THE GLOBAL BRANDING OF STELLA ARTOIS

Jan-Daniel Laufhtte Individual Assignment in International Marketing IIM-3-424

London South Bank University 21/11/03

The Global Branding of STELLA ARTOIS

Table of contents List of Figures.................................................................................i Interbrew in brief ...........................................................................1 The Beer Market structure ............................................................1 Interbrews Positioning .................................................................4 The global STELLA ARTOIS brand launch ..................................6 Does market segmentation make sense?....................................7 Conclusion.....................................................................................9 References .....................................................................................ii

The Global Branding of STELLA ARTOIS

List of Figures Figure1: PEST-Analysis ................................................................ 1 Figure 2: Life-Cycle-Model............................................................ 2 Figure 3: Porters 5 Forces ........................................................... 3 Figure 4: The BCG-Matrix ............................................................. 4 Figure 5: SWOT-Analysis.............................................................. 5 Figure 6: Ansoffs Product-Market-Matrix ................................... 8 Figure 7: Segmentspezifische Marktbearbeitungsstrategien (FRETER 1983)............................................................................... 9

The Global Branding of STELLA ARTOIS

Interbrew in brief
Interbrews roots can be traced back to 1366, to the Den Hoorn brewery. Through merger and acquisition Interbrew became the worlds fourth largest brewer. The companys expansion started with the acquisition of Leffe Brewery in Belgium in 1954. Interbrew fourfold its production from 14.7 million hls (in 1992) to 57.5 million hls (in 1998).

The Beer Market structure

The worldwide markets were during the 1990s influenced by a number of major trends (see Figure 2). The opening of the Central- and Eastern-European countries marked the beginning of the last decade. The Asian crisis shocked the financial markets in 1997. Through Internet and Satellite TV information can be spread all over the world within seconds. The developed countries show a growing conscious for environmental and health issues is notable. In the future a trend towards Premium and Specialty Beer is expected. Figure 1: PEST-Analysis POLITICAL
Opening Europe of Central-& Eastern

ECONOMICAL
Business Cycles: Mature Markets vs. Growth Markets Asian financial crisis

Tight social policies consumption

on alcohol

Lifestyle changes: emerging wine culture in some key markets Growing health conscious: Diet/Light Beers & Mixeries Trend towards premium & specialty products

Introduction of global medias

SOCIOCULTURAL

TECHNOLOGICAL

Source: JOHNSON, G. / SCHOLES, K. (2002): Exploring Corporate Strategy. 6th edition, Harlow: Prentice-Hall, p.100.

The Global Branding of STELLA ARTOIS The worldwide Beer for beer grew in the 1990s with 1-2% per year. But there were significantly regional differences in market size and market growth between Mature Markets and Growth Markets (see Figure 2). Mature Markets, e.g. the North Americas, New Zealand/Australia and Western Europe have shrinking beer markets, because of market saturation. At its opposite Growth Markets in Asia, Central-and Eastern-Europe and Central- and South-America are in an early stage of development and still offer a huge potential for the beer brewers. Figure 2: Life-Cycle-Model GROWTH MARKET SIZE IN lpc
WesternEurope NorthernAmericas NZL / AUS

Central-& SouthAmerica Asia

Central-& Eastern-Europe

DEVELOPMENT

GROWTH

SHAKEOUT

MATURITY

DECLINE

Source: KOTLER, P. et al (1999): Principles of Marketing. 2nd European edition, New Jersey: Prentice-Hall, p.627.

The world beer industry is still fragmented with the four major companies only accounting for 22% of the worldwide market. Hence it was expected that there are chances of consolidation. The aim of industry rationalisation is gathering economies of scale in production, advertising and distribution. But the cost structure high ratio of fixed versus variable costs and different local tastes dampened the consolidation process in the brewery industry. Rationalisation through shifting to modern production facilities requires high investments, often in unstable economies. That is why capital expenditures in these markets should spread over a longer periods to ensure profitability also in early stages. Local brands are often established for centuries and an integral

The Global Branding of STELLA ARTOIS part of life. This fact makes it often difficult to market a brand successfully. The costumers are loyal to their well-known brands. Because of the capital-intensity and in order to save costs the brewery companies started to rationalise their supply base. Interbrew for example reduced number of its suppliers and works now more closely with them. On the one hand it may reduces the costs but on the other hand increases the dependences to the suppliers. Another factor, which affects the industry, is the threat of potential substitutes. The emerging wine market in New Zealand for example led to a slump in beer consumption. In other Mature Markets mixery drinks became common and took market share. Less threatening are Diet and Light Beers, which offer a new market for established and capital-equipped companies (see Figure 3). Figure 3: Porters 5 Forces
Potential entrants high ratio of fixed vs. variable costs

Suppliers power reduced supply base means higher dependence

Competitive Rivalry Heineken,Fosters Anheuser-Busch, Carlsberg

Buyers power no switching costs loyalty to local brands

Substitutes Wine Diet/Light Beer Mixeries Source: KOTLER. P. (2000): Marketing Management. The Millennium Edition, New Jersey: Prentice-Hall, p.218.

The Global Branding of STELLA ARTOIS

Interbrews Positioning
Interbrew is the fourth biggest brewer in the world, competing with AnheuserBusch (USA), Heineken (Netherlands), Carlsberg (Denmark) and Fosters (Australia). Key markets are Belgium, the Netherlands, France, UK, North America, where the company owns Labatt, Mexico (with 37% of the total volume in 1998). The company is also interested in the Growth Markets in Central- and Eastern Europe, South America and Asia (see Figure 4). 86% of Interbrews volume is sold in the top 10 markets, but Interbrews beer is available in over 80 countries. Figure 4: The BCG-Matrix RELATIVE MARKET SHARE MARKET GROWTH RATE 20% STARS
Central- & EasternEurope UK

QUESTION MARKS

10%

South America

Asia

Mexico

0% 10x

USA / Canada Netherlands Belgium France

CASH COWS

POOR DOGS 1x 0.1x

Source: GILLIGAN, C. / WILSON, R.M.S. (2003): Strategic Marketing Planning. Burlington: Butterworth-Heinemann, p.455.

The Interbrew Triangle operations, markets and brands illustrates the corporate strategy. The operational facet shows some of the companies strength (see Figure 5). Most improvements in processes are based on employees propositions. Locations which capacities cannot meet the demanded output are supplemented by less used locations and the supply costs were reduced by selecting a smaller number of suppliers.

The Global Branding of STELLA ARTOIS Interbrews market strategy was to lessen dependence on the domestic markets Canada and Belgium. In the Mature Markets main objectives were to gain market share and improve margins. There Interbrew benefited from its unique portfolio of premium and specialty beers. Figure 5: SWOT-Analysis INTERNAL STRENGHTS
Interbrews employees improve processes Strategic sourcing utilisation and permantly capacity

WEAKNESSES
Corporate structure No global brand

Unique portfolio of premium and specialty beers New markets in Asia, Central-& Eastern-Europe, Americas Competitors Further decrease of consumption in key markets New substitutes

OPPORTUNITIES EXTERNAL

THREATS

In the late 90s Interbrew outperformed its competitors. The growth referred mainly to the premium beer segment, which grew quickly, particularly in the large mature markets. The annually growth for premium and specialty beer in the USA was 9% in the 1990s. Interbrews market share in this market grew even faster. The growth of the premium STELLA ARTOIS was in 1998 19.7%. In the Growth Markets main objective was to use the given opportunities and build significant positions with long-term potential through acquisitions and joint ventures. To achieve its goals Interbrew chose a decentralised approach where country teams could manage their own affairs. It led to early successes but was a weakness in the global launch of STELLA ARTOIS.
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The Global Branding of STELLA ARTOIS Interbrews brand strategy was focused on purchasing and developing strong local brands. Certain brands with potential were market across markets. The newly build Oland Specialty Beer Company promoted several brands successfully (40% increased volumes in its first operating year) with the message richness, mystique and heritage of beer. A couple of premium Belgian beers were sold in the new Belgian Beer Caf in the key markets. The last aspect of Interbrews brand strategy was to develop a global brand.

The global STELLA ARTOIS brand launch

With the launch of a global brand the Interbrew management expected a higher corporate valuation and an improvement for the P/E leverage. Although the global brands market was still small there were a couple of trends that would improve this market segment: There was a higher demand for premium (international) and economypriced beer forecasted. The Internationalisation of the beer business. Global medias could be used for building brands. A global brand would create synergies in advertising and sponsoring and reduce costs. Converging consumer needs in many markets. Interbrew chose STELLA ARTOIS, the companys most broadly available and oldest brand. Labatt the strong Canadian brand was widely unknown outside the North Americas. STELLA ARTOIS was faced with a decline in its domestic market and sought for new market opportunities, first of all in Central Europe. In 1997 it received a thrust when it was launched through three subsidiaries in Central Europe.

The Global Branding of STELLA ARTOIS Not only in the brands key markets Belgium, France and the UK, but also in all Central European markets it was priced at a premium. This fact underlines its premium status and should have made it easier to launch it in other Mature Markets, in which was a trend to premium and specialty beer. With the choice of the premium STELLA ARTOIS as its global brand Interbrew took advantage of this trend. A global premium brand also promised higher margins, which was part of the market strategy. With the Belgian Beer Caf the company had already founded one marketing and distribution tool for the Mature Markets. Most of the Growth Markets were entered when the premium market still was at an early stage and got developed by Interbrew. At the global campaign Interbrew was faced with organisational problems. The decentralised approach, formerly seen as a driver of speed of success in many markets was then a handicap (see above Figure 5). In the short-term there was no common advertising campaign and hence no synergies in advertising and sponsoring.

Does market segmentation make sense?

As a benchmark between Carlsberg and Heineken has shown, P/E leverage and valuation did not depend on a global brand rather on its positioning in growing markets. Interbrew developed four screens a new market has to meet: A large and/or growing market with a premium lager segment of at least 5% and the possibility to position STELLA ARTOIS within the top 3. Attractive margins after at least 3 years. Local partners who assure the right quality and co-invest in the brand. Cross-boarder effects of success in from one market to another. The STELLA ARTOIS launch in Central Europe on a city-by-city-basis and the established Belgium Beer Caf-Chain suggested a centrally supervised but locally tailored campaign, to meet the local environment, focused on one target group: () young [male] adults living in urban centres, with subsequent pull from outlying areas following key city success.

The Global Branding of STELLA ARTOIS The purpose of market segmentation is to identify relatively homogeneous groups of consumers with similar consumption patterns. A market segment has 4 components: (1) it must identifiable, (2) it must be economically reachable, (3) it is more homogeneous in its characteristics than the market as a whole and (4) it is large enough to be profitable (CATEORA & GHAURI, 2000). Another important aspect is, that a target group / market segment should be homogeneous in its usage of media and buying behaviour (MEFFERT; 2000). The defined target group can be easily found in every major city. The selective distribution, prestigious advertising, sponsoring of high-end celebrity events and the pricing above competitors products underlines on the one hand the premium character of STELLA ARTOIS and attracts on the other hand the target group of Young Urban Professionals. A problem could arise when the expenditures exceed the profits. Interbrew market STELLA ARTOIS in two different ways (see Figure 6). In new markets the Interbrew re-developed the focused market segment with posh campaigns like the launch in New York City in 1999 illustrated. Where it was already launched, Interbrew tried to gather new costumers and extend the market share, continuing with high marketing efforts. Figure 6: Ansoffs Product-Market-Matrix PRODUCTS Existing MARKET DEVELOPMENT New MARKETS
markets, where STELLA ARTOIS was newly launched markets, where STELLA ARTOIS was launched at an earlier point

New DIVERSIFICATION

Existing

MARKET PENETRATION / EXTENSION

PRODUCT DEVELOPMENT

Source: DOYLE, P. (2002): Marketing Management and Strategy. 3rd edition, Harlow: Prentice-Hall, p.393.

The Global Branding of STELLA ARTOIS The following Matrix of market treatment (FRETER, 1983) shows the approach Interbrew has chosen. Differentiated marketing efforts require higher (financial, personal) resources. Only bigger companies are able to use this strategy. Figure 7: Segmentspezifische Marktbearbeitungsstrategien (FRETER 1983) DEGREE OF DIFFERENTIATION Undifferentiated COVERING THE MARKET Completely Differentiated

UNDIFFERENTIATED MARKETING

DIFFERENTIATED MARKETING

Partly

CONCENTRATED MARKETING

DIFFERENTIATED MARKETING (SEGMENTS)

Source: MEFFERT, H. (2000): Marketing Grundlagen marktorientierter Unternehmensfhrung, Konzepte Instrumente Praxisbeispiele. 9th edition, Wiesebaden: Gabler-Verlag, p.217.

Conclusion
Interbrew made the right decision in launching a global brand. With its unrivalled portfolio of premium brands they already had a quite strong position in the growing premium beer segment. The company noticed that internationalisation and global medias offered the chance to position a brand global and receive higher margins even in the declining Mature Markets. The approach of a differentiated marketing strategy has to be seen more critical. The focused target group can be easily identified but the marketing efforts include financial risk. Marketing expenditures were doubled with that campaign. In the beginning it certainly interests the costumers but there is also the risk of over-whelming them and loose them in the end. In a situation of an economical crisis less costumer will favour posh products and prefer a more bottom-grounded product or even choose the total opposite, an economy-priced beer.
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The Global Branding of STELLA ARTOIS

References
BEAMISH, P.W. / GOERZEN, A. (2000): The Global Branding of Stella Artois. IVEY Richard Ivey School of Business, 9B00A019. CATEORA, P.R. / GHAURI, P.N. (2000): International Marketing European Edition. London: McGraw-Hill. DOYLE, P. (2002): Marketing Management and Strategy. 3rd edition, Harlow: Prentice-Hall. GILLIGAN, C. / WILSON, R.M.S. (2003): Strategic Marketing Planning. Burlington: Butterworth-Heinemann. JOHNSON, G. / SCHOLES, K. (2002): Exploring Corporate Strategy. 6th edition, Harlow: Prentice-Hall. KOTLER, P. et al (1999): Principles of Marketing. 2nd European edition, New Jersey: Prentice-Hall. KOTLER. P. (2000): Marketing Management. The Millennium Edition, New Jersey: Prentice-Hall. MEFFERT, H. (2000): Marketing Grundlagen marktorientierter Unternehmensfhrung, Konzepte Instrumente edition, Wiesebaden: Gabler-Verlag. Praxisbeispiele. 9th

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