience structure is extremely similar to Guinness target audience which makes Guinness keep investing more money to rugby in the future.