Marketing Corona in Japan

9 September 2016

How aligned are Modelo’s, EBI’s and NS’s short and long-term interests ? In recent times, the market changes affected the short and long-term interest of Modelo, Export Brands International and Nippon Spirits. It was clear that the big picture was extremely difficult to see from the same united perspective as in the past, thus making the Japanese Corona business quite uncertain.

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Corona had a success of almost one decade in the Japanese market also due to the clear and structured partnership between Modelo, Export Brands International and Nippon Spirits. It was very simple as Modelo produced the beer, Export Brands International coordinated delivery and developed the Japanese marketing strategy, and Nippon Spirits distributed and implemented marketing tactics. The pressure of globalization pushed Modelo to consolidate marketing communications throughout the Asia-Pacific region.

In fact the entry of Corona to Japan wanted to be a bridge towards an incursion into other Asian markets that until the end happened with success. This was an objective as it was known that Japanese were Asian trendsetters, and their example will be followed by other countries in the region. But the above Modelo decision affected Export Brands International and Nippon Spirits, as both lost some of their functions and autonomy. Instead Modelo became more involved, deciding to restructure operations, and to develop a more standardized brand image while reaping economies of scale.

It was clear that the short and long term interest of the 3 partners was not aligned in the same direction, and somehow the benefits for each party involved were different. Much more, because the market was evolving, important changes took place as for example a trend to switch back to more affordable domestic brands, particularly lower priced. This phenomenon was due to the world recession that also was present in Japan, and affected the purchasing power. To react to this trend, Modelo could think to other options instead of the direct export of the Corona beer.

I can refer here at a possible move that Modelo could implement, meaning setting up its own local production facility. This move can contribute to : a lower cost (making Corona more affordable) , a perceived local brand image (making Corona almost a local beer) and a more easy distribution in the Asia-Pacific region. In conclusion, also the last exposed idea, can become a fact and contribute to a divergent short and long-term interests between the three partners on the Japanese market for Corona business. 2. What dangers does EBI potentially face ?

As stated in the previous answer, the dangers that Export Brands International can potentially face on the Japanese market are significant and can become real threats. First of all, Modelo can think to increase the foothold in Japan by setting up a own local production facility that will capitalize on the company’s extensive brewing and beer marketing experience, reduce transport and importation costs, and provide nearly total control. Also a second option will represent a danger for Export Brands International, if Modelo will decide to enter into a joint venture with a local brewer and license Corona production and distribution.

This 2 options can be feasible as, like I said, in the last years, Japanese customers were really affected by the recession, and the foreign and genuine nature become not so much important for customers. Secondly, connected or not necessary with the above point, Modelo can be tempted to conduct delivery and marketing in Japan, after a lot of years of indirect presence in the market. The period connected with Japan, created the know-how for logistic and regulatory issues, and most important familiarity with market’s cultural nuances. This can happen as during the times, Modelo focused on Corona brand building which now is at maturity.

Let’s say that the situation will continue like it is now, none of the 2 mentioned dangers happening, other thing can become a real “pain” for Export Brands International: I am referring here at the fact that consumers are increasingly shifting away from mass-produced beers towards high quality, classier, and locally produced craft micro brews. Or the fact that Japanese consumers will be tempted to buy affordable domestic brands due to the economic downturn. As because Corona is the top seller in the Export Brands International portfolio, their revenues and profitability will be seriously affected.

Not to say the fact that right now, Corona is not the only Mexican beer present in the Japanese market, now being under direct attack by a series of other Mexican beer that have high marketing budgets. To maintain the position, Export Brands International is forced to pump heavily in the investment marketing budget , much more than the others as Corona must change and reinvent itself. Export Brands International must come with something new trying once again to differentiate as in the beginnings, now being a lot harder.

The situation can even explode for Export Brands International, as large beers conglomerates with tremendous power, are targeting the same segment and are creating similar beers. We have the real example of Anheuser-Busch new Bud Light Lime which was selling extremely well in the United States attacking Corona position and following the traces of the last one. And as the candy on the cake, the corporate landscape is continuously changing: Export Brands International can be caught in a high level game, where different corporation with different interest are playing at a global scale.

I can think at the fact that Anheuser-Busch has now 50% of Modelo, and after buying everything they will be forced in some markets to sell out most probably first Corona division in order not to have a dominant position (like happened recently in United States). 3. How can EBI consolidate its Corona business ? Export Brands International can consolidate Corona business in Japan by having a new approach towards the other two partners : Modelo and Nippon Spirits. The partnership that was on place from almost ten years ago, must be up-graded as the situation is not still the same.

Export Brands International must build over the foundation that represented the Corona’s success in Japan that was partly attributable to the clear and structures partnership between the three companies. Practically Modelo produced the beer, Export Brands International coordinated delivery and developed the Japanese marketing strategy, and Nippon Spirits distributed and implemented marketing tactics. After open discussion between all three parties, Export Brands International must understand everybody objectives, trying to think how to fulfil the desire of each one and connect it to the major purpose.

Knowing that Modelo new interest is in the Asia-Pacific region, maybe Export Brands International can represents their interests and consolidate their marketing communications in this area. Much more they can extend the initial reason that they were selected in the first instance by Modelo : they covered all aspects of exporting in-house, from shipping and finance to sales and marketing, making it a convenient one-stop solution in Japan.

The same characteristics can be valid as a large scale in the Asia-Pacific region, and be perceived as real value added and minimal risk for Modelo. Much more, Export Brands International can become in the desired region a specialist in food and beverage exports, being familiar with the delicate logistical and regulatory issues, and exploiting the exporting experience they have in Asia which meant familiarity with all markets cultural nuances and networks (it is well known that most of Asian countries are largely operating on personal relationships).

Going furthermore, Export Brands International should explore the possibility to enter a joint venture agreement with an Asian local brewer that in a more advanced step will gave the possibility to propose to Modelo an option to give the license of Corona for production and distribution. In this way Export Brands International can keep, even gain, more control that in the actual situation and also having a higher turnover and gross margin.

Not even counting that the business structure can be proposed to other clients that are present in the Export Brands International portfolio in the region. And because Nippon Spirits is an important chain in the business, Export Brands International can push them towards a regional development. I am referring here that Export Brands International can help them becoming a regional liquor wholesaler.

What Nippon Spirits have to achieve will be to create a regional marketing system, to upgrade the network of connections, to cover the Asia-Pacific region with sales offices in key countries and cities and to bring in the portfolio an impressive number of clients like in Japan : convenience stores, supermarkets, liquor stores, discount stores, departments stores, bars and restaurants, all ready to sell the product. 4. What alternatives does EBI have ?

Export Brands International has alternatives as they have a series of unique competencies: a speciality in food and beverage exports, familiarity with the delicate logistical and regulatory issues, long experience exporting in Japan which meant familiarity with market’s cultural nuances, an established Japanese network and a long-term focus on international brand building. Much more it is very important that Export Brands International is a United States reliable company, specialised in full service export management.

Export Brands International is a company that can cover all aspects of exporting in-house, from shipping and finance to sales and marketing, making it a convenient one-stop solution. Taking into account the above, and as I said previously, Export Brands International can try to develop the actual partnership that they have with Modelo and Nippon Spirits. They can exploit even more the actual situation by adapting the cooperation to the market change.

Export Brands International can even become a top regional player in the Asia-Pacific region and still working with Modelo and Nippon Spirits in a more advance partnership that will suppose higher objective than only just management of exports in Japan. Much more, in such a 3 partnership, it can be an advantage for the others, that Export Brands International to become also a local producer and to set up a facility in the area. As I said before, maybe to agree on a joint-venture in Japan, as they have a solid reputation and a powerful brand.

If Export Brands International will anticipate that one of the other 2 partners, or even both, will want to split, they will have to prepare alternatives accordingly. In the situation that Modelo intend to consolidate the marketing communications throughout the Asia-Pacific region, this action affecting Export Brands International functions and autonomy, they might think also to a complete separation, trying to represent the interest of other beer producers in Japan.

It is knew that the marketing was evolving, with shifts in consumer trends (top-end consumers were more attracted towards higher quality, classier and not so much mass-produced beers and bottom end consumers wanted more affordable products as they were affected by world recession). Connected with the fact that the market was attractive for different beer producer, Export Brands International can really influence the increase of competition in this segment.

In the situation that Nippon Spirits, affected by the decision of Modelo, will leave the partnership, Export Brands International can think also to extend the service portfolio in Japan by becoming a specialty liquor wholesaler in Japan. Export Brands International can set the objective of becoming a top importer/distributor, by handling even different brands of beer.

Export Brands International can focus on establish a successful beer marketing system, a broad network of connections, national coverage with sales office in key cities around the country, and numerous clients : convenience stores, supermarkets, liquor shops, discount stores, department stores, bars and restaurants. This alternative can be validate in case of continuing the partnership with Modelo but even if the Mexicans will step also back from the partnership. In conclusion, Export Brands International can have alternatives to the change. I tried to present shortly only some scenarios as considered by me the most relevant and feasible.

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