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Executive Summary

This project is a part of the internal assessment for the subject Marketing Strategy. We opted

for Porter’s Five Forces as it covered the whole demand and supply chain of a product. We

choose Kingfisher and Fosters to understand supply chain with regard to the following

aspects.

1. Potential Entrants – Threat of new entrants

2. Buyers – Bargaining power of buyers

3. Substitutes –

a. Threat of substitute products or services

b. Rivalry among existing firms

4. Suppliers - Bargaining Power of Suppliers

5. Other Stakeholders – Relative Power of Union, Governments etc.

We have taken two leading brands in the beer segment. This segment has not been studied in

detail, so we thought that we will get a lot to learn by studying this segment. This segment

has a great growth potential, especially in a country like INDIA. So we surveyed the

customer and the retailer to learn about this segment in detail with regard to the Porters Five

Forces model.

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OBJECTIVES

To understand that the biggest external influence upon the organization is the

competitive environment.

To understand that the competitive strategy of an organization and the need to secure

particular competitive advantage over competitors are important.

To find that an appraisal of the competitive environment is vital before plans are laid

down.

Objective of this report is to present a general idea of the Indian beer market.

To get an inside feel of the market by analyzing the marketing mix of the two most

successful brands, Kingfisher, a home-grown brand and Foster's, an international brand.

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RESEARCH METHODOLOGY

Extensive research was carried out for the successful completion of this project. Both primary

and secondary data were collected from various Sources.

PRIMARY DATA:

The primary data was obtained by means of a structured questionnaire. The questionnaire was

given to sample size of 30 Consumers and 10 Retailers from Navi Mumbai. The

questionnaire presented to the Consumer and Retailers mainly focused on the elements

relating to the Porters Five Forces Model relating to Beer Industry. The analysis is done

using MS Excel. This analysis is followed by the interpretation of the data by means of

various charts and pictorial representation and other mathematical computations.

SECONDARY DATA:

The secondary data in this study is collected from various magazines, Newspapers and

Websites. Analysis and others parts are done on the basis of these secondary data and knowledge

collected from the marketing lectures.

SAMPLING TECHNIQUE: Deliberate Sampling was done which involved

employees as particular unit of the universe for constituting a sample which represents the

universe.

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INTRODUCTION

PORTERS FIVE FORCES MODEL

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There is continuing interest in the study of the forces that impact on an organisation,

particularly those that can be harnessed to provide competitive advantage. The ideas and

models which emerged during the period from 1979 to the mid-1980s were based on the idea

that competitive advantage came from the ability to earn a return on investment that was

better than the average for the industry sector.

As Porter's 5 Forces analysis deals with factors outside an industry that influence the nature

of competition within it, the forces inside the industry (microenvironment) that influence the

way in which firms compete, and so the industry’s likely profitability is conducted in Porter’s

five forces model. A business has to understand the dynamics of its industries and markets in

order to compete effectively in the marketplace. Porter defined the forces which drive

competition, contending that the competitive environment is created by the interaction of five

different forces acting on a business. In addition to rivalry among existing firms and the

threat of new entrants into the market, there are also the forces of supplier power, the power

of the buyers, and the threat of substitute products or services. Porter suggested that the

intensity of competition is determined by the relative strengths of these forces.

Main Aspects of Porter’s Five Forces Analysis:

The original competitive forces model, as proposed by Porter, identified five forces which

would impact on an organization’s behaviour in a competitive market. These include the

following:

• The rivalry between existing sellers in the market.

• The power exerted by the customers in the market.

• The impact of the suppliers on the sellers.

• The potential threat of new sellers entering the market.

• The threat of substitute products becoming available in the market.

Understanding the nature of each of these forces gives organizations the necessary insights to

enable them to formulate the appropriate strategies to be successful in their market (Thurlby,

1998).

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FORCE 1: THE DEGREE OF RIVALRY

The intensity of rivalry, which is the most obvious of the five forces in an industry, helps

determine the extent to which the value created by an industry will be dissipated through

head-to-head competition. The most valuable contribution of Porter's “five forces”

framework in this issue may be its suggestion that rivalry, while important, is only one of

several forces that determine industry attractiveness.

• This force is located at the centre of the diagram;

• Is most likely to be high in those industries where there is a threat of substitute products;

and existing power of suppliers and buyers in the market.

FORCE 2: THE THREAT OF ENTRY

Both potential and existing competitors influence average industry profitability. The threat of

new entrants is usually based on the market entry barriers. They can take diverse forms and

are used to prevent an influx of firms into an industry whenever profits, adjusted for the cost

of capital, rise above zero. In contrast, entry barriers exist whenever it is difficult or not

economically feasible for an outsider to replicate the incumbents’ position. The most

common forms of entry barriers, except intrinsic physical or legal obstacles, are as follows:

• Economies of scale: for example, benefits associated with bulk purchasing;

• Cost of entry: for example, investment into technology;

• Distribution channels: for example, ease of access for competitors;

• Cost advantages not related to the size of the company: for example, contacts and expertise;

• Government legislations: for example, introduction of new laws might weaken company’s

competitive position;

• Differentiation: for example, certain brand that cannot be copied (The Champagne).

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FORCE 3: THE THREAT OF SUBSTITUTES

The threat that substitute products pose to an industry's profitability depends on the relative

price-to-performance ratios of the different types of products or services to which customers

can turn to satisfy the same basic need. The threat of substitution is also affected by switching

costs – that is, the costs in areas such as retraining, retooling and redesigning that are incurred

when a customer switches to a different type of product or service. It also involves:

• Product-for-product substitution (email for mail, fax); is based on the substitution of need;

• Generic substitution (Video suppliers compete with travel companies);

• Substitution that relates to something that people can do without (cigarettes, alcohol).

FORCE 4: BUYER POWER

Buyer power is one of the two horizontal forces that influence the appropriation of the value

created by an industry (refer to the diagram). The most important determinants of buyer

power are the size and the concentration of customers. Other factors are the extent to which

the buyers are informed and the concentration or differentiation of the competitors.

Kippenberger (1998) states that it is often useful to distinguish potential buyer power from

the buyer's willingness or incentive to use that power, willingness that derives mainly from

the “risk of failure” associated with a product's use.

• This force is relatively high where there a few, large players in the market, as it is the case

with retailers an grocery stores;

• Present where there is a large number of undifferentiated, small suppliers, such as small

farming businesses supplying large grocery companies;

• Low cost of switching between suppliers, such as from one fleet supplier of trucks to

another.

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FORCE 5: SUPPLIER POWER

Supplier power is a mirror image of the buyer power. As a result, the analysis of supplier

power typically focuses first on the relative size and concentration of suppliers relative to

industry participants and second on the degree of differentiation in the inputs supplied. The

ability to charge customers different prices in line with differences in the value created for

each of those buyers usually indicates that the market is characterized by high supplier power

and at the same time by low buyer power (Porter, 1998). Bargaining power of suppliers exists

in the following situations:

• Where the switching costs are high (switching from one Internet provider to another);

• High power of brands (McDonalds, British Airways, Tesco);

• Possibility of forward integration of suppliers (Brewers buying bars);

• Fragmentation of customers (not in clusters) with a limited bargaining power (Gas/Petrol

stations in remote places).

The nature of competition in an industry is strongly affected by suggested five forces. The

stronger the power of buyers and suppliers, and the stronger the threats of entry and

substitution, the more intense competition is likely to be within the industry. However, these

five factors are not the only ones that determine how firms in an industry will compete – the

structure of the industry itself may play an important role. Indeed, the whole five-forces

framework is based on an economic theory know as the “Structure-Conduct-Performance”

(SCP) model: the structure of an industry determines organizations’ competitive behaviour

(conduct), which in turn determines their profitability (performance). In concentrated

industries, according to this model, organizations would be expected to compete less fiercely,

and make higher profits, than in fragmented ones. However, as Haberberg and Rieple (2001)

state, the histories and cultures of the firms in the industry also play a very important role in

shaping competitive behaviour, and the predictions of the SCP model need to be modified

accordingly.

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BEER MARKET IN INDIA

• Beer market in India is estimated to be around Rs. 3000 crores.

• Around 94 million cases of beer are sold annually.

• United Breweries is the market leader with a 47.5% market share.

• SAB Miller comes second with a 38.3% market share.

Market Share

Source: http://www.theubgroup.com/

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About Kingfisher:

Parent company of Kingfisher, United breweries was established in 1857 with the name

Castle breweries. It was renamed to United Breweries in 1915 and started manufacturing beer

from the year 1944 under the label Exports Beer. UB group started exporting beer to Middle-

East from 1974 and in the year 1978 it launched Kingfisher brand. Market Position: It is the

largest selling brand in India and commands more than 30% share in the beer market. In

2005-2006 it recorded 28% growth. Target markets: Kingfisher has two different products

for different market segments.

Product

No. 1 selling product in its segment.

Good quality raw material is used to maintain the quality standards.

Consistency of product quality is high.

Always tastes fresh due to good quality and well developed distribution network.

Hangover due to heavy consumption is very mild.

Place

It is available throughout India, and is dominant particularly in South and West India.

UB has 16 company-owned breweries apart from nine contract breweries in 20 different

locations across the country.

Kingfisher also has a presence in 60 countries.

Kingfisher also has an online marketing system. Any consumer can go to

www.Kingfishernetshop.com and get their beer- a mini mum of six bottles home delivered.

This move has been a big draw with info tech professionals and district women drinkers.

It also has some sixteen hundred shops apart from pubs and bars. Better retailing outlets are

also to be opened under the Kingfisher Brand.

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Kingfisher also has tie-ups with large department stores like ‘Foodworld’, Big Bazar for

retailing its Beers.

650ml

•Rs.75 (Kingfisher Strong 650 ml Bottle)

330ml

•Rs.40 (Kingfisher Strong 330 ml Pints)

*prices as on March 29, 2009

Kingfisher also has association with number of Very Classy, Up-market & Stylish bars &

lounges which goes hand in hand with its brand image.

Price

In both mild and strong beer segment Kingfisher uses competitive pricing strategy.

Promotion

Kingfisher tagline ‘King of good times’ is one of the most popular and most successful

tagline in India.

Since advertising of liquor is banned in India, Kingfisher uses surrogate advertising methods

like using mineral water and sodas.

Aggressive advertising at Outlets & Pubs.

Recently it also started merchandizing sports goods and trendy clothing and accessories under

Kingfisher brand name.

Each year Kingfisher brings out new calendars featuring top models in swimwear.

Kingfisher also promotes itself by sponsoring events like fashion shows, sportspersons like

Narain Karthikeyan, East Bengal soccer team. UB promoter also acquired a Formula- One

team (Force India).

Kingfisher also deals in sports merchandising starting with an ad featuring Sourav Ganguly

and Ajay Jadeja in 1997.

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With the launch of Kingfisher airlines combined promotion is possible which helps the brand

promotion a lot. Kingfisher also ventured into other businesses with same brand name

making the brand more visible and publicity easier.

Kingfisher recently tied up with NDTV for their new lifestyle channel NDTV Good Times

for five years

And finally the Sultan himself, Dr. Vijay Mallya, the Big Daddy of all brands, the flamboyant

Czar of the liquor industry who is the youth icon of a million hearts. His sole presence

outweighs all other competitors taken together.

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About Foster’s :

Foster's was established by two brothers W M and R R Foster’s in the year 1986. SAB Miller

is the parent company which runs Foster's group, a premium global multi-beverage company

delivering a total portfolio of beer, wine, spirits, and cider non-alcohol beverages. In the 70s

Foster's started exporting to USA and UK and entered the Indian market in a 1998. Foster's is

considered as a consumer driven brand. Market Position: Foster's belongs to the SAB Miller

stable which is the second largest beer company in India, in terms of market share. Till now it

is the only international beer brand which successfully captured a significant share in the

Indian market. Target markets: The main target markets of Foster's in India youth. But

targeting strategy of Foster's can be presented as

Foster’s is promoted as a light beer for the sophisticated consumers who drink beer

just for experience and not for getting drunk. For regular user and other consumers

SAB Miller promotes Hayward’s 5000, a strong beer.

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Product

Premium Lager beer

Fresh taste

Among the two sizes (330ml and 650ml) pint size (330ml) is more aggressively promoted

and

70% of Foster’s sales today come from the pint-sized market.

The product is a light beer - highly carbonated with low bitterness and no aftertaste. It has

fewer calories and lower alcohol content.

Price

Foster's unlike Kingfisher follows a premium pricing strategy for its products. The prices of

widely available Foster’s product are

•Rs.70 (Fosters Lager 650 ml Bottle)

330ml

•Rs.37 (330 ml Pints)

*prices as on March 29, 2009

Place

SAB Miller has 10 breweries in nine states and contract manufacturers in two other states.

Foster's has 24 distributors serving over 5,000 outlets, including over 2,300

outlets in Mumbai.

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General distribution structure of Foster's is shown here-

Promotion

‘Australianness’ is the essence of Foster's brand image is promoted in every market in the

world. All Foster's lager theme advertising is consistent with an Australian positioning.

The overseas advertising of the product often focuses upon the Australian connotations of the

beer, e.g. with reference to stereotypical Australian imagery such as kangaroos, exaggerated

accents, and hats with corks on strings.

Since direct promotion is banned in India Foster's use surrogate advertising method using

mineral water of the same brand name.

Fosters promoted its brand by sponsoring various sports like cricket, to enter the Indian

market. Afterwards it withdrew from cricket and started promoting sports like football,

rugby, motorsport etc.

Foster's is deeply committed to promoting responsible consumption.

While Foster's does not provide medical advice, nor attempt to advise individuals on

important and complex medical issues, the Company is committed to ensuring that

consumers access the best available information regarding alcohol and their health.

Steeping into Men’s Fashion apparels collections for better brand visibility.

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CUSTOMER SATISFACTION SURVEY ON BEER

Male Female Ratio:

1. Tick all the brands have you heard off?

Kingfisher Fosters Cannon 10000

Hayward’s Zingaro Budweiser

Tiger Knockout Sandpiper

Cobra London pilsner Royal challenger

Analysis: The above chart shows the BRAND knowledge of various prevailing brands of the consumers surveyed

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2. How often do you drink beer?

Daily Weekly Monthly

Occasionally Very rare

3. What do you look for in a beer?

Strength Taste something new

Price others Specify................................

Analysis: The consumers are looking for a good taste in the BEER of their choice

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4. Which beer do you prefer among the following?

Kingfisher strong Kingfisher mild

Fosters lager Fosters strong

Analysis: The above chart shows that the consumers prefer Kingfisher Strong in comparison to Fosters

5. Do you think ban on alcohol advertisement has affected the sales?

Yes No

Analysis: The ban on alcohol advertisement has not at all affected the sales of alcohol. So the consumers who want to drink; drink, with or without advertisements

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6. Why do you prefer this brand?

(a) With respect to Quality: -

Analysis: People have rated Kingfisher higher than fosters with regard to Quality

(b) Taste

Analysis: People prefer the taste of Kingfisher more than fosters. This means that Kingfisher being an Indian company has made the beer to the taste which is liked by the Indian consumers.

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(c) Advertisement

Analysis: The advertisements made by Kingfisher are more effective among the Indian Consumers

(d) Price

Analysis: The pricing of Kingfisher is more value for money according to the Indian Consumers

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(e) Punch line

Analysis: The punch line of (Kingfisher – King of Good Times) has more effect on the Indian Consumers than Fosters (Australian Number 1 Beer)

(f) Availability: -

Analysis: Kingfisher is more available for the consumers than Fosters. So the consumers of Fosters switch to Kingfisher due to non-availability

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7. Have you tasted both kingfisher and foster?

Yes No

Analysis: The Consumers surveyed are a mix of people who have tried both brands and who haven’t tried both brands.

8. How will you react if the price of your preferred brand is hiked?

Switch to the other brand Pay any price of your brand

Switch to the cheaper product of your brand (Ex: changing to kingfisher Strong to mild)

Analysis: This proves that the consumers surveyed are very brand loyal.

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9. If a new product is launched –

(a) By your brand how eager are you to try it?

Eager very eager Not yet all eager to try it

9. If a new product is launched –

(b) By a new company how eager are you to try it?

Eager very eager Not yet all eager to try it

Analysis: This shows that most of the consumers surveyed are Innovators and would try a newly launched beer but only by their own brand, as they trust their brand very much

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RETAILER QUESTIONER

1. Among the following which contributes the highest sales?

Kingfisher Fosters Others

Analysis:

Kingfisher has the maximum contribution in the sales of retailers. So the retailers prefer KF to any other brand with regard to sales

2. For a new customer which brand you suggest?

Kingfisher Fosters Others specify----------------

Analysis:

In continuation the retailers recommend Kingfisher to any new consumers as it contributes maximum to the sales

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3. Which company provides more promotional offers/ benefits ?

Kingfisher Fosters Others

Analysis: Kingfisher provides more benefits to the retailers which lead to further increase of their sales

4. What do most of the customers do when their preferred brand is not available?

Buy an alternate brand from your shop Buy the same brand from others

Analysis: The retailers feel that the consumers surveyed are brand loyal so prefer the same brand from same brand

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5. Which company supplies inventory/stock in lead/correct time?

Kingfisher Fosters Others specify----------------

Analysis: Kingfisher also provides Inventory/Stock at correct time which makes their product always available for the consumers.

6. Which company fluctuates their price more with regard to market demand?

Kingfisher Fosters Others specify----------------

Analysis: Kingfisher also has a continuous fluctuation in their prices with regard to the current market scenario, while Fosters do not adapt to the prevailing market scenario

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7. After the ban of advertisement of by govt, what is the extent of affect on sales?

Low High Medium Nil

Analysis: The Government ban on alcohol advertising has least affected the sales of alcohol

8. out of kingfisher and fosters which company come up with new products according to the market condition?

Kingfisher Fosters

Analysis: Kingfisher also provides new and improved products with the changing market while Fosters lacks that adaptability.

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SUGGESTIONS / RECOMMENDATIONS:

Fosters needs to improve the perception of quality of its products.

Fosters need to mould its taste to suit the Indian consumers.

Kingfisher is a well-known brand name and Fosters need to create a brand

name by very good advertisement.

Fosters need make the people feel their product more value for money.

Fosters need to create effective punch line which creates an impact on the

Indian consumers mind.

The Products of Fosters need to more available and more up-to-date.

Fosters has to come with new variants suiting the Indian market.

The incentives have to be improved by Fosters so that the Retailers

recommend to their consumers.

Fosters need an army of brand loyal consumers.

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LIMITATIONS:

Our study is based on Primary data collected only in the region of C.B.D.Belapur. The

sample size was limited only to 30(Consumers), 9 (Retailers). It does not give the real picture

of the Indian Beer Industry.

FINDINGS:

Traditional beer markets in Europe and USA are either flat or are in a state of decline,

whereas India still has a huge untapped market. For these reasons international beer

companies are coming to India almost every quarter. Kingfisher, since its origin proved to be

the marketing savvy brand and even though it was the largest selling beer brand but when

Fosters entered the Indian market Kingfisher sniffed possible competition and invested

heavily in brand visibility and positioning. Kingfisher changed its logo and adopted a new

logo and tagline, sponsored the West Indian cricket team and also used the Indian cricketers

to sponsor its product. It went into airlines, lifestyle and even started a television channel

with NDTV. From our study we have also suggested some brand extension methods under,

line extension and process extension.

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CONCLUSION:

Force1: Our study states that most of the consumers surveyed are Innovators and would try a newly launched beer but only by their own brand, as they trust their brand very much. So there are not many problems in the beer market with the respect to the new entrants.

Force2: Our study states that the bargaining power of buyers is very low as they are very brand loyal and would pay any price for their product.

Force3: The availability of substitutes are very high in beer market.

Force4: The supplier bargaining power is very high as the company fluctuate their prices frequently with regard to the prevailing market condition.

Force5: There is no affect of the new ruling of no alcohol advertisement so the interference of union Govt’s in medium.

In price fixation the interference of State Govt’s is high.