Strategic and Marketing Analysis of Adnams Plc Brewer of Beer

Executive Summary

This paper is divided into two parts. Part one of the paper addresses the strategy analysis while part two addresses the marketing analysis. In the strategy analysis, tools such as SWOT analysis and the Porter’s five forces are used to determine the strategic positioning of Adnams. SWOT analysis identifies the internal strengths and weaknesses and how they can be used to take advantage of the external opportunities and limit the threats to the company from the entire business environment. Lastly, Porter’s five forces analyses the competitive environment of the company. In Porter’s analysis, factors such as barriers to entry, buyers’ power, suppliers’ power and the competition are analysed. The paper discussed how Adnams could take advantage of these forces to develop a competitive advantage.

Part two of this paper evaluates the marketing environment and strategy of Adnams. In this evaluation, PESTLE analysis is used to describe and analyse the business environment of Adnams. The PESTLE analysis laid emphasis on the political, economic and social factors that could influence the strategy of the firm. Finally, the paper identified the main competitors to Adnams and used the competitive analysis to determine the marketing mix for the identified target group that mainly comprised of the young population. However, sustainability of this marketing strategy would depend on the firms’ recognition and appreciation of the cultural and linguistic differences across the entire target population.

Introduction

Adnams plc is a mid-sized UK-based brewer of beer and located in Southwold, Suffolk. The company’s turnover is estimated at 50 million sterling pounds (around $75.8) as at 2012. Apart from beer, the company’s products also include wines, spirits and minerals. Its business lines include brewing, wholesaling and retailing of its products. However, the company has also diversified into other lines of business such as property ownership, pubs and hotel management. Some of the beer brands produced and marketed by Adnams includes Southwold Bitter, Broadside, Explorer, East Green, Gunhill and Lighthouse. On the other hand, the spirits brands include Adnams First Rate Gin, Adnams Longshore Premium Vodka, Adnams North Cove Oak Aged Vodka, Adnams Distilled Gin, and Adnams Barley Vodka (Johnson et al., 2014, 607). For a wider market reach, the company also uses its website to sell some of its products. In order to gain a competitive advantage in this market, the company, therefore, must come up with a strong strategy that would ensure it has an edge over its rivals. This paper assesses how Adnams can compete effectively in this market.

Discussion

Beer and spirit production industry as one of the first developing industries globally implies that the industry players must expect stiff competition from other brewers. In order to design a competitive strategy for Adnams, an analysis of its internal strengths and weaknesses and external opportunities and threats (SWOT Analysis) was conducted as described below.

The company draws its major strength from the relative stability it has enjoyed despite its mid-size (Johnson et al., 2014, 607). Lately, this stability has been threatened as it strives to be a family business that has opened its doors to the rest of the world. Additionally, the organisation’s culture has promoted excellent customer service that has impacted positively on the company’s brand and thus market share. Adnams commitment to stay true to its roots in Southwold has set it up as a unique and special brand thus enjoying much approval from the health conscious consumers who are interested in knowing the source of whatever they are consuming (Johnson et al., 2014, 607). Globalisation has increased the level and quality of competition to the Brewers. Adnams have looked sluggish in trying to expand to the overseas markets and has remained committed to maintaining its market share in the UK market. This phenomenon implies that Adnams have missed on the opportunities that are presented by globalisation while, on the other hand, they have become vulnerable to stiff and high-quality competition from overseas.

Adnams strengths such as stability, organisation’s culture, excellent customer care and its uniqueness are some of the factors that show its resources and capabilities towards the development of the competitive strategy in the market. In the beer industry, there are always opportunities that come as a result of the constant high demand for beer products and the ever evolving technology. These two factors give the brewer an incentive to improve its products and attract more customers creating a relationship between the consumer and the product.

The relationship between the company’s strengths and weaknesses will influence the nature of the company operations in the market (Altuntaşa et al., 2015, p. 304). For beer brewers, high advertising costs represent a huge financial burden on the firms. Due to the low budget, Adnams have concentrated majorly on their narrow product line and slow distribution that has hampered their expansion efforts. From the SWOT analysis, however, the company will be able to identify some opportunities for growth that could help it to generate more profits and cut costs. For example, globalisation and regional integration present an opportunity for Adnams to access a wider range of customers. However, attempts to improve the financial situation within the beer industry are threatened by tax increases, changing customer tastes and anti-alcohol campaigns across various regions.

PEST Analysis

Using PEST analysis, these external threats can be offset by other external opportunities. Politically and economically, the integration of the continental Europe by the creation of a common market and monetary union has brought forth more opportunities than threats. That is, the European Union has created a larger market that has similar tax regimes and the cultures have also been integrated more. Technologically, Adnams will be able to learn more through a larger market experience the best practices from other areas such as the beer and spirit makers from the Eastern Europe and the wine makers from France. These opportunities highlight the need for the company to increase their presence in the European market.

Porter’s Five Forces

Porter’s five forces is a tool used to analyse the competitive environment of an organisation or a company. According to Porter (2004, p. 56) this tool analyses the sector through evaluation of the factors that could attract existing or potential investors into the industry. In the brewery industry, factors such as economies of scale, lack of access to distribution channels, huge capital requirements, differentiation of products and government regulations could create barriers to entry by new firms. Additionally, the technology employed by the existing brewers and the scale of their production could ensure they produce at the lowest unit costs. However, a new firm that intends to join the industry cannot produce at a unit cost lower than the market price. Usually, the market belongs to the brewery corporations and the new competitor has to identify new distribution channels to can be difficult to find. Besides, the new investor shall require huge investments in the beer producing technology, marketing and promotion, market research and raw material acquisition. Government and lobby groups have also engaged in anti-alcohol campaigns that have impeded alcohol sales across the market. Another barrier to entry in this industry is the level of product differentiation. For example, brands such as Heineken and Lomza have achieved high positions in this industry and; therefore, a new entrant will face challenges of trust and loyalty among the target group.

Another force that will determine Adnams competitive position in the beer market is the bargaining power of the suppliers (Porter, 2004, p. 57). In the beer market, the bargaining power of the suppliers has been strongly influenced by the removal of aluminum cost controls thus the increase in the packaging costs of the beer products. Recycling of these materials has reduced companies’ dependent on these materials. Brewery sales are largely influenced by the brand conscious beer consumers who are the company’s target group. According to Johnson (1990, p. 193) to influence such a target group, the Brewers must lay more emphasis on the quality of their products, packaging and customer service. Usually, the customer will choose a brand that mostly fits his/her taste. Since beer lacks any substitutes, new products are hardly launched in this market. This can be justified by the unsuccessful bids by the non-alcohol beers in the past.

Brewery industry is one of the industries that is characterised by stiff competition. In this industry, successful companies have to employ good advertisement campaigns, cost minimisation technologies and attractive packaging. Market leaders such as Heineken and Carlsberg also enjoy benefits from economies of scale. In the beer industry, large, small and medium breweries have different strategies to gain market share and stay profitable. Big corporations promote their brands by investing huge funds in marketing and promotion campaigns while small and medium breweries aim at gaining the market share by selling low-quality cheap beers or by promoting the effectiveness of their salespersons in order to stay competitive (Iriyama, Kishore and Talukdar, 2015, p. 9).

Conclusion

This paper sought to evaluate the competitive strategy of Adnams by looking at the entire beer market. The paper found out the company has strengths in terms of its uniqueness and brand reputation that can be cultivated to turn the opportunities presented by the globalisation technology advancement into profits and thus competitive advantage. Lastly, the paper conducted Porter 5 forces that emphasised the existence of stiff competition in the beer industry and thus difficulty to entry by a new firm.

Due to intense competition in the brewery industry, strategies that can help the firms to acquire a competitive advantage in the market have become even more complex. As a result, an effective marketing strategy can be a vital component in the realisation of the firm’s goals of profits and sales maximisation. On the other hand, globalisation has presented both opportunities and challenges to firms. According to Simsek et al., (2015, p. 473), joining the global market offered firms with better opportunities for success and profitability. On the other hand, if entry to the global market is not managed well it could be counterproductive. Adnams, a UK beer brewer, has been facing stiff competition in the beer market both from the major international producers to the small and mid-sized producers in the UK. A good marketing strategy could be able to help Adnams gain and sustain a competitive advantage in the market. This paper utilises a PESTLE analysis and competitive analysis tools to identify the marketing strategy for Adnams.

Discussion

PESTLE analysis refers to the analysis of various components of the external environment of business with an aim of drawing a competitive strategy from it (Priem and Butler, 2001, p. 31). According to Simsek et al., (2015, p. 474) the external environment of the business is composed of the components such as the political environment, economic environment, social environment, technological environment, legal environment and the physical environment. The challenges to the brewery industry have increased significantly with the economic integration of Europe that means products from other countries could freely move across Europe. On the other hand, the cooperation between the European Union and non-European countries has improved creating many opportunities and limitations for the brewery business.

The alcohol industry is the second industry after tobacco industry in terms of anti-consumption regulations. Governments across the globe have enacted policies such as price regulations; sales limitations and licensing for sale that directly affect alcohol distribution and consumption. Most states aims at limiting the use and the negative impacts of alcohol while increasing their revenues thus the increases in prices. Additionally, in some countries alcohol advertisements are also limited.

For the business to succeed, the economic and social environment plays a vital role. Economic and social environments determine the strategy approach to be used by the business (Priem and Butler, 2001, p. 30). Different economic systems characterise the world and; therefore, businesses need different approaches to infiltrate different markets. However, Adnams main market which is the UK and the European Union are characterised by similar economic systems that include a common trade policy and rules of the export trade policy. Other economic factors to consider include the exchange policy and the labour market factors. For instance, the UK uses the Sterling pounds while the rest of the EU uses the Euro. Outside the European Union, the firm will be confronted with numerous currencies. Labour costs also differ across various industries. For instance, the average hourly wage rate across the EU in 2006 was 20.35 Euros. In 2008, there was a rise by about 20% in most countries in Eastern Europe. Elsewhere, the great financial crisis of 2008 and the recession that followed affected the beer market and aggregate consumption negatively.

The beer industry is also influenced by the social and cultural beliefs across different countries. Religion plays a significant role in determining the target group for a beer company. For instance, 33% of the world population is Christians, 21% are Muslims, and 16% are atheists while 14% are Hindus (Raduan et al., 2009, p. 13). In designing a marketing strategy, the breweries will not target the 21% Muslims since Islam forbids them from consuming any alcoholic drinks. On the technology, the brewers have access to better and more sustainable technology that can be used in the production, storage and distribution of beer products.

Due to pressure for companies to be responsible to the environment, Adnams must secure more sustainable means of production. Sustainability challenge is also brought about by the growing scarcity of raw materials and growing demand from the business owners for the management to do business in an ethical way. According to Barney and Hesterly (2012, p. 87) consumers are demanding for products that are sourced, produced, stored and distributed in an ethical and environmentally responsible manner. Adnams has been a leader in the UK in terms of environmental accountability by using recycled products for their packaging and their new green storage facility. However, the company can use the avenues provided by the European Union to secure for cheaper raw materials for beer and wine products especially from more productive markets in Eastern and Southern Europe if they to increase their capacity to compete with giant players such as Carlsberg and Heineken.

Competitive Analysis

Some of the threats that the company has to deal with in their strategic plan include the unpredictable tax increases in various countries, changing customer tastes and the anti-alcohol policies and campaigns promoted by most governments and lobby groups. In this regard, the Adnams will need to segment and target its market properly, improve their brand identity and presence, analyse the buyer behaviour and develop a sustainable competitive advantage through a unique selling position. The major competitors for Adnams in this market are the Heineken and Carlsberg. These two brands are world leaders and control a significant portion of the market due to their highly regarded brand identity. In order to compete with these two beer giants, Adnams must come up with a strategy that differentiates its product other products and offers uniqueness (Jarazabkowski, 2005, p. 4). In the UK market, the strategy of ‘remain original and unique’ had born positive outcomes.

According to Barney and Hesterly (2012, p. 59) in market segmentation, Adnams must identify the ideal customer for its product. In order to penetrate various markets, the company must consider countries of origins and age with their market strategy. For example, the older generation is more traditional and is loyal to a specific brand. In most cases, the older generation will stick with the domestic brand. Adnams marketing strategy should put little emphasis on this group. On the other hand, young population is risk takers and perceives foreign products to be unique and attractive. Adnams should target this group with their marketing and promotion campaigns. However, to develop loyalty from this target group, their cultural orientations must be considered.

A marketing mix that considers the 4 Ps of marketing will ensure the success of any marketing strategy (Von Hippel, Ogawa and De Jong, 2011, p. 10). The 4Ps imply product, price, place and the promotion. Adnams beer and spirits products should be sold at the right price to the right place, in this case, the European Union. Due to the advancement of technology and the internet, new marketing elements have emerged, that is, the e-marketing mix. Marketing mix to be used by Adnams will, therefore, depend on its resources, market conditions and the changing needs of the clients. Therefore, decisions should be made based on the entire marketing mix but not on a single element. Emanating from the PESTLE analysis, the most accessible target group is the young population. The company must, therefore, adopt a marketing mix that appeals to this group. Usually, this group is tech savvy therefore internet services will be the most appealing element. However, television networks, newspapers and magazines and billboards offer more product visibility than the internet means and, therefore, should not be ignored (Von Hippel, Ogawa and De Jong, 2011, p. 13).

Conclusion

This paper sought to analyse a market strategy that could be applied in the case of the Adnams. Using a PESTLE analysis tools, the paper determined various challenges and opportunities that the external environment presented to the company. Government policies, cultural beliefs and stiff competition were identified as the major challenges to the firms. It also found out that generational differences can play a role in the beer market where the elderly were found to be traditional and thus not easy to lure to a new brand. However, the paper recommended a marketing mix that targeted the young population.