Local and International brand analysis of Heineken and Kilimajaro Premium Lager

8 August 2016

“Critically analyze and compare the marketing strategies of one local and one international brand in one product category and country of your choice and develop recommendations for the local brand. Consider a social perspective in your work”. Aloyce Gervas Haule ID: 6514396 Word Count: 4373 TABLE OF CONTENTS LIST OF FIGURESiv 1. 0 Introduction2 1. 1 Kilimanjaro Premium Lager2 Figure 1: Kilimanjaro Premium Larger Packs3 1. 2. Heineken3 Figure 2: Heineken in different4 2. 0 Market Segmentation and the Firm’s Targeting4 2. 1. Segmentation at Tanzania Breweries Limited- Producer of Kilimanjaro Premium Lager6 2.2. Segmentation at Heineken the 3rd Leading Beer Company in the World8 2. 3. Comparison of the segmentation strategies between Heineken and KPL9 3. 0 Defining the Marketing Mix for the brands9 3. 1 The Products10 Table 1: Brands similarities and differences 10 Figure 3: Kilimanjaro in different bottle packs11 Figure 4: Heineken in different products and packs12 3. 2 Communication12 Figure 6: Heineken, Power Your World slogan15 Figure 7: some sales promotion activities for Kilimanjaro16 Figure 9: Kilimanjaro sponsorship events18 3. 3. Pricing the product19 3. 4. Brand distribution20

Figure 10: Kilimanjaro distribution channel22 5.

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0 Recommendations to the local brand’s marketing manager23 6. 0 Conclusions24 REFERENCES25 LIST OF TABLES LIST OF FIGURESiv 1. 0 Introduction2 1. 1 Kilimanjaro Premium Lager2 Figure 1: Kilimanjaro Premium Larger Packs3 1. 2. Heineken3 Figure 2: Heineken in different4 2. 0 Market Segmentation and the Firm’s Targeting4 2. 1. Segmentation at Tanzania Breweries Limited- Producer of Kilimanjaro Premium Lager6 2. 2. Segmentation at Heineken the 3rd Leading Beer Company in the World8 2. 3. Comparison of the segmentation strategies between Heineken and KPL9 3.0 Defining the Marketing Mix for the brands9 3. 1 The Products10 Table 1: Brands similarities and differences 10 Figure 3: Kilimanjaro in different bottle packs11 Figure 4: Heineken in different products and packs12 3. 2 Communication12 Figure 6: Heineken, Power Your World slogan15 Figure 7: some sales promotion activities for Kilimanjaro16 Figure 9: Kilimanjaro sponsorship events18 3. 3. Pricing the product19 3. 4. Brand distribution20 Figure 10: Kilimanjaro distribution channel22 5. 0 Recommendations to the local brand’s marketing manager23 6. 0 Conclusions24 REFERENCES25 LIST OF FIGURES

Figure 1: Kilimanjaro Premium Larger PacksError: Reference source not found Figure 2: Heineken in different bottle packsError: Reference source not found Figure 3: Kilimanjaro in different bottle packsError: Reference source not found Figure 4: Heineken in different products and packsError: Reference source not found Figure 6: Heineken, Power Your World sloganError: Reference source not found Figure 7: some sales promotion activities for KilimanjaroError: Reference source not found Figure 9: Kilimanjaro sponsorship eventsError: Reference source not found Figure 10: Kilimanjaro distribution channelError: Reference source not found

THE PRIDE OF TANZANIA Mount Kilimanjaro: The highest mountain in Africa and the highest free-standing mountain in the world at 5,895 meters or 19,341 feet above sea level. 1. 0Introduction Since the evolution of globalization and global interactions, markets and trade barriers have been minimized and hence new trade challenges have been experienced to both local and international brands.

Markets have also been challenged as to how they can set marketing strategies that will serve both local and international competition that are increasing in an increasing rate due to reduction of trade barriers that is resulting from interaction of globalization. This works thus intends to analyze and compare the marketing strategies of a local brand (Kilimanjaro Premium Larger) and an international brand (Heineken) in Tanzania. And a strategic move for a local brand will be proposed. 1. 1 Kilimanjaro Premium Lager

Kilimanjaro Premium Larger (KPL) is a truly Tanzanian beer brand (local brand in this case), with crisp and refreshing flavour, slightly bitter and never sweet. It is light in colour, and contained alcohol at 4. 5%ABV. Its country of origin is Tanzania, and its famous slogans are, “Kilevi chenye bonge la ladha inayoburudisha – Refreshingly ” and “100%TZ flavour” Figure 1: Kilimanjaro Premium Larger Packs 1. 2. Heineken On the other hand, Heineken, a Dutch beer that is imported in Tanzania by Mabibo beer wine and spirits distributors, is an international brand originated from Netherlands.

It was first imported in Africa in 1990, and it is now available in more than 23 countries (Tanzania inclusive). In Tanzania, the beer is largely imported from South Africa where it is manufactured by South African Breweries (under licence). The beer is bottled and canned in green, with alcoholic content of 5. 0%ABV Figure 2: Heineken in different 2. 0Market Segmentation and the Firm’s Targeting Segmentation is coming from the concept of setting segments, or breaking into groups, or simply grouping.

Thus market segmentation would mean market grouping. Kotler (2006) says that, market segmentation starts from mass marketing. In mass marketing, the sellers or industries engages in mass production, mass distribution, and mass promotion of the product for all buyers. If mass marketing is practiced, then marketers will have to design for mass strategies in the markets that they are serving. Strategically, this would imply that there will be largest potential markets, and hence lower cost per unit which might lead to low prices or high margin.

In practice, however, this is very challenging due to dynamism of consumers – “a marketer can rarely satisfy everyone in a market” (Kotler, 2006:24), and the large number of communication media and distribution channel are increasingly expensive to reach the mass audience. Thus, the most appropriate strategy is market segmentation and market targeting (Roy, 1998) Market segmentation is the process of breaking down all consumers into groups of potential buyers with similar characteristics (Roy, 1998). But Kotler, (2006) defines segmentation as the process of grouping customers with similar needs and wants.

Similarly, Joshi (2010) refers segmentation to dividing the market of potential customers into homogeneous sub-groups. All definitions basically agree on dividing, grouping and homogeneity or similarity of consumer or market characters. For that case, we can define market segmentation as the strategic process of grouping homogeneous structures from heterogeneous group of market. These market structures could be areas, and thus a geographical segmentation, or could be consumer traits bases, hence we have demographic segmentation. After segmentation, a potential or profitable and promising segment will be selected or choose to be served.

The process of choosing this potential segment to serve is what we call target market or market targeting. 2. 1. Segmentation at Tanzania Breweries Limited- Producer of Kilimanjaro Premium Lager 1Tanzania Breweries Limited (TBL), the producers of KPL have segmented the market (local market) in two ways. First, the market is segmented geographically, and thus four regions were created: East (Dar es Salaam, Morogoro, Lindi, Mtwara, Dodoma and Zanzibar). This is the most profitable and has the highest consumer concentrate area taking to about 46% of total sales share.

North West (Mwanza, Shinyanga, Kigoma, Tabora, Singida, Kagera, Mara, Simiyu, and Geita). This is the second profitable segment, taking to about 28% of the company sales share. Southern higher lands region (Mbeya, Iringa, Ruvuma, Sumbawanga, and Katavi). This is the third region with about 14% annual sales share of the company sales. And lastly the North East region (Arusha, Kilimanjaro, Tanga and Manyara). Regionally, Kilimanjaro Premium Larger is targeting the Eastern and North East regions. And it is the leading brand (by sales volume) into the regions.

Thus, the target markets for local market are eastern and north east regions. Secondly, the local market is demographically segmented. By this strategy, consumers are segmented into the following groups: 1. Passive escapists: this is a group of consumers with very low income. They can hardly afford a beer, so mostly they take local brew, and hard liquor. But when they want or drink beer, it should to be hard, full bolded flavour, extra bitter, and high alcohol. Their major reason for drinking is escapement. This segment is contained with early, and late old rural people, retired people, and un-employed 2.

Back breakers: this is a group of consumers who earn money bay working very hard, and doing heavy jobs with relatively lower pays. Mostly are casual workers, and those who use more power, or muscles. This segment drinks beer occasionally, may be weekends after receiving their weekly pays, but when they drink they want something bitter, hard, and which can quickly take them. This segment contained a casual and seasonal working group from both rural and urban areas. 3. Washikaji segment: this segment is the group with mostly youth, aged 24 to 45 years. The word washikaji means friends or companions.

Thus is the group of college and working class with average income. They drink mostly for belonging, early or drinking learners, and company. They have minimum responsibilities; they are outgoing, and can easily share their common interest. They normally drink in groups, and frequently. 4. We are there: this is the segment with well off people, who are either successful business people or hold executive positions in organisations. They normally drink for belonging, or in events, and they drink in executive outlets. Thus, KPL has followed the segmentation by targeting the third class or segment of washikaji.

The brand has targeted the segment because it is the most beer consuming segment, and they want a beer with parameters similar to Kilimanjaro. Since Kilimanjaro has moderate alcohol, with crisp and refreshing flavour, it is light in colour and easily drinkable, then it is a nice beer for youth. Similarly, the beer has positioned as a youth beer which makes it perfect for the segment. 2. 2. Segmentation at Heineken the 3rd Leading Beer Company in the World 2Heineken, the third leading beer company in the world after ImBev and Miller, has transformed its geographic footprint significantly in recent years (Heineken–annual report, 2012).

This shows that the company has strategically segmented its global market in geographical aspects. The changes reflect the growing importance of emerging markets, and by 2010 the companies’ previous reliance on European markets has decreased significantly. While in 2001 Western Europe accounted for 53% of its global volumes, followed by Eastern Europe’s 20% volume share, in 2010 Latin America became the second most important market for the company with 25% volume share, while Western Europe share has decreased to 29%.

Eastern Europe still plays an important role in the company’s portfolio, representing 22% of its volumes, but its share has declined. Heineken is well placed in Middle East and Africa, where beer consumption showed strong volume growth (more than 5% in 2010), and the company has strengthened further its position in Nigeria with the acquisition of two holding companies from the Sona Group in January 2011. Asia Pacific is the only region, where the company lacks a strong presence.

It operates through joint ventures (Asia Pacific Breweries and United Breweries), but it is an area for further development, as the region is the biggest beer market and offers high-growth potential (Heineken Nv Annual report, 2010). 2. 3. Comparison of the segmentation strategies between Heineken and KPL Comparing the segmentation strategies for KPL and Heineken, it is more less the same strategies keeping in mind the mission, and vision of brand owning companies.

Heineken is showing high volume share in Western Europe, Latin America and Africa and Middle East markets with volume shares of 29%, 25%, and 22% respectively, and Kilimanjaro is growing in Eastern, North East and North West markets. Similarly, Heineken is lacking strong presence in Asia pacific (China in particular) where it has only 3% volume share and Kilimanjaro is lacking representation in the Southern High lands region.

But in the context of Tanzanian market, Heineken is the urban beer because it is targeting “we are there” segment, and it is priced with premium prices, while Kilimanjaro is an all place beer (both rural and urban) however, it is getting more volume in urban than rural. Also it is targeting the washikaji segment and few of we are there segment. 3. 0Defining the Marketing Mix for the brands Marketing mix is a set of marketing tools the firm uses to pursue its marketing objectives (Kotler, 2006; Neil, 1994).

The ‘Marketing Mix’ is a term used to describe the combination of tactics used by a business to achieve its objectives by marketing its products or services effectively to a particular target customer group. It is also referred to as the ‘4 Ps’ – Product, Price, Promotion and Place, or the ‘7 Ps’ – the 4 Ps with the addition of People, Process and Physical Evidence, also called the extended marketing mix (Doole, 2008; Mollel, 2005; Roy, 1998). Thus this section will analyse and compare the marketing mix for goods (4Ps) since products used are tangible. 3. 1The Products

Product is anything that is offered to satisfy needs and wants. Products have got very different features; however, some have similar features. For the case of Kilimanjaro and Heineken they are very different with minor similarity. To start with similarity, it is only the fact that, they are all beers, golden colour. However Kilimanjaro is pale gold (light) in colour than Heineken. Also, all brands are packed in both bottles and cans. But these brands are very different as shown on the table below. Table 1: Brands similarities and differences Element/item Kilimanjaro Premium Larger Heineken 1. Packs Cans of the same size

Bottles of different size Available in drought Cans of different size Bottles of different size Not available in drought 2. Bottle Long neck , Returnable, Long neck, Non-returnable, 3. Bottle Labels Three labels – front , back and neck labels Two labels – front and neck label 4. Pack colour Brown bottles, and yellow colours cans Both bottles and cans are green in colour 5. Alcohol 4. 5%ABV 5%ABV and 2%ABV for Heineken light For the product context for the local brand (Kilimanjaro) has created a competitive advantage when it was changed from euro to longneck (locally called “mwanamkenyonga”) in September 2006.

The shape of the bottle became so appealing, making the product sexy and lovable. Similarly, the changes in label shapes also made the product look nice. Figure 3: Kilimanjaro in different bottle packs This product development resulted into an increase in sales share by 24% in the North West region, while showing a big sales increase in other regions as well for the brand. In the North West region, the brand moved to the second selling brand from third position, after brand development.

For the case of Heineken, the market have experienced more similar the same brands being imported, with in introduction of Heineken light (2%ABV). This product didn’t catch the market as consumers saw it more similar to juice. The brand did not perform and it was removed from the market. Figure 4: Heineken in different products and packs 3. 2Communication For any brand, communication is very important, and it should be for different purposes. Similarly, for international and local markets, effective communication is crucial to both firms and brand success.

To do this, firms mostly use different techniques and means which are called communication mix. The communication mix includes: advertising, sales promotion, direct marketing, personal selling and public relations (Kotler, 2006; Joshi, 2010) Advertising is referred to be the non-personal formal of communication which uses the paid media to include newspaper, magazines, ration, television, and other mass media, by an identified sponsor (Solomon et, al, 2009; Kotler and Keller, 2010; Joshi 2010). In Tanzania, both Kilimanjaro and Heineken have been using this strategy to communicate.

Kilimanjaro have used almost all local communication media with large coverage or high regional coverage. The use of radio adverts, local televisions and newspapers is very popular. And it has managed to have very nice and influencing slogans when advertising the product. Some of which included, “if you can’t climb it, drink it”or “be on the top of Africa”, to mean if you cannot climb Mount Kilimanjaro (the highest mountain in Africa) then drink Kilimanjaro beer, or by drinking Kilimanjaro you will be at the top of the highest mountain and hence at the top of Africa.

Similarly, the brand have been advertising itself as the truly Tanzania beer, i. e. 100%TZ flavour. 3Figure 5: Some Kilimanjaro advertising logos For the case of Heineken, advertising is mostly through television and only the international channels of Dstv football, and mostly during UEFA champion’s league. This is because it uses the standardization advertising strategy. Joshi (2010) defines standardization as the use of the same advertising strategy across the countries you are operating. Thus, since Heineken is a multinational company, then its strategy is advertising.

In Tanzania, Heineken have not been advertised in any local television, newspaper, radio or magazine. This makes the coverage or the advertising to be limited to only those who are football fun and those who have subscribed Dstv channel. Then, because of limited access to coverage, Heineken is not very much known in rural markets where 80% of the Tanzanian population live. This limits the market for the brand as well. Heineken also is advertised by using the international slogans, and strategies.

In advertising, selection of media is among of the most important challenges – as it should cover the targeted audience, and be in right time. Similarly, and selection of slogan is also important as the society will have an impact when decode the message. In marketing, it is not the encoding that is important, but the decoding, because if the message will be poorly decoded, then the image of the brand will be distorted. Thus, the use of international covering media, and the “power your world” slogan, makes Heineken very international, and builds and exceptional image to market consumers in Tanzanian market.

Figure 6:Heineken, Power Your World slogan Sales promotion comprises of short-term marketing measures which stimulates quick demand and results into an immediate sales of the product. This element has different techniques to make it successful, some of which includes rebate and price discount, samples and coupon, gifts, and catalogue. Both brands, have been using different strategies for the institutionalizing the strategy. Kilimanjaro have been using different mechanics for sales promotion to include luck draws, price discount (buy two get one free), and street selling shows.

Also Kilimanjaro has used football funs to make sales through “mtanijembe” – “the great team fun” which were targeting two big teams’ fans – Simba Sports Club and Dar Young Africans. Figure 7: some sales promotion activities for Kilimanjaro Heineken on the other hand, have been doing sales promotion, but mostly in the form of sampling, and coupons. Heineken have been issuing coupon to sampled people, and also doing in-door sampling sales promotions. However, this is mostly done in big cities and municipals, as well as executive outlets.

This limits the reachability, and builds a brand image to be for people with high income only. 4Figure 8: Some sales promotion activities for Heineken in Tanzania Public relation or corporate social responsibility is a form of communication where the firm or brand builds its image through offerings and supporting public activities, initiative and events. This may include sponsorship of sports and cultural events, press releases, and even lobbying at the central or local government levels (Mollel, 2005; Perreault and McCarthy, 2006; Solomon et, al 2009).

Kilimanjaro has been doing so many public relations in different forms than Heineken. Being among the popular and leading brands in the market, it should gain loyalty and trust among customers and the society. Kilimanjaro is sponsoring so many events from health to entertainment. Kilimanjaro is for example a core sponsor of two major football teams in Tanzania – Simba sports club and Dar Young African Football club. Also the brand is sponsoring the highest and most respected music awards in the country –KiliMusic Awards, and the highly respected and famous marathon in Tanzania – Kilimanjaro marathon.

Figure 9: Kilimanjaro sponsorship events Apart from sponsoring entertainment sector, Kilimanjaro have built water infrastructures in Kilimanjaro region, have provided agricultural support in wheat and barley, and have renovated some schools and hospitals in different regions. This has created a very big trust and acceptability among youth and beers consumers in the market. On the other hand, Heineken has sponsorship programmes but not of benefit to the local community of the local market – Tanzania in this case. This is because it is sponsoring international events, or at international level.

For example, in 2013 Heineken sponsored a movie of James bond, and also it is an official sponsor of UEFA champions’ league. This makes a brand not to be trusted and seem not responsible for the development or wellbeing of the community. So to the brand, this is a disadvantage. Direct marketing is also an effective marketing communication tool where in a firm has direct interaction with the customers. When this is done by firm’s sales force or commissioned agents for the same, it is considered as personal selling. This strategy is expensive and needs much time to be done. 3. 3. Pricing the product

Pricing is among the most important aspect of building brand image and ensure profitability of the product or brand. In international market, pricing strategies becomes more complicated because it involves other aspects like monetary policies of the host country, purchasing power, and exchange rates. However, it can easily be adopted because the strategy involves less commitment of firms’ resources. Price is the sum of the value received from the customer for the product. It is generally refers in terms of money, but it may also include other tangible and intangible items of utility (Joshi, 2010).

In Tanzania, Kilimanjaro is priced at retail price throughout the market. The manufacturing company – Tanzania breweries in this case, always issues the proposed retail price, and they make sure it is enforced. Currently, Kilimanjaro is sold at Tshs 2000, and this retail price will be charged all over the country and to all outlets, except the upmarket (we are there outlet segment). On the other hand, Heineken is using adopted pricing strategies. This could be due to exchange rates, and differences in monetary value of the countries they are trading.

But in Tanzania, Heineken is among brands offered at premium prices, and currently is offered at a price of Tshs 3500 to Tshs 5000 per bottle or can 340mls. For Heineken, pricing is very fragmented, and each outlet decides on the price depending on where and how acquired the product. Since the brand is imported, then wholesale price depends much on first price from the country of origin, and secondly associated costs of bringing the product in Tanzania. This causes price fluctuation at both wholesale and retailing level, and thus leads to consumer dilemma i.e. no one is precisely aware as at what price eh/she will purchase the product. This creates a challenging buying decision as no one wants to buy a product with uncertain prices. 3. 4. Brand distribution In order to offer value to its customers, and ensure brand sales volume and profit growth, firms should ensure availability is at maximum. Getting products into hands of customers is among the most effective strategic move for organisations since you cannot sell what is not available. This function is highly performed in the channel of distribution.

Channel of distribution is the combination of agencies, institutions, units, people, and interested parties network in performing all the activities required to link producers with users to accomplish the marketing tasks (Joshi, 2006). Some of these tasks include (Mollel, 2005; Joshi, 2006; Kotler and Keller, 2010): physical flow of goods from the producers or manufacturers to the ultimate consumers/customers; transfer of ownership during the product flow; realization and management of payments flow; regular flow of information; and enhancing effective communication.

For local market, managing channels of distribution is relatively easier than in international market. This makes easy access of customers for local brands, than international brands. In that case, Kilimanjaro has a very strong distribution network, with commissioned and well structured distribution channel members. It all begins with manufacturing plants from all four regions. Since the market is segmented geographically, then each segment has its own manufacturing plant. A form plant, Kilimanjaro is sent to either depots or distributors. Each region has its own depots and distributors.

Then, wholesalers, bulk buyers, and stockists will buy from depots and distributors, and of course within themselves for areas where infrastructures are not well developed. Then retailers will buy from wholesalers, bulk buyers, and stockists. This distribution network has ensured brand availability in the market. For urban areas, availability is about 98%, while for rural markets availability is approximately 89%. This is explained as in the figure below: Figure 10: Kilimanjaro distribution channel For the case of Heineken in Tanzania, its distribution is complicated.

At first, the sources are not always the same. Heineken importers get the product from different countries. In Africa, Heineken is manufactured in 25 countries, thus the product can be acquired from any of those within the region. However; in Tanzania, most imports are from South Africa and Malawi. The mostly known distributor is Mabibo beer wine and spirits importers, and they perform all activities and functions in international markets. The major challenge faced by the brand is the availability of product from other importers, and imports from West Africa.

These imports saturate the markets, and sometimes distorts brand image by offering the products at relatively cheaper prices, and having improper communication. Also, from distributor, the distribution channel is not well established since the product is transported by public transports, or in other mixed cargo trucks. In most cases, Heineken is available not from well known locations and identified suppliers. This is a disadvantage to the brand because its distribution channel is not well known and hence availability is limited. 5.0 Recommendations to the local brand’s marketing manager Kilimanjaro Lager is among the performing brands in Tanzanian market, and it takes a large market share of beer brands in Tanzania. But keeping that share is a challenge; hence marketing manager should make sure appropriate strategies are in place. Product itself is fine, and the marketing manager should ensure proper positioning and brand image building. Since the beer has positioned itself as a youth and truly Tanzanian, then its advertising, social responsibility and sales promotion should focus on that image.

Coverage and availability in rural should be given an important attention. In Tanzania, about 75% of the population is in rural areas. This makes potential growth for the brand, hence the segment will be targeted, and for sure the brand will grow Social responsibility and sponsorship should cover the whole market. Currently, sponsorship and social responsibility are biased to North East and South region, this destructs the image of being a Tanzanian brand, and customer could let only people from those areas to consume the brand. This will be a challenge.

Hence the aids, sponsorships and social responsibilities should be national 6. 0Conclusions To enter and operate in international markets, particularly in developing country is very challenging because consumers are more price and quantity sensitive relatively to quality and other product features. Thus setting marketing strategies to penetrate these markets becomes very difficult. A proper decision is important, particularly on product decisions – it is important to have adaptive product than standardized; communications, to have an effective use of local media than multinational since reachability and coverage is very limited.

Similarly, consumer should have some sense of ownership, and hence sponsorships and social responsibility are mostly valued. Heineken could think of franchising than importing strategy in order to penetrate the market. There is growth potentials which are not well utilized, and the brand has good image For Kilimanjaro, their positioning is perfect, and availability is good, and the products still have growth potentials if more marketing strategies will be initiated.

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