Tsingtao Brewery Companys Marketing Strategy Commerce Essay

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This report base on Tsingtao Brewery Companys marketing strategy. Tsingtao beer is one of the most famous products in China. It has over 100 years history. The following market assessment has five sections. In the first section, there are some basic details of Tsingtao Brewery Company. And then the report will explain environment of Tsingtao beer in China; in the next section, there is the market mix strategies analysis which will be made to identify how Tsingtao beer use its strategies to adapt changing environment. In the fourth section, the report shows how the company operates STP strategies and percent examples. In the last part, connecting with brief SWOT analysis, writer rise up some recommendations.

1. Company Background

Tsingtao Beer is the main product of Tsingtao Brewery Limited Company which is the oldest brewery in China. Its root can be traced back to 1903 when its predecessor - Germanic beer Qingdao stock company, was established by the German businessmen and British businessman and joint venture in Qingdao (Tsingtao Brewery Limited Company, 2011). The Company was registered on 16 June 1993, and then issued H-shares in Hong Kong (Tsingtao Beer Stock (0168)), which were listed on the Stock of Exchange of Hong Kong Limited on 15 July 1993. It is the first domestic enterprise listed on an overseas stock exchange.(Hong Kong Stock Exchange, 2012) In the same year, the company issued A-shares in China (Qingdao beer (600600)), which were listed on Shanghai Stock Exchange on 27 August . This firm is the first company which listed in two places at the same time (Tsingtao Brewery Company Limited Official Web, 2012).

After 100 years of development, 'Tsingtao Beer' was listed among the top 500 brands all around the world successfully and became one of the official sponsors of the 2008 Beijing Olympic Games. The business scope of the Company is the production and sales of beer, and other related business. It occupies leading position in the domestic beer industry in terms of size and market share with 56 breweries in 18 provinces, cities and regions all over China (Tsingtao Beer, 2011). The value of its brand is ï¿¥50.258 billion as at 2012 (ChinaNews, 2011).

2. Business Environment

It is very important that an organization considers its environment before beginning the marketing process. Once a marketer makes the initial decision to enter a new business, the company must have a good understanding of the local conditions in that region (Solomon, 2013). Usually, a market can be divided into two kinds of environment: macro and micro.

2.1 Macro Environment

In macro environment analysis, PEST (Political, Economic, Social and Technological) is the most frequent decision to be used. This way focuses on the external, macro-environment in which your business operates. It provides the "big picture" framework, which helps business owners to build a vision of the future and to decide on appropriate actions that take into account (Dynamiq, 2012).

2.1.1 Political Factors

During the period of adopting the Reforming-and-Opening Policies, China has maintained social stability as it achieved rapid economic growth and raised people's living standards. Productivity improves continuously. In such a policy environment, people do no longer just notice solving the problem of food and clothing, but the condition to achieve a higher quality of life. In this century, Chinese government started to encourage consuming and issue new economic strategies to stimulate that. Beer industry had a rapid development. In 2011, the beer industry achieved sales revenue, ï¿¥158.94 billion more than last year the corresponding period grows 22.9%, higher than the growth of beer production, liters of beer sales increase of 11.1% over the previous year(National Bureau of Statistics of China,2012).

At the same time, China government increased the import tariffs on drinks, in a recent policy issued on the 15th Notice of Chinese General Administration of Customs by General Administration of Customs of the People's Republic of China in March 2012: From 15th April, a new duty tariff table entry articles will enforce. It said that the wines' (including beer, wine, etc.) tariff rate increase to 50%. So it offers a good protection to the national beer enterprises, which has played a positive role in promoting sales (General Administration of Customs of the People's Republic of China, 2012).

In addition, the Chinese government made a number of policies to regulate the food processing industries vigorously, in order to improve the admittance threshold, to improve the recall and delisting system and to strengthen the punishment on the illegal processing food industries. And they use product packaging policy to prevent vicious competition between beer enterprises (China International Beer Web, 2010).

2.1.2 Economic Factors

The current economic situation in China now is keeping a stable growth. In 2008, the government decided to stimulate consumption, so there was a high rate of Economic growth. But in 2010, China cancel stimulate consumption policy gradually. Economic growth rate has dropped, but still keep in a normal range. Such growth not only shows China's growing potential of the Chinese market, but also led to the improvement to the Chinese people's standard of livings.

Since the economic crisis, the export volume of the international barley decline sharply. At the same time, the barley demand of Chinese beer industry is increasing. In this 'supply behind demand' situation, the rising price of raw materials is another economic factor. Chinese beer industry has to maintain high speed development for many years, and become the largest beer barley importer all over the world. At present Chinese beer industry development speed is still as high as about 15% (China International Beer Web, 2011). However, although there is a huge demand of barley in China, China is not the traditional planting countries of barley. Rice in barley prices lead to the increasing of production cost greatly.

2.1.3 Social-Cultural Factors

Along with the beer market increasingly expanded in China, beer consumption gets bigger. Drinking beer has been transformed into a form of beer culture. The enthusiasm of Chinese seems to be gradually warming; they love to use beer to exchange emotions on the table. Comparing with drinking spirit, the feeling of drinking beer is cooler and more relax. It is suitable for all kinds of social occasions. The Olympics add passion, fashion, happy young elements into the products. It promotes the market share. An investigation shows that, in last few years, the amount of consumers who are 18-29 become the largest consumer groups of Tsingtao beer, risen by 14%(NBD, 2009). This will enhance the competitiveness of Tsingtao in the future.

2.1.4 Technical Factors

In today's society, people pay more attention to health. So they improve the quality requirements of alcoholic drinks. Development of technology can improve the production efficiency, reduce production cost. Beer is a kind of popular drink, domestic and foreign constantly develops new technology beer production. Scientists found that, with the wavelength 410 mm, the intensity is 0.2 w / ㎡of fluorescent lamp to yeast suspension uniform illumination hours later, fermentation activity can improve the 25-30%, and fermentation time shorten one day(Forhecz ,2009).

2.2 Micro Environment

Marketing management's job is to attract and build relationships with customers by creating customer value and satisfaction (Kotler, 2005). It is related to the micro environment. In this section, the report mentions two aspects.

2.2.1 Competitors Analysis

As alcoholic drinks, alternative products of Tsingtao beer exist. The first kind is called product competitor. This competitor can be divided into two kinds: soft drinks (nonalcoholic drinks) and alcohol. Soft drinks include carbonated drinks, fruit juices, dairy products and mineral water, etc. In some family parties, hotel get-together party banquets, they often become the beer's alternative products. In terms of alternative products, the competitiveness yellow wine and spirit is not strong. But wine and beer for high-end customers are certain competitors. Of course, beer has its unique market positioning. In celebrating or party occasions, if people don't want to get drunk, beer will be the best choice.

The second kind of competitors is Brand competitors. Main competitors are Snow beer and Yanjing beer. From the regional distribution, Tsingtao beer bases on Shandong province, and has made the good record in the south China, east China; Snow started from northeast China, then set up base areas in Sichuan, Anhui and Tianjin; Yanjing beer occupied more than 95% of the market in Beijing firmly(Liu, 2008). However, we need notice that in China, there is not any manufacturer having the absolute control of market share. In 2011, Tsingtao beer only has 19% of the share, the sum share of former three manufacturers market (Tsingtao, Yanjing, Snow) is less than 45%. So the company faced this extremely competitive market environment (National Bureau of Statistics of China, 2012).

Char 1 Share of Market of Tsingtao, Yanjing, Snow & Other Brands in 2012

(Data from: National Bureau of Statistics of China)

2.2.2 Customer Behavior Analysis

In China, with the improvement of living standards and the deregulation of government, buying beer has become routine problem solving (Solomon, 2013). As a kind of fast moving consumer goods, beer appears in the Chinese daily life frequently. When people need to drink beer, everyone will have some brands for choosing. Some of them are come from internal experience, such as middle-aged people, they have many drinking experience. On the other hand, for the younger, it is likely come from the external experience, such as advertisings or recommendations (Mooij, 2011).

In addition, when consumers are making purchase decision, they may have preferences of beer's taste, price or the enterprise culture. The taste of Tsingtao is light type. It is conform to the Asian habit. Most products strategy of Tsingtao is 'high quality and high price'. When feting friend or business mates, Chinese are more willing to choose this to show their sincerity.

3. Marketing Mix

A planned mix of the controllable elements of a product's marketing plan commonly termed as 4Ps: product, price, place and promotion (BusinessDictionary, 2012).

3.1 Production

The product is the code of the marketing operation. The enterprises' all behavior is focus on the product. When the products purchased in different situation, they meet the diverse needs from different consumers. This is what the company's managers should consider. Tsingtao beer introduced different types of beer to satisfy the requirements of different social activities. Such as in the south of China, the people prefer sweet and refreshing beer, so Tsingtao introduced Draft beer; And successful middle-aged business people normally need higher life quality and have certain economic ability, so in business negotiation occasion, they will choose Gold beer; Besides, the economic ability of university graduates who just enter the society is limited, in the leisure occasions, they would choose Shanshui beer which the price is a bit lower(Tsingtao Brewery Company Limited Official Web, 2012).

Tsingtao beer also develops new products actively and gives them heterogeneity packages. Such as in the packing of Gold beer, Pure Draft beer, there are clearly epidemic elements. It establishes a solid foundation for entering the market of the Tsingtao beer. For the high-end product, as Gold beer, managers mainly adopt unified luxury packaging strategy, but the cost of product packaging is higher. Luxury packaging reflected their high grade brand strategy in order to maintain consumer idea of high quality low.

3.2 Price

More and more consumers buy the product rationally. As long as the product of each attribute can meet consumers' psychological recognition, the price is no longer the key influence factors. In the modern marketing, the high grade product is still accepted by consumers even sold in high price.

Tsingtao beer adopts differentiated pricing strategy. Its product positioning is very clear, so different product has different price.

Company distributes products from the low to high level. For example, Shanshui beer, low-end products, has a low price which basically close to the cost. The result of this strategy is the increasing of their market share. Such as Tsingtao canned beer market price is ï¿¥3.50 each can. Comparing with the similar product of other brands, there is more than ï¿¥0.5 to 0.7 higher. Meanwhile, High-end products, such as Tsingtao Pure Draft, Tsingtao Gold, can increase sales of Tsingtao beer, and make positive effects on the own brand shaping, so the price is over ï¿¥8 generally(Alibaba, 2012).

3.3 Place

The sale channel is divided according to the product classes in Tsingtao beer. In beer industry, many products are divided into three levels. The channels are divided into three categories: food straight channel, super market & retail channels, circulation wholesale channel, different grades of products is corresponding to the different terminal; terminal is corresponding to the different channels.

Chart 2 Tsingtao beer sales network diagram

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In China, Tsingtao beer keep setting up relationship with various levels terminals what including the national distributor, high-grade restaurant, super market & retail store, places of entertainment and community retail terminal. At the same time actively strengthen the same they maintain the good cooperation relations with operators.

3.4 Promotion

1) Advertisement

Tsingtao beer advertising is 'Centaury as one, passion achievement dream' (Tsingtao beer, 2011). It not only mentions the company's history, but also gives their products with a sense of the Times image and full of vitality.

In the Tsingtao beer's official website, home page design unique creativity. In the left, a bottle of beer gives a person the feeling of sweet and refresh. The light yellow foam shows the high quality and high grade of Tsingtao beer. This design sets up the heart guide to the potential customers who have never tried Tsingtao beer. At the same time, in view of the different brands of products for different types of star endorsement also play a guiding role. Such as Pure Draft series looking for China is a very famous band, advertising effect is good.

2) Public Relation

In the public relations Tsingtao beer mainly uses 'the government' marketing, 'Olympic' marketing to attract consumers' eyes. After Beijing's bid for the Olympic Games the success, they became Olympic sponsors, and actively use the Olympic platform to promote the brand in the international influence.

Tsingtao beer has been insisting on the concept of the Olympic Games, the Olympic spirit of communicators. In order for the greatest degree of spread the Olympic spirit and enhance the brand image, Tsingtao beer made in stages of Olympic marketing plan, respectively for 2006 years 'light the passion', 2007 'transfer passion', 2008 'release passion', 2009 'deductive passion'(China International Beer Web, 2010). Furthermore, they connected beer to music, sports through a variety of activities. Now Tsingtao international beer festival is China's most influential one of the beer festival, to the world propaganda Tsingtao beer long beer culture.

At the same time, Tsingtao Beer Company did public charity in 2008. It shows the company's social responsibility, in this way a wide range of publicity, consumers won the favor deeply.

3) Sales Promotion

In the daily sales activity, Tsingtao beer in order to be able to improve sales, the company puts forward for all kinds of promotional activities. Such as, for the people who purchase with a certain amount of Tsingtao beer in one time will present a new research and development of products to customers. It is not only the way to increase sales, but also can promote new products to customers. Personnel promotion is commonly used. The enterprise sent promotions specialist on the site promotion, such as promotion to consumers, evening show supermarket shopping guide, etc.

4. Segmentation, Targeting and Position Strategy

4.1 Segment Strategy

Market segmentation is the inevitable trend of the development of market maturity. Segments of the market stand from the point of view of consumers in the division. The overall market of a certain product divided into several consumer groups, each consumer group is a market segment.

Due to the beer belong to fast moving consumer goods, the average price is low in price by ï¿¥2-15, and China's average annual income per capita is ï¿¥24,000 (National Bureau of Statistics of China, 2012). So in the national scope, consumers purchase ability are basic same. Tsingtao beer uses the many kinds of segmentation methods. The first is the regional segmentation. Although the national regional consumer purchasing power is similar, but different areas formed different tastes, because of the influence of their eating habits. Through the investigation, the northern people like to powerful, roundly type of beer; Jiangsu, Shanghai and people from the south like gentle type of taste. Guangdong, Fujian coastal areas is fond like tasting strong alcohol and acid with bitter taste. According to this difference, the company will form different taste characteristics of beer to meet the needs of the consumers.

Secondly, the company does the vertical segmentation in population. With age as segmentation criteria, different age paragraph has different demand. Such as young people like light beer. In the party, they can have a good time, and do not need to worry drunk. Middle-aged group people be fond of liking taste a little strong beer. It is to be in commonly business negotiation or with friends and family to get together to drink. In addition, the age always related the income level. Usually, age and consumption is proportional to the ability. So the market can be divided into high-end market and mid-low market.

4.2 Targeting Strategy and Positioning Strategy

This two operations have close relationship. Market targeting is when the market segmentation later, in a number of subsidiaries in the process of optimization. Meanwhile, the market positioning is the enterprise according to the target market similar products competitive situation, in view of the customer for this kind of products are some characteristics or attribute value degree, for the enterprise products shape strong, distinctive bright individual character, and the vivid image transfer to the customer, get customer recognition(MBAlib, 2012).

After one hundred years of development process, market targeting has gradually determined for high-end market. Market positioning of products is the noble, elegant, have grade and fashionable. From the product strategy, the Tsingtao beer products completely have into the target market conditions. In Germany the traditional brewing process and the improvement of science and technology, Tsingtao beer's quality is undoubted fantastic. Additionally, the company's pricing is also slightly higher than other brand. No matter in hotel or the places of entertainment or the large supermarket, as long as consumers spend some money to buy high quality, high grade of beer.

But as the market competition has been more intense, Tsingtao beer began to consider to enter the lower level market. So they develop Tsingtao beer family series wine. Its brand positioning is popular, cheap and fine, amiable. The situation is the consumer to Tsingtao beer high-end product of high popularity. Due to the expansion of the company mid-low products in 2000 was launched, so they need time to further improve the business.

5. Recommendation

Integrated above four parts analysis, we can know that Tsingtao beer now has some advantages and disadvantages, as well as they need to face the opportunities and threats.

As the leader of industry, brand awareness of Tsingtao is high, has obvious brand advantages. And they owned breweries distributed in all parts of the country. This is favorable conditions for Tsingtao beer into except outside Shandong. But at the same time, the regional differences also can become one disadvantage of Tsingtao beer. Although the beer brands of local place are not as famous as Tsingtao beer, but they have deep knowledge by locals. When Tsingtao beer gets merger and acquisition of these enterprises, if they do not pay attention the replacement of excessive of the brand, it will deeply touch native inner to local cultural beliefs. Then it will make local consumers ricing up a big rejection mood, and lead to the agent cannot easily agent, and the sales cannot reach expected. Furthermore, Tsingtao beer is beer brand from the north, though in the north of the city has many reputation, to the south of the consumers, it is still a relatively new brand. In addition, Tsingtao beer through way of merger in process with the original formula keeps consistent, but due to the reason of soil and water, it maybe cannot keep its original quality. At the soma time, the situations of acquisition enterprise are intermingled. So the completed integration is difficult.

The government policy and the support of the huge beer consumption space is a good opportunity Tsingtao beer. Because of listing in both of Hong Kong and Shanghai, new issues bring new opportunities to the development of Tsingtao beer. It is an important opportunity that cooperates with important events. Each year, the international Tsingtao beer festival brings a large number of consumers and partners. It Expand the Tsingtao beer's popularity. But there is growing number of new brands into the beer market. The promotion strategies which they use will drive the whole market declining profits. And raw material prices also bring pressure to the firm.

At present, Tsingtao beer has entered into the mature period. Tsingtao beer market prospect is very broad. Along with the social development progress continuously, and social activities become more and more frequently, people put forward higher the quality of life of the new requirements. This requires the Tsingtao beer with the continuous development of society to improve product quality to increase the added value of products. Tsingtao beer sales area is narrow; the high-end product market share is low. In the sales channels, they should expand sales channels, and make full use of the dealer's financial products into the domestic big cities. The strategic alliance and domestic and foreign well-known hotel for strategic alliance is right choice, like Pepsi and KFC as alliance.

Tsingtao beer enterprise must be good at catch opponent's weak and then open marketing offensive. Such as Beijing Yanjing, Nanjing dealer for instant noodles, beverage and other non now drink terminal product distributors. They are lack of operation drink terminal market corresponding network and the actual status of the experience. Tsingtao beer should increase in Beijing drink terminal market in terms of has formed a fixed consumer groups.

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