The Possibility of Marketing the Australian Victoria Bitter in East Asia - Research Paper Example

EXECUTIVE REPORT This executive report will look at the possibility of marketing the Australian Victoria Bitter in East Asia, specifically in Japan. Victoria Bitter is dubbed as Australia's "full strength beer" whose production dates back in the early 1890s (Victoria Bitter 2005). VB had consistently reaped awards from the Australian liquor industry which includes "Best Full Strength Beer" in 2001, "Tap Beer of the Year" on 2002, and the "Best Full Strength Beer" again in 2003 (Victoria Bitter 2005). Business Situation in Japan Beer is the most popular drink in Japan. According to the Brewers' Association of Japan (2004), Syozaburo Shibutani started beer brewing and marketing in Osaka during 1872. Beer importation dates back to as early as the Meiji period through the foreigners who came for the development of the Hokkaido (Japanese Sake 2006) though it was only during 1886 when the quantity of domestically produced beer exceeded the level of imports. Nowadays, global brands of beer continue to target the Japanese market while local production is concentrated on breweries who are capable of manufacturing 60K1 of beer (Brewers' Association of Japan 2004). The Japanese beer industry is estimated to be 3.2 trillion yen in value (approximately US$27.3 billion, based on 2001 amounts) indicating the wide popularity of beer in the country. The large market for beer is also evidenced by the fact that beer consumption accounts for 50% of the total alcoholic beverages consumption in volume and 70% in value (The Japanese Beer Industry 2003). There is a huge market for beer in Japan as the country belongs to the biggest beer consumers in the world. During 2003, the country's annual per capita consumption reached 13.4 gallon, making Japan the fourth largest beer consumer worldwide (Impact Databank 2004). The Japanese beer industry is currently comprised of two subsectors namely, regular beer and low malt beer. The regular beer subsector constitutes beer products with 67% or more barley malt content. The low malt beer category is unique to the Japanese beer industry. The creation of this subsector is attributed to the lower tax levied on beer with lower malt content. Typically, products on the low malt subsector has a 25% or less barley malt content having a liquor tax rate which is lower by 40% and has a retail price which is cheaper by 35% relative to regular beer. The low malt subsector has captured a large market in Japan and has experienced double-digit growth since its establishment in 1994. It currently holds 44% of the total beer shipments while approximately 60% of it is consumed locally. Just recently (2003), the low malt subsector was faced with a 28% rise in taxes while regular beer's taxes remained unchanged. This together with product maturity is expected to pull demand for low malt beer (The Japanese Beer Industry 2003). The structure of the Japanese beer industry is oligopolistic in nature with the four major national brewers in Japan accounting for 97% share of the total market. There are still however, foreign brands and local microbrewers who battle for the remaining market share. The major producers of beer in the country are Asahi Breweries (38%), Kirin Brewery (36%), Sapporo Breweries (14%) and Suntory (11%). Asahi Breweries recently dislodged Kirin as market leader due to the wide popularity f its Asahi Super Dry beer. On the other hand, the second largest player Kirin is moving into the production and marketing of non-beer products and becoming an "all-round beverage player." Sapporo lacks competitive advantage while Suntory's beer business profitability is in question (The Japanese Beer Industry 2003). Problems Encountered Victoria Bitter's move of market diversification targeting Japan will surely be met by certain problems and difficulties. Some of the probable problems are cultural, while others are more business in nature. Japanese are known to be very loyal to their culture which keeps them from adopting Western ways. Instead, they maintain their own way of doing business with foreigners, specifically with Australian exporters. Victoria Bitter will be entering the Japanese beer industry as a new player and as such, it needs to be backed and supported by other Japanese business partners to pursue market diversification. One of the major difficulties that Victoria Bitter will encounter is language barrier. English is not widely spoken in Japan in business and government (Austrade 2006). Doing business with the Japan nationals will surely entail conversing with them in their native tongue. Japanese highly value politeness in business dealings and this for them, is shown by adapting to their culture. Victoria Bitter should employ Japanese speaking staff or an interpreter to assists in business meetings. It is also recommended that if a meeting is conducted in English, Australian exporters should speak slowly and clearly. The use of Australian idiomatic expressions or humor is also discouraged. These recommendations are crucial as language and cultural misunderstandings are the most often causes of business relationship breakdown between Australian and Japanese partner (Austrade 2006). Since Victoria Bitter will be entering the Japanese market, one of the most essential marketing strategies that it can put in place is to customize its product to the taste of the Japanese consumers. However, this will be in large conflict with the real essence of marketing the Victoria Bitter in Japan as the Australian beer really aims to make a name for itself in the Japanese beer market. Another problem that Victoria Bitter will encounter in its entry in Japan is the high level of tax levied on regular beer where Victoria Bitter is classified. It should also be noted that the Australian beer will also be paying tariffs on exports aside from the liquor tax. This higher leve; of taxes will mean additional expense for the Australian beer indicating a lower margin for the company. This is aggravated by the fact that Japanese consumers are both price and quality conscious (Austrade 2006). Marketing will also be an obstacle which will be probably faced by Victoria Bitter. Venturing in the Japanese beer industry will entail partnership with a Japanese business entity with a strong marketing arm. This will help Victoria Bitter gather the much needed insight on the preferences and needs of the customers. The Australian beer should also gear itself in battling with other large competitors in the Japanese industry. It should be noted that the Japanese beer sector is largely dominated by local manufacturers who knows the market better than any foreign company in the short run. SWOT Analysis Strengths: Victoria Bitter largely relies in its popularity as one of the consistently awarded beer in the past decade. The Australian beer had already established a name in the Australian beer industry and it could possibly utilize this to enter and find a strong partner in the Japanese market. Since Foster's Lager is an established company in Australia it has a strong financial muscle to finance the market diversification strategy for Victoria Bitter. Weaknesses: Relative to its competitors, Victoria Bitter has little understanding of the Japanese beer industry. This puts the Australian beer in a more disadvantageous position compared to Asahi, Kirin, Sapporo, and Suntory. As the Japanese beer industry is dominated by four giant players cornering 97% of the entire market share, Victoria Bitter cannot hope to capture a chunk of the total beer market. Opportunities: The Japanese beer industry is characterized by the rapid development and introduction of different products to satisfy the customer (The Japanese Beer Industry 2003). Victoria Bitter can take advantage of this opportunity by offering a new choice in the sector. Threats: The most potent threat in the viability of introducing Victoria Bitter in the Japanese market is the more intense inter and intra industry competition. The deregulation of the beer industry in 2003 leaves more competition between the four major beer companies. This also squeezed the potential market of the foreign companies operating in the country. Intra-industry competition is also becoming a significant factor as the liquor market matures. Beer is currently competing with other alcoholic beverages such as shucho (clear distilled liquor), wine and chuhai which appeals to the growing younger population (The Japanese Beer Industry 2003). Policy Solutions In order to succeed in the Japanese beer industry, Victoria Bitter will have to prepare for and settle the problems and obstacles that it will face in diversifying to this new market. Foremost, Victoria Bitter needs to adapt culturally to gain a stable Japanese partner. The Australian beer should take time to study the culture of Japanese and how they do business with foreign exporters. This together with the good name of Victoria Bitter will aid the company in finding a strong partner. Victoria Bitter should also use intensive market research to gain a deep understanding on the preference of Japanese customers. Finding a Japanese partner who has been in the beer industry will help accomplish this feat. To offset the high level of expenses on tax and tariff, Victoria Bitter will undertake cost saving measures to remain profitable in its operation. Instead of choosing to cater the entire Japanese population, Victoria Bitter should opt to serve a profitable market niche. It is stated above the almost the entire market for beer is already captured by the four giant local breweries. As a new player in the industry, Victoria Bitter cannot battle head-on with these giants. Instead, it can choose to concentrate in its differentiation strategy and identify a single market niche to focus on. This way, it can avoid the intense competition with other large players. This strategy can also save resources for the company as serving only a specific market niche usually entails lower costs than covering the entire market. However, as it gets to know and gain more market recognition in the Japanese market it can try to widen its customer base top increase profitability. References Asahi Beer 2004, Market Information, Retrieved 20 January 2006 from http://www.asahibeer.co.jp/ir/pdf/annual/2004_21.pdf Austrade 2006, Japan Profile, Retrieved 20 January 2006 from http://www.austrade.gov.au/australia/layout/0,,0_S2-1_CLNTXID0019-2_- 3_PWB162870-4_doingbusiness-5_-6_-7_,00.html Beer News 2005, Soybeans with a Buzz, Retrieved 20 January 2006 from http://www.probrewer.com/news/news-002501.php Brewery Convention of Japan 2003, History of the Japanese Beer Industry, Retrieved 20 January 2006 from http://www.brewers.or.jp/english/09-history.html Impact Databank 2004, Expanding Sales of Beer and Soft Drinks in Asia as Top Priority, Retrieved 20 January 2006 from http://www.asahibeer.co.jp/ir/pdf/annual/2004_12.pdf Japanese Sake 2006, Retrieved 20 January 2006 from http://www.japan-guide.com/e/e2037.html The Japanese Beer Industry 2003, Retrieved 20 January 2006 from http://www.rabobank.com/Images/rabobank_publication_japanese_beer_tcm25-152.pdf Victoria Biter 2005. Retrieved 20 January 2006 from http://www.fosters.com.au/enjoy/beer/victoria_bitter.htm Read More