Assignment

8 August 2016

Given the rich cultural depth of the Castle brand in South Africa, Castle Draught can present a very unique through the line marketing opportunity. There are however Castle brand constraints to overcome and opportunities to leverage. The constraints that need to be de-emphasized are perceptions related to low cost (cheap) and old-school (not trendy), body-effect (gas and hang over) and taste (the notion that a drinker must first acquire a taste for the beer).

This substantially drives away new drinkers in favour of retaining the existing customer base only. In de-emphasizing the constraints, they must be decisively replaced for Castle Draught with substantial alternative consumer oriented appeal. This repositioning is radical but not without risk, however a mediocre intervention will yield an inevitably mediocre result. To some extent the risk will be mitigated by a trusted and strong underlying mother castle brand.

Assignment Essay Example

The competition is fierce and the on-going subject of raging debate in drinking circles. Competitor offerings must be taken head-on. Draught such as Heineken and Windhoek enjoys an appeal similar to Coca Cola in its pervasiveness and intensity, and therefore presents a very serious sustainable challenge. Castle Draught as a variant to Castle Lager has not enjoyed sufficient differentiation in its initial launch. It is proposed that it be re-launched with substantially revised context and stunningly differentiated impact.

Accordingly, the “untouchable” assumptions must be revisited within a conservative framework of retaining base brand identity and embedded brand strength, as well as the existing customer base; the proposed alternative appeal are the following Taste (controlled reduction HOP content and extra filtration to enhance smoothness) Brand markings (Slightly larger size with hologram surface differentiation) Bottle colour (marginally brighter)

Brand identity –whilst traditionally most emphasis has been on the roots and tradition in SA, this has other historic political connotations considering the intended target market being the young black male and the brand identity must be exploited and further leveraged and moved out of the closet into the open to take on the other brands directly. Castle Draught scope as a product must be re-viewed to consider repositioning as a more premium brand for South Africa and selected other countries.

A substantial and pervasive intervention is required to support the radical and sustained re-launch as follows: 1. Revitalise (brighten) bottle colour (From brown to dawn glow, brand markings, taste and cost with specific deliberate change to a soft luminous green glow in the dark. (Glass luminosity is available from technical perspective) 2. Create refreshing slogan material: Your Draught from your Castle; Dawn of Draught etc. 3. Identify and establish synergy with trending jet setting material for the target market. 4. Identify and leverage exclusive synergistic industry and sport affiliation for the target market with the objective of driving loyalty and brand first mention in an attempt to capture the below the line marketing initiative for the beer industry in a conclusive and sustainable manner. 5. Establish a trendy mobility platform for smart phones leveraging gaming, synergistic companies, and advertising and customer surveys to advance below the line marketing at relatively low cost 6. Leverage young set celebrities for role modelling. 7. Re-define the distribution model to fully exploit the channels that have currently emerged as winners (Counter sales no doubt has the highest convenience and access –billboard support and even uniforms and T-shirts for higher volume customers are likely to take this forward ) 8. Review packaging in total –consideration of larger volume packages for counter sales convenience specifically The launch campaign must be built up gradually to peak at 2015 to allow for tentative surveying and direction setting.

This will be a dynamic launch, tentatively sensing customer preference in this emerging market to confirm direction within all the dimensions. This supports typical customer and market survey results as per Appendices A-E Internal/Situational Analysis To fully understand the market positioning of Castle Lager brand in general and Draught in particular, a full situational analysis is required. This requires understanding SABMiller’s capabilities, customers and business environment. This analysis considers the macro and micro environmental factors that affect SABMiller externally and internally respectively.

The purpose is to indicate SABMiller organizational and product portfolio, as well as the overall sustainability of their business. Macro environmental analysis This constitutes a review of all the factors that SABMiller is unable to control, also illustrating the current business environment. Pestle Analysis A common tool for conducting this analysis is the PESTEL, which include factors from the political, economic, social, technological, environmental and legal aspects in the business environment.

The ultimate purpose of this analysis is to create a strategy that will leverage as many of these external factors as possible in SABMiller’s favour. Political SABMiller is a global brand and in terms of its operations in South Africa is affected by national government regulations and legal issues. These issues impose strategic constraints and also provide opportunities for Castle draught. For example, government is strongly campaigning against drunk-driving and underage drinking which can affect the tendency of people to drink beer in restaurants, pubs and bars.

Government debate to increase drinking age limitation will affect Castle Lager market segments and market share. Higher sin taxes in 2013 budget speech affect beer price increases adversely and thereby affect demand by beer consumers. Therefore, buying packaged beer and in bulk may be the new trend for the consumer. The Government has the power to penalise industries that do not meet legal or regulatory requirements. The brand is linked to a previous era and related political dispensation that the vibrant and growing new consumer does not associate strongly with. Economic factors

SABMiller is affected at the macroeconomic level due to high inflation rate in the country. Salary increases are also not keeping up with the rate of inflation increase. Consumer’s purchasing power is decreasing, disposable income is lower and consequently price plays a greater role in a consumer’s decision to buy. Consumers might prefer to drink at home or in groups and buy packaged beer in bulk as it is more cost effective than drinking out. High levels of unemployment, costs of raw materials such as energy (ESKOM), petrol, interest rates, will have a substantial adverse impact.

A recession depresses business causing lower spend. Depressed spend together with a move to alcohol, and specifically lower cost brands creates activity at the lower ends of product price ranges. In the budget speech an announcement was made to increase excise duties of alcohol products between 5 and 10%. Inflation is high in South Africa. Electricity price hikes, fuel price increases, food and drink prices have increased as a result. The consumer’s purchasing power is decreasing, disposable income is lower and consequently price influences consumer decision to buy.

Consumers might prefer to drink at home and buy packaged beer in bulk as it is more cost effective than eating out. Castle Draught represents a lower end cost product, and from affordability perspective is likely to be favoured in terms of volumes providing a premium and purpose built connotation can be created in favour of a low cost “dad’s drink”. Social Factors According to researched information from social media and questionnaires conducted as indicated in the appendix A,B, C, E below, most of beer lovers change from strong beers to light beer’s (low-alcohol) because they believe this is healthier.

Light beers calorie percentage is lower than regular beers. However some people argue that light beers are nothing but marketing strategy. Castle draught was introduced to the market to compete with other light beer rivals in the market. Furthermore consumers have reduced their beer consumption because diet and health issues. These consumers think beer affects body fat because of the calories; therefore consumers switch to wine, malt-flavoured alcoholic drinks. The Living Standard Measure (LSM) affects consumption patterns of the different income groups.

The emerging black middle class have the greatest buying power and shows increased consumption. Growing concerns about alcohol abuse are a concern to SABMiller and have accordingly sponsored the Arrive Alive campaign (don’t drink and drive). Changing social attitudes and tastes such as the way individuals spend their leisure time, for example; going to the cinema, or just ‘hanging’ out with friends. Peer pressure is an on-going issue. Underage drinking levels are increasing. Virtual presence is increasing, and can be leveraged to further develop the idea of togetherness and friendship within the context of Castle Draught.

Technological Technology assists SABMiller to develop more efficient distribution channels and upgrade facilities with technology that increase the brewing process and improve the quality of the cultivate ingredients and harvesting process. This helps to increase consistency and reduce costs. SABMiller is very rich in using information Technology for their production process because its large operations are highly dependent on the availability of information systems. The control room in the production facility reveals the centralisation of control within the plant.

In addition, the increased filtration for the Draught is as a result of technological innovation. Technology facilitates quicker change to: Changes to certain products Introduction of new products, such as; fruit flavoured beers Economies of scale in brewing and distribution Responding to consumer’s tastes and preferences changing depending on one’s mood Creating another variant or tweaking an existing one Platforms of social media and mobility Legal Factors Legal issues affect the beer industry when packaging, advertising and labelling.

When advertising beer products target consumer age must be over 18 years. Therefore SAB has to obey rules and regulations in South Africa where it operates. SAB message ‘arrive alive’. There is also legislation as this affects food production. There is a future strategy of government to limit alcohol advertising and related sports sponsorships. Supposing advertising is prohibited or limited, market share will remain static. The continued high volume production of alcohol beverage within a legal framework is imperative to ensure that Castle Draught enjoys substantial and authentic re-launch.

Environmental factors Preserving the environment is becoming a major global drive. Recycling waste is becoming increasingly important. The waste bottles and tins should be re-used or re-cycled. Recycled glass accounts for more than 30% of the materials used to produce new bottles. For example Heineken International (2011), points out that glass is used in 76% of packaging material for beer and they distribute beer in returnable packaging for reduce waste environmental pollution. Water is the primary ingredient for brewing process.

SABMiller has built on-site water treatment plants to reprocess and purify water for the brewing process. They also use Bio-Energy Recovery Systems (BERS) to treat wastewater, reducing its strength and volume while creating a renewable biogas that helps fuel their breweries. Other remaining waste water in production units is discharged after the treatment of on-site wastewater treatment plants. Summary of PESTLE as this relates to Castle Draught The PESTLE analysis performed above is an audit of SABMiller’s environmental influences and the purpose is to use this information to guide their strategic decision-making.

The assumption is that if SABMiller is able to audit its current environment and assess potential changes, Castle draught will be better placed than its competitors to respond to changes. Porter’s 5 Forces Given significant rivalry in the beer industry, it is critical that the following competitive dynamics are understood to establish the attractiveness of the industry and the receptivity to a “new” Draught. New market entrants Barriers to entry in the low volume beer market are low and this has been a stimulus for smaller brewers (micro-breweries) to enter the market in recent years and make the industry more competitive and less attractive.

However these micro-breweries serve a niche market, as their beer offers consumers a unique taste, sells at a premium, and is sold at select locations only. Hence they are unlikely to tap into the mass-produced beer market of SAB and are not considered a threat. The required plant and equipment to compete at this level of volume is high cost; therefore the barrier to entry is high for immediate high volume competitors. The existing brands are very strong (SABMiller, Heineken etc. ) which makes it difficult for new high volume entrants to emerge.

For high volume production, the capital infrastructure is also prohibitively high, effectively preventing entry to this market on a pure capital cost basis. The existing distribution channels are also established through strong relationships with various supply chain partners, and new supply and distribution channels will take time and effort to develop. In addition, advertising cost is very high, and high volume producers are able to stay ahead because of the affordability. This threat of new entrants into high volume market is consequently low. A high volume

Lager or Draught from a new entrant is very unlikely, unless Heineken or one of the other larger brands is on the brink of a new introduction into the market. The bargaining power of suppliers SAB suppliers provide raw material for the product, labelling, bottling, distribution etc. In this regard the raw material and distribution is mission critical. The suppliers of raw materials to SABMiller are mainly farming communities contracted to SABMiller. SABMiller has the significant market share (approximately 90% of the South African market), work closely with local suppliers to stimulate local economic growth and boost local jobs and income.

The next biggest competitor to SABMiller, being Brandhouse Beverages, cannot match the magnitude of SABMiller’s supply needs; therefore there is no better substitute for the farming communities. The construction of the new malting plant in Alrode, Gauteng will further increase SAB’s local footprint. Hence the bargaining power of suppliers is low. The bargaining power of buyers From SABMiller perspective, the bargaining power of bulk buyers is as relevant as consumers. The bulk purchasers of beer (Counter sales, taverns etc. ) have high bargaining power because there are a number of bulk suppliers of beer.

Consumers also have many choices because many companies that make beer each sell multiple brands of beer (e. g. : Heineken, Amstel, Windhoek, Guinness). Consequently the bargaining power of beer consumers is high, which is a threat to SABMiller. This threat is mitigated somewhat by SAB being a local producer of beer, having built a legacy of excellence over more than a century. They have built that emotional association to its products with their target market. Considering all of the above, the buyers have high bargaining power and the associated Castle Draught offer must be compelling and captivating in its essence.

The threat of substitutes Substitutes for beer include any beverage, but specific attention is placed on alcohol substitutes. People can switch to wines, ciders or whiskeys which also contain alcohol. Consumers’ tastes differ so they have a right to choose what they want to enjoy, so this will affect the beer market and SAB. Hence the threat of substitutes is high. Considering Castle Draught as a product, the main substitute in the eyes of the consumer is apparently Heineken Draught, given the historic volumes of the two productions and as a result this substitute poses a substantial past and future threat to Castle Draught.

The extent of competitive rivalry Brandhouse Beverage supplies a quality range of beers with strong brand recognition but their market share increase has been constrained by SABMiller. The sheer heritage of the Castle brand and its ability to last the test of time has made it a favourite amongst the majority of beer lovers in South Africa and has ensured brand loyalty. The beer market in South Africa is competitive but the SABMiller premium portfolio brands occupy a significant share of the market and that is unlikely to change. From a draught perspective, Heineken is the market leader followed by Castle.

Castle has the advantage in that it can use its brand strength and loyalty as a shield, to allow its new draught offering to ease its way into the market, with little risk. Rivalry is strong both from beer and industry perspective. Summary of findings using Porter’s five forces –as this relates to Castle Draught Porter’s tool is a simple but powerful tool for understanding where power lies in a business situation. This is useful, because it helps SABMiller understand both the strength of their current competitive position, and the strength of a position they are considering moving into.

With a clear understanding of where power lies, they can take fair advantage of a situation of strength, improve a situation of weakness, and avoid taking wrong steps. This makes it an important part of their planning toolkit. Therefore, with help of the tool, it was found that the barrier to entry is low, bargaining power of supply is low, bargaining power buyer is high, rivalry is strong and there is substitute for beer, thus making the industry unattractive to new comers.

The underlying warning and opportunity given the rivalry is that a new Draught launch will have to be compelling and captivating to a new and growing vibrant market that is not very well understood by all but local associates. Market analysis Market analysis is critical to position Draught for SABMiller to enable evaluation of existing strategies and provide direction and guidance on how to tap on to new markets while accomodating loyal customers. This analysis will ensure that SABMiller keeps in tune with trends in the market place, abreast of customer needs and aware of the competition.

Today’s world is complex and dynamic, SABMiller acknowledges that new initiatives are continuously required to generate a sustainable source of future support for their brand and to survive over the long term. This is all the reason they need to develop a full through-the-line marketing plan for its Castle Lager Draught, using all mediums of the marketing mix that will assist in driving sales among non-Castle Lager drinkers. Through-the-line marketing implies a marketing campaign that combines both expensive activities like national TV adverts (‘above the line’) and less/inexpensive activities like direct mail executions (‘below the line’).

Customer analysis For SABMiller to fully understand their customers’ needs calls for the development of a market or customer led strategy that offers value to customers. Also, because SABMiller intends to attract new customers and retain the loyalty of current ones this analysis is a priority. It will assist them to be customer-centric, i. e. treating each interaction in a way that is highly personalized and targeted. The starting point will be to conduct customer segmentation, which will intelligently divide customers for more relevant interactions.

The tabe below depicts the market segment; In addition, SABMiller needs to identify and leverage exclusive synergistic industry and sport affiliation for the target market with the objective of driving loyalty and brand first mention in an attempt to capture the below the line marketing initiative for the beer industry in a conclusive and sustainable manner. Furthermore, SABMiller needs to establish a trendy mobility platform for leveraging gaming, synergistic apps, and advertising and customer surveys to advance below the line marketing at relatively low cost.

This can be done through a comprehensive Market Mix (four C’s) which will warrant that customers are SABMiller’s prime focus as follows: Consumer – SABMiller can embark on traditional marketing mix where the primary focus is on products; however their primary focus should be the customer. This will enable them to make sure that the variant products like Castle Draft satisfy their customers. See appendix B, C, D and especially E that portrays a snapshot of existing and potential customer needs. Cost – SABMiller needs to give the cost variable a special attention.

More so because SABMiller wants to attract the young, fun, outgoing people who love entertainment, clubbing, and mostly those who love sport and having fun with friends. The perceptions and facts related to low cost (cheap) and old-school (not trendy), might drive away new drinkers in favour of retaining the existing customer base only (oldies). In de-emphasizing the constraints, SABMiller must decisively replace this with alternative consumer oriented appeal. Communication – The marketing communications for SABMiller should be completely revised to cater for the different target segments.

The need is to create refreshing slogan material: Your Draught from your Castle; “The dawn of Draught” etc. In establishing trendy mobility platform for leveraging gaming, synergistic apps, and advertising and customer surveys SABMiller can leverage young set celebrities for role modeling, etc. to advance below the line marketing at relatively low cost. Convenience – In order to attract the new customer base, the convenience of the customer in acquiring the product plays a critical role.

We recommend SABMiller exploits an already advanced distribution model to fully exploit the channels that have currently emerged as winners (Counter sales no doubt has the highest convenience and access – billboard support and even uniforms and T-shirts for higher volume customers are likely to take this forward). Also, they need to review packaging in total – considering larger volume packages for counter sales convenience specifically. Leveraging the 6W Model of Customer Analysis the following can be found. Who are the customers?

Castle Lager was the big beer brand in the South African market. It started rapidly losing market share after South Africa’s political landscape changed. The brand struggled. The cool crowd, the young progressive black urban market, saw Castle as an out-dated brand drunk by older men. The target market for castle lager is the not so young, but fun, outgoing people who love entertainment, who love clubbing, and mostly those who love sport and having fun with friends. The challenge is to get it back into the hearts and minds of the identified target market, 18-24 city living black males.

Because Castle Lager is the mother brand for Castle Draft it has the same customer base where the rationale for the development of a full through the line marketing plan came from. What do the customers do with the product? Today the beer that prides itself on celebrating genuine friendships and great taste and refreshment is brewed in nine countries and enjoyed in over 40 countries worldwide. Castle Lager connects with its target audience with humour and the focus on real friendships – all with a South African flair.

It’s always about a close circle of friends making a plan to help a friend, to celebrate a special moment, to get to a game, or to simply to catch up on each other’s lives. Everything about Castle Lager shouts ‘local is lekker’. And Castle Lager is not paying lip-service to its support of local sport. It is premier sponsor of Bafana Bafana; principal sponsor of the Proteas Test Cricket team; sponsor of the Castle South Africa 2009 Lions Series; associate sponsor of the Springbok Rugby team; official beer supplier to Super 14 2009; and official beer supplier to PSL 2009.

Castle Lager hasn’t won massive support based solely on ad campaigns and the support of local sport. If it didn’t taste great, no amount of marketing would help elevate it to the number one position in Johannesburg. According to the feedback of independent tasters, Castle Lager’s balance of taste and refreshment is based on the perfect orchestration of 13 flavour notes to create a beautiful symphony in the mouth. Mastering this distinctive taste requires superior knowledge and experience and that’s why Castle Lager brew masters are amongst the best in their field. In fact, the Castle Lager brewing process has not changed over the years.

It’s a process that produces a beautiful liquid that brings friends together time and time again. Where do they buy the product – Channels of distribution? Industry leaders, such as SABMiller have well established channels of distribution over the years, which make it more difficult for newcomers to enter the market. Due to the fact that SABMiller produces such a high volume of the market share, have strong market presence in South Africa, and are now working on expansion into international markets, they receive high volume discounts on their shipping rates, and have established beneficial distribution partnerships.

What are the implications here – direct marketing? Company resources and name recognition are distinctive strength. These are areas where the company excels, in comparison to its competitors. When people discuss beer commercials, the Castle Lager commercials are easy to remember, and create a lasting impression. SABMiller’s hotels and licensed house interests were rationalized with the launch of the wholly owned subsidiary, Southern Sun in 1969. SABMiller’s hotel interests were held through the Southern Sun group, and through Southern Sun Gaming SABMiller held a 50% share in the casino company Tsogo Sun.

The remaining 50% of Tsogo Sun was held by Tsogo Investments, a broad-based black empowerment group. In December 2002, SABMiller & Tsogo Investments announced the most important empowerment deal yet in South Africa, with an agreement that resulted in the transfer of both companies’ interests into a new company, Tsogo Sun Holdings (Limited), which is controlled by Tsogo Investments. When do they buy the product – seasonal, situational? In the beer industry there are more buyers than there are firms in the market.

Since more than 50% of the South African population buys and consumes beer on a regular basis, it would indicate that there is significant buyer concentration. Castle Lager can be enjoyed with a bowl of biltong watching the Lions kicking the seven shits out of the Sharks / Stormers / Bulls / Cheetahs. In winter I just love Guinness, Castle is for summer. Why do they buy? According to the customer survey attached as appendix A “Castle Lager, fell out of heaven, landed in SA, and enjoyed ever since. I have in my life drank many a beers, mostly dozen a day for 35 years”.

Castle has very fine taste – very good quality and affordable. Nothing beat castle lager and if you can find it in draught even better. Castle Lager is the best beer one can come across in my life. You can try other beers from other manufacturers, but still it remains on top”. In summary An understanding of the above (6W) helps to reveal: Customer value Customer needs Customer segments For Castle Draft to entice new customers and keep the existing one customer value, needs and segmentation is of utmost importance. Constantly shifting customer needs and competitive pressure has assisted Heneken to stay ahead in the market.

How? How Castle Draught can be re-positioned to meet these criteria by replacing their strategies with alternative consumer oriented appeal. Castle Draught as a variant to Castle Lager has not enjoyed sufficient differentiation in its initial launch. It is proposed that it be re-launched as a product as a premium brand for selected other countries than South Africa. 1. To create refreshing slogan material: Your Draught from your Castle; “I am connected. ” “Castle fell from heaven, landed in South Africa and enjoyed ever since. ” Draught is your Castle in the sky. ” etc. 2.

Identify and establish synergy with trending jet setting material for the target market. 3. Identify and leverage exclusive synergistic industry and sport affiliation for the target market with the objective of driving loyalty and brand first mention in an attempt to capture the below the line marketing initiative for the beer industry in a conclusive and sustainable manner. 4. Establish a trendy mobility platform for leveraging gaming, synergistic apps, and advertising and customer surveys to advance below the line marketing at relatively low cost 5. Leverage young set celebrities for role modeling.

This will be a dynamic launch sensing customer preference to confirm direction within all the dimensions. This supports typical customer and market survey results as per Appendix A. Competitor analysis The primary aim of a marketing strategy is to satisfy the customer better than competitors can. It is to identify and differentiate itself positively from its competitors by using competitive intelligence methods Jooste, et al. (2012). Heineken has made strides in relation to this statement successfully identified and differentiated itself better than the other competitor.

Identification of Competitors The following competitor classification is identified: Market leader –In1998 Castle Lager was the dominant market share leader in South Africa. Currently the Castle Lager brand, in terms of Draught, is the market challenger in the industry. Heineken is currently regarded as the market leader. Challenge – Castle Draught is currently the challenger Follower –Windhoek Draught follows Heineken and Castle Draught One type of competitor identification is the organisations offering the same or similar products and services now.

In that instance, the Castle Draught, Heineken and Windhoek are classified as types of organisations offering the same or similar products, which is beer. The source of competition for Castle is that the competitor is competing to satisfy the same customer needs, which is Windhoek and Heineken drinkers. It is also a brand competition in terms of promoting the Castle lager brand. The following future competitive threats sources: Companies competing in a related product/market. The future competitive threats sources for Castle Draught will be all companies competing in the related product and market, however big and small.

The future competitors sources will therefore remain Heineken and Windhoek, and possible premium entrants which may be coming from other countries, this are likes of Stella Artoise from Belgium. This company brands are using similar technologies of marketing their brands and will also target the Castle Lager and Draught drinkers. Companies using related technologies – Heineken and Castle most likely use the same technologies Companies already targeting your prime market segment of unrelated product – Both companies are targeting the same market segments Companies from other geographical areas – Both companies are also competing on the same geographical areas Analysis of Strategic Groups Strategic group pursue similar competitive strategies, e. g. same distribution channels, or an aggressive low-price approach. In this case SAB and Brandhouse are strategic group of companies applying similar techniques to gain a competitive edge. They are also more or less equally large brand companies will similar assets and production scales. The following are the characteristics of identifying strategic groups: Size and market share.

Brandhouse Heineken has large market share than Castle Draught Extent of product/service. This two groups focus on targeting the beer drinkers Geographic coverage. Both cover the same geographic areas, especially in South African urbanised areas. Market segment served. Castle Lager and Draught has dominated the older people segment which is the old generations while Heineken has served all the markets with the image of a premium beer. Type of distribution channel. Both use similar distribution channels which is transporting to similar warehouses and liquo

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