Financial Aspect of 961 Beer

1. Long term objective

 Capability to produce in larger volume to cover pub’s demand
 Consolidate or expand?
2. Pay dividend
a. Price
The price for each case of 961 Beer is $12.5. Noted that the price for each case of beer
is lower than its cost. This is because as a new entry to the market, 961 Beer tried to
position their product stay competitive. Lebanon beer has a very high competition,
therefore to increase more sales, 961 Beer have to set the price at minimum to increase
potential buyer.
b. Competition
 Almaza, dominated most of Lebanon beer market, founded in 1933, acquired by
Heineken in 2002.
 Heineken also acquired second Lebanese brewer in 2003.
 Lack of any anti-competitive law
c. Innovation
961 innovation is craft brewing. Most of beer market consist of mass production. Craft
breweries market is growing. Craft beer had not previously existed in Lebanon.
961 offered four regular beers: wit bier, porter, red ale, and lager. 961 specialty product
is Lebanese Pale Ale. Most beer consumers in Lebanon have never tasted red ale.
New beer styles and types. Mixed traditional ingredients (hops, barley, yeast, and
water) with unorthodox and non-traditional ingredients.
d. Revenue
The revenue from selling 961 Beer per case is US$10.6 in 2006 & US$12.5 in 2008.
e. Cost
The cost for manufacturing 961 Beer per case is US$13.6 in 2006 & 2008. This cost
only accounted raw materials & packaging.
f. Sales
The actual sales of 961 Beer for 2008 and projected sales for following years is shown
in table below:
Volume of Beer Sold
Year
(case = 24 bottles)
Actual 2008 6,000
Projected 2009 12,000
Projected 2011 60,000
Projected 2012 200,000

Porter 5 Forces
Competitive Rivalry
Threat of New Entry Medium
The competition of beer market in Lebanon is very high.
Lebanese consumer interest in nightlife makes demand in
alcoholic beverages, especially beers, high. 961 Beer faces
High threat not only from local beers but also from international
beers such as Carlsberg or Heineken. 961 Beer main local
competitor, Almaza, is also a subsidiary of Heineken. This
brand have the capability to produce beer in mass numbers.
Market demand for beer in Lebanon is high. Beirut, the
capital city of Lebanon, has fascinating nightlife. The
consumption of beer in Lebanon is not limited to major
 brands (mass production) but open to craft beer. The
investment for craft beer is not as high as mass production’s.
Although it takes recursive trial-and-error process, the
potential for sales growth is promising. However, due to
minimum variety of beer in Lebanon, it is difficult to craft
beers that suit consumer preference.
In terms of beer, Lebanon consumers might consider other
type of beer such as non-alcoholic beers. Considering
religious views in Gulf states, non-alcoholic beers
Threat of Substitution Medium consumption is about 60 million liters per year. However,
in terms of craft beer, especially types of beer that are
uncommon for Lebanese consumer such as red ale,
substitute product is minimum.
Most of raw material for production of 961 Beer (hops) were
still imported from Germany. This means, to meet their
needs for raw material, 961 Beer still have high cost due to
importing cost from Germany to Lebanon. Germany is also
Bargaining Power of famous for its beer qualities, therefore hops imported from
Medium
Supplier Germany has a high quality and price. However, some local
farmers are growing hops for 961 Beer future production.
The presence of local hops farm might significantly
minimize the raw material cost, while it may limited in
quality.
Beer market in Lebanon consists of local and international
breweries. Many of those brands have been around since the
beginning of the 20th century. Consumers in Lebanon is
known for their fascinating nightlife. In addition, political
situation in Lebanon makes consumer less willing to spend
Bargaining Power of
Medium nights outside Therefore beer breweries have to pay high
Buyer
amount of money to satisfy consumer needs and reduce
prices to remain competitive in the market. However, with
the growing awareness of local product (that are not
controlled by international brands) and craft beer, consumer
might want to consider spend more money.

Product Life Cycle

Product Life Cycle is a tool to assess the sequence of stages for a new product. The outcome of Product
Life Cycle is applied to marketing strategy and marketing mix. Therefore, to determine 961 Beer PLC
it is viewed by Marketing Mix aspects:
 Product
o 961 Beer products are new products, considering its first launch it 2006
o 961 Beer market is considered new and niche market
 Price
o 961 Beer pricing strategy is to set its product price competitive. It means that since it is a
new product, 961 Beer had to set a price that might be lower than its competitor so that
potential buyer have the willingness to buy their products.
 Promotion
 o 961 Beer is still trying to increase brand awareness by using social media to advertise their
products. The key in their promotion is having conversation and interaction to their
potential customers rather than just advertising announcement.
 Distribution
o Due to high competitive environment in Lebanon, 961 Beer distributed their products
through their own pub that was specifically created to sell their products.
Based on this marketing mix analysis, it can be concluded that 961 Beer products is still at Introduction
stage.

Consolidate or Expand
Based on Financial Analysis, Porter Five Forces Analysis, and Product Life Cycle-Marketing Mix
analysis, the future strategy for 961 Beer is to expand its business. The success after product launch
should not be ignored. It can be assumed that even though 961 Beer did not target specific types of
customers, buyers enjoy and aware of the products delivered by 961 Beer. The company actual and
projected sales shows growth can be increased by 100 to 400%. It means that 961 Beer can be successful
in Lebanese beer market, especially for craft beer .Based on company’s and industry’s Five Forces
Analysis, 961 Beer should pursue the strategy to expand. The only challenge is from the competition
for national-wide beer market. Lack of anti-competitive law made market leader might limit 961 Beer
to distribute their product to further areas. With the political crisis and war in Middle East, the
emergence of such law might have to wait. Based on Product Life Cycle analysis, 961 Beer is at
Introduction stage. This means the potential for 961 Beer to grow and increase valuation is big. 961
Beer is not only successful to introduce their product to the Lebanon beer market but might also create
a new-segmented market or niche market.
Business expansion is related to winning. At introduction stage, 961 Beer winning strategy should
consider winning in its own market, craft beer, rather than directly aiming to become the market leader
of Lebanon beer market. 961 Beer resources, brand awareness, and distribution channels at this stage
were not sufficient enough to take over its main competitor, Almaza, which is supported by one of the
top beer producers in the world, Heineken. 961 Beer objectives are to win in this stage is increasing
brand awareness and product demands. These strategy is not independent to one another, if 961 Beer is
able to meet its projected demands then indirectly it will also affect brand awareness. 961 Beer challenge
is to produce beer at large volume due to their machinery incapability. Political crisis and war also affect
their capability because of one of the country that is the manufacturer of their machine, refuse to send
its technician. 961 Beer 2008 production is 6,000 cases or equal to 4752 liters of beer (6000 cases times
24 bottles times 330 ml). It is still considered small (0.32%) comparing to national beer consumption
annually (about 15 million liters). Proposed solution to this problem is by selling the pub and current
machinery in order to buy a brewery plant and new machinery. Political crisis and war might limit the
machine option but 961 Beer can view other options such as secondary market or buying from countries
that are willing to sell and provide after sales service to Lebanon despite the crisis. Assuming after 961
Beer already made these proposed investment their production capacity is increased to about 200,000
cases or 1,584,000 liters, their projected sales can increase to 11% of national beer consumption.

Reference:
http://www.more-for-small-business.com/product-life-cycle.html . (Accessed on 02/10/2018 00:03)
https://smallbusiness.chron.com/would-marketing-mix-change-different-stages-product-life-cycle-
3283.html . (Accessed on 02/10/2018 09:16)
http://www.nogarlicnoonions.com/lebanese-beer-market-yet-to-brew/ . (Published on 14/04/2014,
Accessed on 02/10/2018 10:17)