WKD Brand in the UK Alcopops Market - Case Study Example

Alcopops Case Study Product: WKD (2250 words) The market for alcopops was at its height in the mid to late 1990’s but since that time the market has shrunk and indeed, according to Leatherhead Food Research (LFR), ‘sales have halved in value in the past five years’. In 2008, the UK market for alcopops was valued at an estimated £650 million – a 9% drop in value on the previous year (Watson, E. 2009). This essay will focus on the WKD brand, manufactured by Beverage Brands UK Ltd, and one of the top three brands in the UK alcopops market. Alcopops generally have been accused of targeting under age drinkers. Indeed, as recently as 2006 WKD itself was accused of fuelling underage binge drinking and its TV commercials were banned by the Advertising Standards Authority who stated that ‘...the music and personalities in the ads were likely to appeal strongly to under 18s.’ (Poulter, S. 2006) Alcopops manufacturers have since tried to clean up their acts and for the purposes of this essay the target market is defined as drinkers aged 18 to 24 years. The first part of this essay examines the operational environment for the WKD brand in the UK. Political A study by the Organisation for Economic Cooperation and Development of youngsters well-being in 30 industrialised nations has concluded that the UK’s young people are amongst the worst behaved in Europe and they are more likely to get drunk (especially girls) than those in any other country. In recent years the political climate in the UK has been firmly anti binge drinking by teenagers. The UK government and the alcohol industry have both tried to promote socially responsible drinking amongst young people. The government has also recently adopted a ‘Youth Alcohol Action Plan’ which outlines how the problem of underage and excessive drinking by young people will be dealt with. The plan is to forge stronger partnerships with parents, industry, criminal justice and law enforcement agencies and communities (Department for Children, Schools, and Families 2009). All of the above will only serve to intensify pressure on the need for the socially responsible promotion of alcohol to young people. This will particularly impact on alcopops brands like WKD. Economic The global economy is still in recession although there are indicators suggesting that the worst may be over. In the UK the recession is expected to have moderated by the end of 2009 with recovery underway by the second quarter of 2010, according to the CBI (Sargeant, R. 2009). In terms of the alcopops market itself then demand may be hit by a change of government in 2010. The price of alcopops will be increased by £1.50 for a large bottle under plans unveiled by the Conservatives. (Barnes, E. 2009). It has to be remembered that the target group has substantial spending power. However, this spending power has been severely damaged by the recession. With the recession has come unemployment and one of the hardest hit groups has been the 18 to 24 year olds which as seen unemployment numbers rise from just under 500,000 in the last quarter of 2007 to 722,000 in the second quarter of 2009. This figure is expected to grow to 770,000 by the middle of 2010 (Kearn, D.2009) Social/ Cultural Consumer socialization is the process by which young people learn to become consumers in their own right and learn about the value of money and when to save and when to spend. They also learn when, where and how products should be bought and used (Jones, KL). This process begins at a very young age and certainly long before young people make any actual purchasing decisions of their own. Culture is the set of values, attitudes and beliefs that shape the way we all live and behave. These are learnt from a very young age and are continuing to be internalized and developed though the adolescent years to adulthood. Consequently, the cultural context for young people is very much ‘on the surface’ and is bound, therefore, to be a major influence on their all aspects of their behaviour including how and what they purchase and where they purchase it. Each broad culture contains ‘sub-cultures’. These can include not just different religions or racial groups, but also groups of people who simply share the same values, attitudes and beliefs. One such sub culture is ‘youth culture’ which displays distinctive purchasing behaviour in its own right and is recognised by marketers as highly valuable market segment. This is borne out by subculture theorists such as Dick Hebdige (2002) who states that: ‘members of a subculture often signal their membership by making distinctive and symbolic tangible (purchasing) choices in, for example, clothing styles, hairstyles and footwear’. Youth culture, as a cultural sub set, is a powerful and important purchasing group and will continue to be so in the future. In terms of alcohol, the ability of this to pay for and consume alcoholic drinks may be undoubted but will always be legally restricted. Technological Young people today have grown up in the ‘digital age’ and their consumption of marketing messages has grown with the increased diversity of the media available to them. This is especially true of digital media. Research by Morgan Stanley (2009) on ‘How Teenagers Consume Media’ has shown that young people generally finds traditional media like newspapers and radio to be largely irrelevant. It also finds that, although they watch a lot of TV this is decreasing due to the availability of more selective ways of seeing their favourite shows online via services such as ‘ITV player’. Young people aged up to 24 years are far more likely to be influenced in their purchasing behaviour through what they are exposed to on the internet and mobile devices. However, they are also resentful of intrusive advertising through these media. Legal Alcopops brands like WKD will continue to be under the legal and regulatory spotlight. It is likely that the legal framework will get even more onerous in the future. In its latest attempt to tighten the rules on alcohol advertising the Office of Communications, Ofcom, explicitly refers to the relationship between alcohol and youth culture. Advertisements for alcoholic drinks must not be likely to appeal strongly to people under 18, in particular by reflecting or being associated with youth culture (Ofcom, 2009). With regard to the above environmental analysis, the following is the recommended marketing strategy for the WKD brand in the UK for the period 2009-12 Product: WKD was launched in March 1996 as a range of vodka based alcopops drinks. This year a cider based drink, WKD ‘Core’ has been launched to coincide with the resurgence of popularity for cider which has largely been fuelled by ciders targeted at young people such as Magners. It is recommended that ‘WKD core be the lead product in the future although, of course, trends in the appeal of alcopops drinks need to be monitored very carefully as certain drinks can quickly become ‘uncool’. Price: Whilst it is undoubtedly true that the buying behaviour and attitudes of young people are the key factor in their desire to buy alcopops, price also has an important role to play. Bearing in mind the economic factors identified in the analysis above, the pricing for the product is going to be a key factor in its success. With the ongoing economic downturn and potential imposition of a huge tax rise on alcopops, if the conservatives come to power in the first half of 2010, then there is a danger that WKD products could become highly price sensitive even amongst its relatively affluent and alcohol-predisposed target group. Whilst it is likely that this mix of factors will deter new market entrants, it is still crucial for WKD to adopt an aggressive pricing policy whilst still maintaining acceptable margins. Place (distribution): WKD will have to become more innovative with its distribution strategy. It needs to penetrate the online market to a greater degree and to rebuild strong relationships with the off trade which were damaged when alcopops became discredited in the late 1990’s. Promotion: As happened when alcopops were first launched, promotion will be the key driver of success in the future. It is recommended that WKD adopts a classic ‘Push’ and ‘Pull’ promotional strategy (Fill, C. 2006). ‘Push’ is where the flow of the activity is ‘pushed’ from manufacturer to the supply chain intermediaries with the prime intention of developing relationships and building brand reputation with those intermediaries who will ultimately sell the product to the end consumer. ‘Pull’ is where the flow of the activity is direct from the manufacturer to the end consumer. The intention of ‘Pull’ is primarily a call to action in the form of either a purchase or an enquiry by the end consumer through the supply chain intermediaries. Below is a suggested outline promotional plan. Promotion and Communications Tools Target Audience Push – Channel Intermediaries Pull – End Consumers Advertising: Television; Radio; Cinema; Magazines – Consumer young men and young women interest; New Media – Online End Consumers Information dissemination - product and service; Call to action. Advertising: Magazines – Trade Channel Intermediaries Relationship development Information dissemination – product and service; Call to action Media Relations: News Releases News Conferences News Events All Target Audiences through target media relations Relationship Development Information dissemination – corporate, product, service and financial; Call to action Internet: Website presence End Consumers and channel intermediaries Relationship Development Information dissemination – corporate, product, service and financial; Call to action Lobbying Government; Regulators Relationship Development The next part of the essay will critically analyse and evaluate the opportunity for WKD to expand internationally into one chosen European country. The country chosen is the Republic of Ireland. This choice has been made in line with international marketing theory as follows: The three functions of international marketing analysis were used. Namely: Firstly, scanning international markets to identify and analyse opportunities: Accessibility: Ireland is easily accessible from the UK and the operational environment is broadly similar. Plus of course, there is no language barrier meaning that the current UK packaging and promotional material will be able to be used. Profitability: The Irish spend more of their income on alcohol than any other EU country. In fact they spend three and a half times the EU average (Times Online, 2008). This suggests that there is a profitable market in Ireland. Market Size: Ireland has a higher per centage of 15 – 24 year olds than the UK (15% versus 13.6%) Secondly, Building marketing information systems to monitor environmental trends The information systems for Ireland can be modelled on the UK systems. The anlaysis of the UK market carried out in the pestl analysis above will have parallels in Ireland. Also, a ‘12C’ analysis should be carried out for the Irish market. Thirdly, Carrying out primary marketing research for input into the development of marketing strategies. There is a wealth of secondary marketing research available. For example, The European Beer, Cider and FABs Market to 2007 has data on the Irish market. Plus there are numerous market intelligence databases online including the Economist Intelligence Unit which has country reports and economic forecasts for all EU countries. Therefore, the need for primary research may be limited to attitudinally based research amongst the target group to establish any difference in attitude and perceptions to WKD compared to the UK market. The recommended market strategy for Ireland will be based on the following criteria: The company objectives and expectations relating to the size and value of anticipated business: Although the age profile of the Irish market is conducive to market entry the volume of potential customers is relatively small when compared to the UK. WKD is currently the number three brand in the UK. This has been achieved with considerable marketing investment. Consequently, the initial objective will be to establish the WKD brand in the Irish market with a market share of 10% in year one. The size and financial resources of the company: WKD is spending an estimated £18 million on marketing its brand in 2009, which is an increase of £5.5 million over 2008 (Marketing Week, 2009). It is recommended that an allocation of the ongoing UK marketing budget for the period to 2012 is made to support the Irish market entry. Existing foreign market involvement: WKD is exported to over 40 countries around the world via a network of distributors and importers. (Beverage Brands UK website, 2009). It is recommended that the entry strategy for Ireland uses the existing model for international distribution and sales. The skills, abilities and attitudes of the company management towards international marketing. The company is well skilled in exporting with over 15 year’s experience (Beverage Brands UK website, 2009). The nature and power of the competition within the market. The Irish market is dominated by the traditionally strong UK brands such as Smirnoff Ice and Bacardi Breezer. These brands are supported by substantial marketing budgets. The nature of existing and anticipated tariff and non-tariff barriers: The nature of the product itself, particularly any areas of competitive advantage, such as trademark or patent protection. It is recommended that WKD products are produced in the UK to protect the trademark and the nature of the product in the bottle and then exported to wholesale distributors in Ireland. The timing of the move in relation to the market and competitive situation: The market position in terms of regulation and tax on the product may well change within the next 12 months. Therefore it is recommended that a controlled test entry into the market takes place before the end of 2009. The process of finding a suitable distributor should begin immediately and should be based on the distributors financial strength, contacts with the licensed and off licence trade; their commitment levels with other customers; and the suitability and quality of their premises, equipment and other resources including salespeople. -ends- Bibliography Barnes, E. 2009. ‘£1.50 to be slapped on cost of alcopops’ Accessed 21.10.09. Beverage Brands UK website, 2009. . Accessed 22.10.09. Department for Children, Schools, and Families, 2009. Youth Alcohol Action Plan. . Accessed 21.10.09. Fill, C. Simply Marketing Communications, First edition 2006 Hebidge, Dick, 2002 ‘Subculture, the Meaning of Style’. Published in the Taylor and Francis e-library. Kearn, D.2009. Chief Economist at the British Chambers of Commerce. BCC UK Economic Forecast. September 2009. Jones, KL. 2009 ‘Social Influences on Consumer Behaviour’ . Accessed 21.10.09. Marketing Week, 2009. Beverage Brands boosts WKD spend to £18m. http://www.marketingweek.co.uk/home/beverage-brands-boosts-wkd-spend-to-acirc16318m/2021375.article accessed 22.10.09 Morgan Stanley, 2009. ‘How Teenagers Consume Media’ Accessed 12.10.09. Ofcom, 2009. ‘Final Revised Alcohol Advertising Rules. < http://www.ofcom.org.uk/consult/condocs/AlcAds/decision/rules.pdf>. Accessed 21.10.09. . Poulter, S. 2006. Mail Online. Alcopop adverts banned for targeting under-18s. . Accessed 21.10.09. Sargeant, R. 2009. Fair Investment. ‘Recession recovery to start this time next year.’. Accessed 21.10.09. Times Online, 2008 ‘Irish splash most in the EU on booze’. accessed 21.10.09. Watson, E. 2009. Food Manufacture. ‘Alcopops and wine sales bomb, research indicates’. . Accessed 21.10.09. Read More