MexicaliBeer_SouthAfrica_ImportProject

Mexicali Pilsner in

South Africa International Marketing Management Project

Nadine Rittmann 334823 Delyan Smilyanov 332293 Lucas Fietz 328915 Ron Groen 333660 Carolina Déniz 353519

2011

Group 2 (Class 2EFG) Coach: Ian Fitzgerald

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1 Mexicali Pilsner in South Africa

Executive Summary

This preliminary marketing plan was written in order to support Mexicali’s decision whether to

launch the product ‘Mexicali Pilsner’ in South Africa or not. As a detailed marketing strategy is the

main content of this preliminary plan, it was necessary to analyze the South African culture, the

industry, the economy and possible competitors.

After doing so, it was found that the beer industry in South Africa is greater than expected and that

there is a demand for a Mexican beer as ‘Mexicali Pilsner’.

The data analyzed regarding the market segmentation and target group revealed the following

outcomes. A geographical segmentation showed that Mexicali should launch the beer only in

provinces named Gauteng, Western Cape, and KwaZulu-Natal as these provinces have a high

population density. Furthermore, the demographic segmentation exposed that white, educated

males between 25 and 40 years are the required target group for Mexicali.

The beer itself shall not be adapted to the market as the slightly different taste and look of the

transparent bottle is considered as product differentiation and are therefore desired.

In addition to that, it is recommended that the ‘Mexicali Pilsner’ should be launched as a premium

beer with a premium price approach. This is essential as the company has never introduced a

product into the South African market before, and costs for promotion and other expenses are

considered too high. Furthermore, the image of Mexicali as a premium beer brand shall not be

undermined.

As there is a great distance between Mexico and South Africa it is also recommended to license the

beer to an existing brewery in South Africa. By doing so, the business risk and the promotion costs

will be split in a 30/70% ratio. Even though, Brandhouse Beverages Ltd. is considered as one of the

main competitors of Mexicali, it was discovered that the company would be most suitable as licensee

partner.

The promotion strategy mentioned in this report is a recommendation for Brandhouse Beverages Ltd.

and includes advertising channels as the internet, television, cinema, billboards, direct sales

marketing as well as sponsoring.

Concerning financials, as mentioned before, as licensing partner Mexicali would have to insert 30% of

the entire promotion costs, whereas Brandhouse Beverages would pay for all other expenses. Thus,

Mexicali will be entitled to 0.05$ profit per bottle sold. Even though Mexicali would not generate

enough revenue in the first year to break even, the second and third year will be very promising for

the company.

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Table of Contents Executive Summary ................................................................................................................................. 1

Introduction ............................................................................................................................................. 4

Methodology ........................................................................................................................................... 5

1. Company Overview ......................................................................................................................... 6

1.1 History ..................................................................................................................................... 6

1.2 Resurrection of Mexicali .......................................................................................................... 6

1.3 Mexicali Pilsner ........................................................................................................................ 6

2. Company Mission and Vision .......................................................................................................... 7

2.1 Mission .................................................................................................................................... 7

2.2 Vision ....................................................................................................................................... 7

3. Market Analysis ............................................................................................................................... 7

3.1 Country Analysis ...................................................................................................................... 7

3.2 Market Analysis ....................................................................................................................... 8

3.3 Microeconomics ...................................................................................................................... 8

3.4 Income Classes ........................................................................................................................ 9

3.5 Market Segmentation............................................................................................................ 10

3.5.1 Geographic Segmentation ............................................................................................. 10

3.5.2 Demographic Segmentation .......................................................................................... 10

3.6 Target Group ......................................................................................................................... 10

3.6.1 Targeting income group ................................................................................................ 11

3.6.2 Market Share & Sales goals ........................................................................................... 11

3.7 Analysis of Competition ......................................................................................................... 12

4. Product .......................................................................................................................................... 14

4.1 Product Life Cycle .................................................................................................................. 14

4.2 Product Component Model ................................................................................................... 15

4.2.1 Core product .................................................................................................................. 15

4.2.2 Actual product ............................................................................................................... 15

4.2.3 Augmented product ...................................................................................................... 17

4.3 Unique selling point ............................................................................................................... 18

4.4 Branding ................................................................................................................................ 18

5. Place .............................................................................................................................................. 19

5.1 Market entry .......................................................................................................................... 20

5.1.1 Exiting breweries in South Africa .................................................................................. 20

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5.1.2 Conclusion ..................................................................................................................... 21

5.1.3 Intellectual Property in South Africa ............................................................................. 22

5.1.4 Licensing Agreement ..................................................................................................... 22

5.2 Channels of Distribution ........................................................................................................ 23

5.2.1 Spar Group ..................................................................................................................... 23

5.2.2 Pick n Pay Retail Group .................................................................................................. 23

5.2.3 Shoprite Holding ............................................................................................................ 23

6. Pricing ............................................................................................................................................ 24

6.1 Prices of our competitors ...................................................................................................... 24

6.2 Estimated manufacturing cost .............................................................................................. 24

6.3 Expenses ................................................................................................................................ 24

6.4 General pricing of Mexicali .................................................................................................... 24

6.5 Final Pricing approach ........................................................................................................... 25

7. Promotion ...................................................................................................................................... 26

7.1 Advertising Channels ............................................................................................................. 26

7.1.1 Internet .......................................................................................................................... 26

7.1.2 Television ....................................................................................................................... 28

7.1.3 Cinema Promotion ......................................................................................................... 28

7.1.4 Billboards and Poster ..................................................................................................... 29

7.1.5 Direct Sales Promotion .................................................................................................. 29

7.1.5.3 Retailer Promotion ........................................................................................................ 30

7.1.6 Promotion Articles ......................................................................................................... 30

7.2 Sponsoring ............................................................................................................................. 30

7.2.1 The Promotion – Findings .............................................................................................. 31

8. Financial Part ................................................................................................................................. 32

8.1 Pro Forma Income Statements .............................................................................................. 32

8.2 Promotion costs .................................................................................................................... 36

8.3 Financial Conclusion .............................................................................................................. 36

9. Conclusion ..................................................................................................................................... 37

Appendix 1: Chosen Clubs for Promotion ............................................................................................. 38

Appendix 2: Promotion Materials ......................................................................................................... 39

Appendix 3: SWOT Analysis ................................................................................................................... 42

Appendix 4: PESTL Analysis ................................................................................................................... 43

Bibliography ........................................................................................................................................... 46

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Introduction

This report contains a preliminary marketing plan written for Mexicali, a Mexican beer company, to assist with the penetration of the South African beer market. The preliminary marketing plan created contains valuable information useful for the decision making process of, whether it is feasible to take actions regarding the penetration of the South African beer market or not. The content of the market analysis comprises crucial information about the current beer market in South Africa. Furthermore, the income classes, and micro as well as macro economics are examined, which results afterwards in the market segmentation. After segmenting, the target group and possible marketing share is calculated and examined. Subsequently, changes in the marketing mix of Mexicali Pilsner are presented. This part contains changes regarding the product, price, promotion and place (distribution) of the Mexicali beer in South Africa. As for the product, the product component model is thoroughly reviewed to describe the beer in the most elaborate way. The pricing part, takes competitors prices and estimated costs into account when defining the Mexicali beer price in South Africa. The placing part, describes the market entry methods, as well as the retailers responsible for the distribution of the beer. As for promotion, all channels and ways of promoting and sponsoring the Mexicali beer are briefly discussed and elaborated. Lastly, in the financial section of this report pro forma income statements for the next five years will be examined. In addition, the promotion plan created beforehand will be displayed in detail with all costs listed. Throughout the report all currencies will be converted into US$.1

1 http://exchange-rates.org/converter/ZAR/USD/1 visited 06.04.2011

http://exchange-rates.org/converter/ZAR/USD/1

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Methodology

The members of the group were asked to create a preliminary marketing plan for Mexicali, a Mexican beer brand. This plan shall be used as a guideline to penetrate the South African market in the future. In order to create a preliminary marketing plan, micro and macro economical factors as well as target customer preferences had to be identified. Therefore the geographical, demographical, economical and cultural situation in South Africa had to be traced. In order to discover the target market, market segment, product adaptation, product differentiation, etc. a country notebook was created by all group members. As this project required a lot of secondary research the information was mostly gathered by using country specific links from Black Board as well as the internet in general. Furthermore, the International Marketing book provided through the IMM class was used as a source for general marketing mix questions etc. For more detailed information about used sources, please refer to p. 40 Bibliography. After collecting all necessary data, tasks were divided equally among the group members. Group meetings were scheduled every week so that members were able to determine together on multiple marketing decisions. The collaboration within the group went well, and there were no irritations what so ever among the group members. Group members were open for constructive feedback which resulted into clear individual work.

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1. Company Overview

1.1 History2 In the early 1920’s, Mr. Miguel Gonzales and Mr. Heracio Ochoa started a partnership and formed the first industrial brewery in Baja California. This occasion was later known as the birth of the Mexicali beer brand. On September 15th, 1923 the breweries doors were opened, and Mexicali quickly became one of the biggest and solid industrial facilities in the Northwest regions of the Republic of Mexico. When the years passed by, Mr. Ochoa defaulted from the brewery and Mr. Gonzales became the sole owner of the corporation. Thirty years later, Mr. Gonzales died, but the brewery is still operating today. The brew master is the key to success for a brewery. Mr. Miguel Gonzales met Aldolfo Bindler, a German brewery chemist and brew master that created the Mexicali beer whose fame extends till this very moment, and probably will continue in the future. When Mr. Bindler died, his son took the responsibility of the brew master over in order to ensure that the high quality of the Mexicali beer was kept unchanged and the ingredients and brew techniques would stay confidential. After fifty years of satisfying local customers and tourists the brewery closed. Today the same quality and packaging is brought back in the beer industry, to satisfy customers once again and make them experience the original taste of Mexicali beer.

1.2 Resurrection of Mexicali3 As mentioned before, a beers key to success is its brew master. Mr. Oswaldo, a former student, continues the heritage of Mr. Bindler at the moment. With a technical degree in food and beverages and a BS in biochemical engineering, Mr. Oswaldo has the potential to resurrect the Mexicali beer. In order to gain his knowledge, Mr. Oswaldo was trained by brew masters and international brewers. After a while Mr. Oswaldo was able to learn the basics on: special operations in malting, packaging and brewery quality control. While paying close attention to his fellow brewers, combined with the academic knowledge he derived from his education, Mr. Oswaldo mastered the art of brewing.

1.3 Mexicali Pilsner4 The original Mexicali beer: is bright, has a deep golden color with sweet malt, lightly floral and hoppy taste. The original flavor of Mexicali reflects its hop bitterness with a slightly sweet touch. This results in a clear and semi dry finish. The beer contains a 5% quantity of alcohol, and is currently sold in a 12oz bottle. One bottle contains 159 calories.

2 http:// www.mexicalibeer.com/

3 http://www.mexicalibeer.com/

4 http://mexicalibeer.com/mexicali_beer.html

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2. Company Mission and Vision

2.1 Mission

The mission that has been undertaken with Mexicali beer is to import and spread a high quality

premium pilsner throughout South Africa and to become the best choice for South African people

that would like to drink a fresh premium beer. The mission is to increase the brand awareness of the

young and exotic Mexicali beer. The Mexicali beer shall attract people of either gender to drink and

enjoy the best available premium Mexican beer – Mexicali Pilsner.

2.2 Vision

Mexicali Pilsner’s vision of a successful future in South Africa encompasses several aspects. The most

definite proof of the success of Mexicali beer would be the popularity among people between ages

25-40 – the company is aiming to prove itself as the best tasting, highest quality premium Mexican

Pilsner in South Africa. Spreading the word in the chosen segment would be the primary goal, which

is believed to lead the company to high sales and the pleasure of being able to share the taste and

joy of „the“premium Mexican beer.

3. Market Analysis

3.1 Country Analysis

With a total population of 49.004.031 million people and a ground area of 1.2 million square

kilometers, South Africa is considered a medium-sized country. South Africa possesses nine provinces,

from which Gauteng is the smallest and Northern Cape is the largest one. The country’s capitals Cape

Town, Bloemfontein and Pretoria are in this order in authority of the legislature, judiciary, and

administrative duties and responsibilities of the country. Whereat, Johannesburg, with its 3.6 million

inhabitants, is considered the economic interior of South Africa. 5

Keeping the size of the country in mind, the urban population captures 62% of the population and

therefore leaves most of the land area uninhabited. Another significant factor to be taken into

account is that 65.8% of the population is between 15 and 64 years old and that the median age of

the population is rounded 25 years for both, male and female. With its different ethnic groups,

namely black African, white, colored and Indian/Asian, the inhabitants speak different languages in

the entire country.6

For further information about the country, please refer to Appendix 4 PESTL Analysis.

5 http://www.southafrica.info/about/geography/geography.htm

6 https://www.cia.gov/library/publications/the-world-factbook/geos/sf.html#top

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3.2 Market Analysis

The beer industry in South Africa has been growing over the past years tremendously. The per-

capita-consumption of beer lies nowadays by approximately 60 liter7. The FIFA World Cup played

certainly a big role as advertising from breweries increased during this time.

In the past, South Africa used to import most of its beers from Europe. But over the years, South

Africa was able to build up a strong domestic beer industry itself by importing only ingredients from

Europe and brewing it own beers. Nowadays, the beer taste of South Africans is considered western

oriented as many European brands settled in a joint venture with Brandhouse Beverage, a brewery

with several branches all over South Africa.

The total beer market is currently dominated by SAB Ltd. with a market share of 79%, followed by

United National Breweries with 14% and Brandhouse Beverages Ltd. with 9% of the total market

share. As SAB Ltd. possesses ten different types of beers on the South African market it is a strong

competitor in all segments by targeting basically every social class in the country. Brandhouse

Beverages Ltd. is responsible for the production of Heineken, Amstel, and several other brand beers

and therefore is located in the premium market segment of the beer industry.8

As mentioned before, the FIFA World Cup was an important event for the South African beer industry.

But it was not anything new to South Africans to combine beer and sports. As in many other

countries, the typical beer consumer in South Africa does not separate beer and soccer. Furthermore,

white and Indian Africans over the age of 20, who have usually a higher school education, are

considered as premium beer market consumer, whereas black and colored Africans rather drink

mainstream beer.

As in many countries, South Africans are not allowed to drink alcohol under the age of 18 years.

Restaurants, bars and hotels are not allowed to serve alcohol on Sundays or Holidays as well as if

they are not in possess of any of the three ‘Y’ tags. One ‘Y’ stands for beer and wine consumption

only in conjunction with food served. ‘YY’ stands for beer and wine consumption during the entire

opening hours and a ‘YYY’ tag stands for authorization to serve beer, wine and hard liquor. The

government of South Africa reacts with strict fines if the owners of these facilities violate these rules

and regulations.9

3.3 Microeconomics

South Africa has a middle income economy, an emerging economy with important sources of natural

resources. Furthermore, transportation, energy, telecommunications, legal and financial the country

is well-developed. It also has a stock exchange that ranks among the world's first (the first of

Africa). In addition, the modern infrastructure leads to an efficient distribution of

goods to major urban centers throughout the region. South Africa's economy accounts for 25% of

African GDP. But growth has not been enough to overcome the high unemployment rate. The

7 http://www.allbusiness.com/services/business-services/4553785-1.html

8 http://www.euromonitor.com/beer-in-south-africa/report

9 http://www.suedafrikatour.de/allgemeines/alkohol_und_drogen.htm

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country still has problems inherited from the period of apartheid, especially poverty and lack of

economic power among the disadvantaged groups. South

African economic policy is fiscally conservative but pragmatic at the time of dealing with inflation and

liberalizing trade as means to increase job growth and household income.10

At the end of 2007, South Africa experienced an electricity crisis. The supplier of the country

"Eskom" had problems with aged plants, necessitating "load-shedding" cuts to residents and

businesses in the major cities. And although growth was strong from 2004 to 2007 and reaped the

benefits of macroeconomic stability, it began to slow due to the electricity crisis and the impact of

the global financial crisis on commodity prices and demand. GDP fell by almost 2% in 2009.11

3.4 Income Classes

According to the report "Personal Income Patterns and Profiles for South Africa 2009”, only 3.8% of the adult population earn 39.4% of total personal income, showing that income distribution is very uneven. Likewise, 20.8% are in middle class income groups, while 75.4% of adults earn the lowest incomes. Personal incomes had a 5.9 % growth rate in nominal terms during the period 2008 to 2009, but a negative growth rate of about 1.2 % in real terms. As it was demonstrated above, in South Africa is a great inequality in the distribution of income in relation to the population displayed in the Gini coefficient of 0.67, one of the highest in the world. The study result also demonstrates a strong relationship between employment status, as of residence and income. Thus, workers residing in metropolitan areas earn 46.2% of revenues in South Africa during 2009, while rural dwellers earn 13.1% of revenues.

The age group 35-49 years old earns 44% of total personal income in South Africa. There seems to be a strong correlation between aging data and personal income to the group of 35 to 49 years of age. After the connection is weakened, many elderly people have insufficient funds for daily expenses and retirement. The educational level is a strong predictor of income. People with secondary education earn the most of lower incomes. Then people with secondary or tertiary education earn most revenue, while people with higher education earn higher incomes. Strong correlation between education and income in South Africa is also evident. Whereas 89.4% of adults with no schooling have lower incomes, only 25.6 % of adults with a tertiary qualification earn the most.12

10 http://es.wikipedia.org/wiki/Econom%C3%ADa_de_Sud%C3%A1frica 11

https://www.cia.gov/library/publications/the-world-factbook/geos/sf.html#top 12

http://allafrica.com/stories/201003010747.html

http://es.wikipedia.org/wiki/Econom%C3%ADa_de_Sud%C3%A1frica

https://www.cia.gov/library/publications/the-world-factbook/geos/sf.html#top


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3.5 Market Segmentation

3.5.1 Geographic Segmentation

One of the most important parts of market segmentation is the geographic segmentation. In order to

achieve high sales there should be focus on areas with a high population density. In South Africa the

cities with the highest population numbers and density are the following: Johannesburg, Cape Town,

Durban, Germiston, Pretoria and Port Elizabeth.13

Province Main cities Total Population

Gauteng Johannesburg, Germiston, Pretoria 11,191,700 (22.4%)

Western Cape Cape Town 5,223,900 (10.4%)

KwaZulu-Natal Durban 10,645,400 (21.3%)

The main focus therefore should be on the province Gauteng as it is South Africa’s economic

powerhouse and the most populous province in the country.14 In addition to that it is also the

smallest one in size, which means it might be easy to establish a good distribution channel

throughout the whole province.

3.5.2 Demographic Segmentation

The demographic segment that has been chosen for popularizing the Mexicali Beer is among white

young educated males from 25 to 40 years old with medium or high income. The reason for the

chosen age and ethnicity is that on average white people in South Africa have an income that is two

times greater than the one of other ethnic groups. 15 The population of this market segment is

approximately 1,788,70016 throughout the whole country.

3.6 Target Group

Mexicali pilsner is a young and fresh exotic premium beer and as such educated people should be

attracted who prefer to have a premium quality beer while chatting with their friends and enjoying

their time.

The chosen target group for Mexicali Pilsner is therefore educated white people between age 25 and

40, with medium or high income. One of the reasons for not choosing a lower age limit for example

18, which is the legal drinking age in South Africa, is because people of that age would mostly aim for

cheap mainstream beer because they will not be able to afford premium beer.

As mentioned above in the demographic segmentation, the white population in South Africa has on

average an income of 2.2 times higher than the other ethnic groups. That is why the main focus lies

13

http://www.southafrica.info/about/people/population.htm 14


Income & Expenditure of households 2005/2006, Statistical release P0100 page 23 16

Mid-Year Population Estimates South Africa 2006, Statistics South Africa page 9

http://www.southafrica.info/about/people/population.htm


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on white males with medium or high income. In addition, the target group shall aim educated

individuals as they might be more open-minded and interested towards a different premium beer.

Therefore the total amount of our target group equals roughly 3.6% of the total population of South

Africa.17

It is important to take into consideration the serious competition that is at hand – with beers such as

Heineken, Amstel, Castle Lite and more. To be able to successfully execute an effective marketing

strategy Mexicali has to differentiate itself by not just offering yet another premium beer, rather

establishing itself as a high quality exotic premium beer that is the best choice of premium beer for

educated people that would like to enjoy a special beer.

3.6.1 Targeting income group

The income group that has been chosen for Mexicali beer are people with a medium to high income.

The reason for this is the actual nature of the beer – it is an exclusive premium beer.

The average income GNI per capita in South Africa is US$ 576018 and this might not be enough to be

a regular Mexicali beer consumer due to the premium nature of the beer and its higher than

mainstream beer price. However, the higher the age of individuals the higher their income is. For

example, the 35 – 49-year-oldage group earns 44% of the total personal income in South Africa, with

an average income of US$ 44,724 – US$ 74,540.19 Also important to mention is that people with

secondary or tertiary education have incomes between US$ 44,724 and US$ 74,540 which is why it is

necessary for Mexicali to aim for educated people.

3.6.2 Market Share & Sales goals

Premium beer market share end of March 201020

Distributor Beer Market Share

SAB Miller Castle Lite 30.1%

(Total share 40.6%) Hansa Marzan Gold ~3.5%

Peroni ~3.5%

Miller ~3.5%

Brandhouse Amstel 29.4%

(Total share 58.2%) Windhoek ~14.55%

Heineken ~14.55%

Total Market Share owned by SAB Miller & Brandhouse – 98.8%

As the table above displays, both imported and domestic premium beer is popular in South Africa.

Market leaders of the premium beer industry are Castle Lite and Amstel, with a similar market share

of around 30%. Knowing that one of the two top premium beer brands is an imported beer shows

that South African people are open-minded when it comes to testing new imported beer brands.

17

1,788,700/49,991,300 = 0.036*100= 3.6% 18

http://data.worldbank.org/indicator/NY.GNP.PCAP.CD 19

http://allafrica.com/stories/201003010747.html 20

http://www.fin24.com/Business/SA-premium-beer-drinkers-shun-SAB-20100513/

http://data.worldbank.org/indicator/NY.GNP.PCAP.CD


http://www.fin24.com/Business/SA-premium-beer-drinkers-shun-SAB-20100513

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Another interesting fact to mention is that there is no presence of ‘Corona Extra’ beer in South Africa.

‘Corona Extra’ is the most popular Mexican premium beer, but it is currently not available on the

South African market.21 This is a great benefit for Mexicali beer, as it would be the first Mexican beer

that is going to be launched in South Africa. Because of this fact there might be a higher amount of

interest towards Mexicali beer, as it will be seen as an exotic premium beer.

The initial sales goal should be to obtain approximately 1% of the premium beer market share and

within the next two years it should increase to about 2.5%. Achieving this market share should not be

a problem as Mexicali beer has one great advantage – it is going to be the first Mexican beer to be

imported in South Africa, therefore it is expected to attract attention. With an accurate marketing

campaign towards the chosen target group achieving the desired market share should not be a

problem.

In 2004 South Africa was ranked 22nd in beer consumption with an average rate of 59.2L per

person.22 According to SAB Ltd. the South African retail expenditure growth should increase beer

consumption.23

Currently the premium beer sector is approximately 7% of the whole beer industry, with

expectations that it will be doubled in the following years.24 As previously mentioned, Mexicali beer

should aim to obtain 1% of the sales of premium beers which will be equal to 2,071,639L25 of beer.

3.7 Analysis of Competition South Africa is the country with the highest consumption of beer in Africa. The per capita

consumption is more than 59.2L 26 , 10 times the average of Africa. South Africa is also the 9th

world beer market.

SAB Ltd., the 2nd largest beer company in the world, controls about 89% of the South African

market. Each year, the company sells about 25 million hectoliters beer all over the country.27

The SAB Ltd. main premium beer product line consists of:

Brand name Bottle Characteristics Origin %ABV

Castle Lite

Its lower levels of bitterness units ensures a light aftertaste and a decreased level of

carbon dioxide result in the drinker feeling less full

South Africa

4%

21

https://www.corona.com/ 22

http://www.kirinholdings.co.jp/english/ir/news_release051215_4.html 23

http://www.sabmiller.com/files/presentations/2004/040304/040304_beer_southafrica_prospeects.pdf 24

http://www.sabmiller.com/files/presentations/2004/040304/040304_beer_southafrica_prospeects.pdf 25

49,991,300*59.2L= 2,959,484,960L*7%= 207,163,947L*1%= 2,071,639L 26

http://www.kirinholdings.co.jp/english/ir/news_release051215_4.html 27

http://www.sabmiller.com/

http://www.kirinholdings.co.jp/english/ir/news_release051215_4.html

http://www.sabmiller.com/files/presentations/2004/040304/040304_beer_southafrica_prospeects.pdf




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Hansa Marzan Gold

A fast finishing clean beer with distinct specialty malt flavors and hoppy notes

South Africa

5,2%

Peroni

Crisp and refreshing Italian taste Italy 5,1%

Miller Genuine Draft

Cold-filtered for incredible smoothness and refreshment

United States

4,7%

Brandhouse Beverages Ltd. is one of the leading premium alcohol beverage companies in South

Africa offering consumers an unrivalled portfolio of spirits, beer and RTD brands. It is a joint venture

between three internationally acclaimed parent companies Diageo, Heineken International and

Namibia Breweries Limited. This other most direct competition is also increasing its market share,

which has climbed from 2% to about 11%.28

The Brandhouse Beverages Ltd. main premium beer product line consists of:

Brand name Bottle Characteristics Origin %ABV

Amstel Lager

It's a distinctive beer, mildly, bitter taste with a cheerful character

The Netherlands

5%

Windhoek

It's mild in bitterness with a distinctive hops flavor

Germany 4%

Heineken

Refreshingly fruity wheat The Netherlands

5%

28

http://www.brandhouse.co.za/


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4. Product

4.1 Product Life Cycle As Beer is a popular product that has been available for ages, the product is still being consumed a lot all over the world. The following graph shows the product life cycle of beverages.

Source: http://www.emeraldinsight.com/fig/0010320304001.png

29As displayed in the graph, beer is currently positioned in the maturity stage. During this stage, sales continue to grow, but in a slower paste then during the development stage. During this stage the brand awareness is usually high, and advertising expenditures can therefore be reduced. However since Mexicali beer is first introduced in South Africa, brand awareness is weak so investment in brand awareness is important. During the maturity stage competition is usually high, and competing products are very similar. However, since Mexicali will be the first Mexican beer introduced to the South African market the company has a differentiation advantage over their competitors.

29

http://www.netmba.com/marketing/product/lifecycle/

Source: http://www.marketingteacher.com/lesson-store/lesson-three-levels-of-a-product.html

http://www.emeraldinsight.com/fig/0010320304001.png

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4.2 Product Component Model30 Mexicali’s marketing purpose should not only be selling beer, rather the main goal should be to satisfy the customer needs at a profit. The total product model will display all the relevant information needed to satisfy the customers’ needs.

4.2.1 Core product

The core product is the benefit the customer receives from the beer. It is the aspect that allows the product to be what is. Mexicali beer will satisfy the customers thirst. But that is not all. Its hop bitterness with a slightly sweet touch will tickle the customer sense after for example, a long day of work. The taste of the beer, which is different from the other beers currently available in South Africa, will give the customer a feeling of satisfaction.

4.2.2 Actual product

The actual product consists of the tangible: design, quality, fashion, branding, style, color etc. These aspects make it easier and more convenient to enjoy the beer.

4.2.2.1 Color

Mexicali beer has a deep golden color which is actually not that different from other beers. This does not differentiate the beer from other beers on the market. However this common beer color makes it easier for customers to recognize the product as a beer. Changing the color is therefore not a good idea. Changing the color would also change the ingredients and probably taste of the beer, while Mexicali’s intention is to offer the traditional Mexicali taste to the South African people.

4.2.2.2 Bottle

The bottle used to penetrate the South African market will be a traditional long-neck. The original Mexicali bottle holds 12 oz of beer, which is 354.8 Milliliter31. This bottle is slightly bigger than the current beer bottles in South Africa. In order to build a strong brand Mexicali will offer the beer in 330 Milliliter bottles, just like the South African people are used to32. By offering the beer in these, for the South African people, familiar bottle sizes a stronger brand will be build. The color of the original Mexicali beer bottle is transparent. The traditional South African beer bottles are mostly brown or green. These two colors are common because they protect the beer against the UV from light. Transparent bottles however, need a special layer that protects the bottle against UV components. Still, as the Mexicali beer will be positioned in the premium beer segment it is crucial to differentiate the product from other beer brands. Therefore the color of the bottle should not be changed. As a customer will pass the beer cooler in the retail shop, the Mexicali beer will most certainly stand out. In addition, the beer should only be offered in bottles as there is evidence that cans do not display the same premium image as the transparent Mexicali bottle.

30

http://www.marketingteacher.com/lesson-store/lesson-three-levels-of-a-product.html 31

http://mexicalibeer.com/mexicali_beer.html 32

https://www.pnponline.co.za/Product.aspx?CategoryName=Liquor and Wine&ProductId=576002&PageID=0

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4.2.2.3 Label

The original Mexicali front label will not be adjusted. It is an attractive label whose colors or shapes does not insult the South African culture. Moreover, South African people should get familiar with the original Mexicali beer label, which can benefit the brands image when sponsoring for example the South African marathon runners during international marathons. During these international events, foreigners who are familiar with the label will recognize the beer.

The back of the label will be adapted for the South African market, in order to meet the legal requirements. 33The Label legally needs to include: Name of the product, Name and address of licensed manufacturer, instructions for special storage conditions (which will be three-to-five degrees Celsius) and the products original country of origin (which is Mexico). South Africa has 11 official languages and it would cost Mexicali a lot to produce the labels in 11 different languages and distribute them to the region were the language is spoken. But as English is one of the South African official languages, the legally required requirements will be displayed in English. In addition to the legally required requirements, a: support service phone number, the South African Mexicali website, alcohol percentage, ingredients, date mark and volume will also be displayed on the label.

4.2.2.4 Packaging

Creating a premium image, asks for premium packaging. Therefore the beer will not be provided in large quantities, for example crates, to the customer. Creating a premium image requires smaller quantity packages which displays that it is a special beer, not just a crate which is bought to get intoxicated. As an example, just like ‘Corona Extra’ established itself as a premium beer in the Netherlands, by offering the beer only in six-packs or single units, Mexicali should be offered as well only in six-packs or single units. However, Bars and Nightclubs can purchase the Mexicali Pilsner in large quantities, as the beer will be provided from their coolers in single units at the end.

4.2.2.5 Quality and ingredients

As mentioned before, the ingredients of the Mexicali beer Mexicali Pilsner should not be changed for the market. The famous Mexicali quality, first brewed by Miguel Gonzales and Aldolfo Bindle, has been the same, and probably will be the same for decades. A premium beer is supposed to be of good quality and Mexicali beer is certainly good quality beer. Changing the ingredients might jeopardize the penetration of the South African market.

33

http://www.ttb.gov/itd/southafrica.shtml

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4.2.3 Augmented product

The augmented product contains the non-visible aspects of the product. Therefore, the support service is Mexicali’s augmented product. It exists, for people who have questions, complaints or other notations. This service will ensure that customers, who experience a malfunction of the product, will be compensated with a new, free of charge beer.

4.2.3.1 Positioning map34

The following map displays the desired position which Mecicali beer should posses in the South African market. The X axis displays the two extremes regarding the variable: quality of the brand, mainstream and premium beer. The Y axis displays the two extremes regarding the variable: brand price, higher price and lower price.

The map displays the most popular South African beer brands. All brands are either launched by SAB Ltd. or by Brandhouse Beverages Ltd. As displayed in the map, Mexicali’s main competitors are: Windhoek, Miller genuine draft, Amstel Lager, Peroni, Hansa gold, Castel Lite and Heineken. These brands already located themselves in the premium beer section of the market. Mexicali on the other hand, still has to position itself in this section by branding the product carefully.

34

http://www.sabmiller.com/files/presentations/2004/040304/040304_beer_southafrica_prospeects.pdf ,page 17

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4.3 Unique selling point35

What sets Mexicali beer apart from its competitor? First of all, Mexicali will be the first Mexican beer introduced to the South African market. Surprisingly not even ‘Corona Extra’, a very popular Mexican beer, which is available in a lot of countries all over the world, is available in South Africa. This is an incredible opportunity for Mexicali. Being the first Mexican beer to enter the South African market can result in customers referring to Mexicali when mentioning Mexican beer. This means that customers will define the product ‘Mexican beer’ by using the brand name ‘Mexicali’, which is definitely a unique selling point. Mexicali beer will be branded as a premium beer. Although there are competitors in the premium beer section, Mexicali has a differentiation advantage. As mentioned before Mexicali will be the only Mexican premium beer, which means it will differentiate itself from other premium beers by its taste and its looks.

4.4 Branding36

The main goal shall be that the South African population will identify Mexicali’s: name, term, design,

symbol or a combination of these factors which intend to identify the product and to differentiate it

from competitors. The most ideal situation is not when the South African population would prefer

Mexicali beer over the competitors beer, but when they identify Mexicali as the exotic premium

beer and see no substitute for this product. Effective branding can help the company to achieve this

goal.

Since Mexicali is firstly introduced in the South African beer market, brand awareness is very weak.

Mexicali has to invest a lot of: time, effort and money in building a strong brand. Therefore some

aspects of the marketing mix: Price, Promotion, Place and Product, have to be taken care of. Along

the report, adaptations in the marketing mix are dealt with in depth in the corresponding sections. In

this section, the most important and value adding changes will be summarized once more.

Since the South African’s should experience the original Mexicali taste which differentiates from other brands, no changes in brewing the beer should be made. The beer will be offered in 330 ml bottles, which is slightly different from the original bottle offered in Mexico. This adjustment will adapt the bottle size to the most common bottle sizes used in South Africa, with which South African’s are familiar with. Since Mexicali shall be branded as a premium beer, it will only be offered in small quantity packages. It will be sold in six-packs and single units. Along with the common promotion channels, certain high income promotion channels are used for targeting the higher income population. Using promotion at musical festivals, bars, pubs and clubs, directly attracts the higher income population. This gives Mexicali the opportunity to build a strong brand among the high class population.

35

http://desktoppub.about.com/cs/freelance/a/usp.htm 36

http://marketing.about.com/cs/brandmktg/a/whatisbranding.htm

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5. Place

When it comes to introducing a new product into a given market it is of great importance to establish

stable and well-organized distribution channels. These channels of distribution must be selected

carefully; as once they become active it would be very costly to change to other channels of

distribution.

In general, channel strategies consist of six specific strategic goals – cost, capital requirements,

control, coverage, character and continuity. These strategic goals are referred to as the six C’s of a

channel strategy.37

Strategic goal Description

Cost With a licensing partner Mexicali will choose a brewery, which will brew the beer according to the original Mexicali recipe. The main cost to be considered are therefore the once which will arise by manufacturing the beer. In addition to that the transportation costs within the given channels of the partner company should be considered. It is also important to mention that if the product is getting damaged (e.g. broken or leaking bottles) on the channel ways the transporting company should be liable and therefore has to pay for the damaged bottles.38

Capital Requirement

There are two critical elements linked to the usage of channel intermediaries – capital requirements and cash-flow patterns. There are no plans for establishing Mexicali’s own internal channels of distribution as that would be very costly. Therefore the capital investment will be lessened through the use of distributors. 39

Control When it comes to control it is important to know that the more a company is involved in the distribution, the more control it would be able to exert.40 In this case, Mexicali beer will focus on building a strong trustful relationship with its licensing partner in order to have more inside about the channels of distribution.

Coverage It is important to choose distributors that have wide-spread coverage. In Mexicali’s case, the company should reach out to most popular retailers in South Africa – Shoprite Holdings, Pick n Pay Retail Group and Spar Group.41

Character The type of distribution channel should also fit the character of the company. Therefore, Mexicali should consider a business partner who is already operating in the premium beer segment of the South African market and therefore has the right distributors already on hand.

Continuity Channels of distribution often pose longevity problems.42 To avoid such problems it is from great importance that the business partner of Mexicali puts effort into building high brand loyalty with its existing distributors.

37

International Marketing, Cateora, 14th

Edition, page 413 38







South Africa Retail Foods – 2010 Annual Retail Food Sector Report page 8, table 4 42


Edition, page 415

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5.1 Market entry

When entering a foreign market, Mexicali has to take different options into consideration.43 The first

option, broadly speaking, would be to export the beer from Mexico to South Africa and the second

option would be a joint venture or licensing agreement with a company in South Africa. By exporting

the goods, Mexicali could either sell the beer directly to the customer, via retailers or indirectly

through different intermediaries such as wholesalers or trading companies. This would generate

costs for shipment, agent commissions, distributors, and trading contracts.

The type of market entry strategy that has been chosen for Mexicali Beer is overseas production, and

more particularly licensing a brewery in South Africa to produce Mexicali beer. The reason for

choosing licensing is that it requires a low direct investment. In addition to that if the beer is

produced in a South African brewery, the standard size bottles of that country can be automatically

used, although in Mexicali’s case, a different kind of glass has to be used (transparent, compared to

the regular brown and green bottles manufactured there).

The following paragraphs will display the two breweries which are considered as potential licensing

partners of Mexicali. After carefully analyzing the advantages and disadvantages of each brewery, a

conclusion will be drawn about the most suitable licensing partner.

5.1.1 Exiting breweries in South Africa

5.1.1.1 SAB Ltd.44

South African Breweries Ltd. is a subsidiary of the SABMiller plc cooperation founded in 2002 with its

headquarters in Great Britain. As mentioned before in this report, SAB Ltd. dominates the South

African beer market currently with a market share of 79%. With its seven breweries and 40

warehouses, SAB Ltd. also covers most of the customer segments by providing South Africans with

ten different beers. Furthermore, SAB Ltd. is considered one of the biggest employers in South Africa

with 355,000 jobs provided mostly to people from disadvantaged groups. The company is aware of

its social responsibilities and therefore is an active participant in advertisements regarding

responsible alcohol behavior.

5.1.1.1.1 SAB Ltd. as Licensing Partner

SAB Ltd. currently provides ten different beer brands on the South African market, for instance Castle,

Hansa, Miller, Grolsch and Dreher. With these brands, SAB Ltd. was able to cover mainstream and

premium beer segments in the past. One important factor for Mexicali to know is that SAB Ltd. has

none comparable beer to the Mexican beer in its current product line in South Africa. However,

SABMiller is an international company and has different South American beers in its product lines in

other foreign countries. This aspect could signify that SAB Ltd. would rather work with an existing

business partner together when launching a Mexican or South American beer in South Africa in the

43 http://www.mybusiness.co.uk/YTeT-jBone4LcQ.html 44

http://www.sablimited.co.za/sablimited/content/en/sab-home

http://www.mybusiness.co.uk/YTeT-jBone4LcQ.html

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future. Furthermore, as mentioned before, SAB Ltd. has a very broad product line in both segments;

premium and mainstream. This could result into a promotional disadvantage. The company might

make mistakes in promoting Mexicali efficiently because it is already too busy with the promotion of

other brands and therefore launching the beer in the South African market could fail.

5.1.1.2 Brandhouse Beverages45

Brandhouse Beverages is a joint venture from Diego, Heineken International and Namibia Breweries

Ltd. created in 2003. The company with its 9000 employees is regarded one of the leading alcohol

beverage businesses located in South Africa. When the company reintroduced ‘Amstel’ beer in 2007

its market share increased tremendously and as a result of this the premium beer portfolio of

Brandhouse Beverages. Nowadays, Brandhouse Beverages holds 9% of the total market share in

South Africa and the company is considered a major competitor of SAB Ltd. Brandhouse Beverages

Ltd. has a clean and respectable image, promoting campaigns against alcohol abuse and several

other projects. Furthermore, the company has a premium beer market share of 58.8%46, therefore

being perceived positively by the native population.

5.1.1.2.1 Brandhouse Beverages as Licensing Partner

Brandhouse Beverages maintains eight diverse beer brands on the South African market. The

company possesses rights on several world leading international brands, namely Heineken, Amstel

Lager, and Windhoek. As previously mentioned, Brandhouse Beverages aims to sell its products only

in the premium market sector in South Africa which is of prime importance for Mexicali as the

Mexicali beer should be introduced into the premium segment. Furthermore, by producing Mexicali,

Brandhouse Beverages would be able to extent its product line and therefore increase its market

share as there is none comparable Mexican beer on the market in South Africa.

5.1.2 Conclusion

Mexicali should introduce its product through Brandhouse Beverages into the South African market

as a licensing partner. There are several aspects why Brandhouse Beverages could be interested in a

co-operation with Mexicali. First of all, it could increase its market share by launching another beer in

South Africa, which is a long-term goal of the company. Secondly, Brandhouse Beverages could

extend its product line, with a product which is not even similar available on the market yet. Thirdly,

when distributing the Mexican beer, Brandhouse Beverages could use its existing distribution

channels, because they are already developed for the premium beer market segment. Last but not

least, the company would split the risk of product launching failure with Mexicali and both

companies could be unburdened by this process.

45

http://www.brandhouse.co.za/ 46


http://www.fin24.com/Business/SA-premium-beer-drinkers-shun-SAB-20100513

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5.1.3 Intellectual Property in South Africa

As Mexicali would license its beer to Brandhouse Beverages, the laws in South Africa regarding the

intellectual property or patent of Mexicali are from importance. The so called intellectual property

law in South Africa covers patents, trademarks, copyrights and designs. It is from interest for Mexicali

to know that the patent act in South Africa is based on the Strasbourg Convention and that it is very

similar to other European patent acts. After both parties agreed on all terms and conditions of the

licensing agreement, it has to be registered at the corresponding patent office. Therefore the so

called ‘Deed of License’ is adequate enough. South African’s patent act includes several prohibitions

and restrictions to protect the licensor, which are mentioned below:

‘To prohibit or restrict the purchaser or licensee from purchasing or using any article or class of articles, whether patented or not, supplied or owned by any person other than the seller or licensor or his nominee’;

‘To prohibit or restrict the licensee from using any article or process not protected by the patent’;

‘To require the purchaser or licensee to acquire from the seller, licensor or his nominee any article or class of articles not protected by the patent’;

‘To require or induce the purchaser to observe a specified minimum resale price in respect of any article or class of articles protected by the patent’; or

‘To prohibit or restrict the making, using, exercising or disposing of the invention concerned in any country in which the invention is not patented.’47

5.1.4 Licensing Agreement

As a legal document, both companies have to agree on all terms and conditions stated in the

licensing agreement. The content of the document has to include information about Mexicali and

Brandhouse Beverages Ltd., the licensing patent rights, the product, gross sales, confidential

proprietary information, the grant of exclusive license, license payments, effect of termination, effect

of delay, return of patent rights, and miscellaneous as advertisement, promotion, warranties, etc.48

As mentioned in the pricing section of this report, the promotion expenses would be split up in a way

corresponding with the profit distribution agreed on. That is, if Mexicali agrees on a 30-70% split up

of the promotional costs, Brandhouse Beverages would have to pay out a profit corresponding to this

agreement, for example 0.05€ per bottle sold.

In addition, Mexicali would have the right to put in a veto if Brandhouse Beverages would damage

the image of the Mexicali brand in any ways by promoting.

47

http://webcache.googleusercontent.com/search?q=cache:Ty-1sM77oEQJ:law.wustl.edu/Library/cdroms/IBL/License/Hahn.htm+licensing+agreement+in+south+africa+%2B+regulations&cd=1&hl=de&ct=clnk&gl=de&source=www.google.de 48

http://www.1000ventures.com/doc/legal/agr_sample_license_exclusive_byum.html

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5.2 Channels of Distribution

One of the main logistics companies regarding beverages in South Africa is “Imperial Distribution”.

“Imperial Distribution” is a 3rd party logistics service provider, and is also the main logistics partner of

Brandhouse Beverages Ltd.49 Therefore, using the already established logistics chain of Brandhouse

Beverages Ltd. would allow Mexicali to penetrate the market faster.

In addition to utilizing the already established channels of logistics of the Brandhouse Beverages

brewery, Mexicali beer should also be distributed through the most well-known retailers in the

country: Spar Group, Pick n Pay Retail Group and Shoprite Holdings. These three companies have a

total market share of 96.5% among supermarkets in South Africa.50

5.2.1 Spar Group

The Spar chain was established in 1963 when 8 wholesalers were given exclusive rights to the Spar

brand in South Africa and were given 500 small stores.51 Currently, there are 1,400 Spar outlets in

South Africa, Botswana, Namibia and Zimbabwe. There are several formats of Spar stores:

Supermarkets, Spars, Kwikspars, Build it and TOPS.

Apart from selecting Spar because of its market share in the country, it is also the biggest liquor chain

in South Africa – TOPS.52 Providing Mexicali beer in the country’s largest liquor chain is a great

benefit that will help increase the brand awareness tremendously.

5.2.2 Pick n Pay Retail Group

Pick n Pay Group is the 2nd largest supermarket chain in South Africa. It is also present in Southern

Africa and in Australia. In 2009 Pick n Pay introduced Pick n Pay Express outlets which are available at

British Petroleum gas stations. The supermarket division focuses on conveniences and freshness by

trying to add value through fresh food supply chains.53

What makes Pick n Pay supermarkets even more attractive for Mexicali Beer is that they have

supermarkets in towns where other retailers have none. The prices in these supermarkets are also

for middle- to high-income people, which are the actual target group Mexicali is aiming for.

5.2.3 Shoprite Holding

The Shoprite retail chain is the largest food retailer in South Africa, with a market share of 34%.54

Shoprite targets middle- to lower-end consumers with a focus on private label or branded products

on foods for more price-conscious consumers.55

49

http://www.imperialdistribution.co.za/customers.html 50

South Africa Retail Foods – 2010 Annual Retail Food Sector Report page 8 51





South Africa Retail Foods – 2010 Annual Retail Food Sector Report page 10

http://www.imperialdistribution.co.za/customers.html

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One of Shoprite’s chains is the Checkers Hypers, which are the best hypermarkets in South Africa that

target medium- to high-income groups. In addition to that these hypermarkets are known for their

large variety of imported foods and beverages.56

6. Pricing For the pricing of the product Mexicali Pilsner different sources will be taken in consideration in order to achieve a reliable and reasonable price. It will be looked at prices of competitors, the estimated manufacturing costs, pricing of Mexicali in other countries and several other expenses. Afterwards all facts will be compared and a conclusion can be drawn about which pricing approach should be used for launching the beer in South Africa.

6.1 Prices of our competitors

As previously mentioned, main competitors in the premium beer sector are Amstel Lager, Miller

genuine draft, Castle light, Hansa gold, Sterling Light Lager, etc. From these brands the price per

bottle lays around US$ 1.3557 (9 Rand). In comparison, mainstream beer costs around US$ 0.9958

(6.59 Rand) per 330ml bottle in South Africa. The Mexicali beer should be positioned quite near to

the premium beer prices. The company should be aware of the fact that the prices cannot be lower

than the once from competitors as market entry and promotion of a new product is costly and the

costs thereby incurred have to be covered. Therefore, price differentiation is not a possible option

for Mexicali.

6.2 Estimated manufacturing cost

The estimated costs for manufacturing one Mexicali beer in South Africa is 0.15$59 per bottle. Since

the costs for shipment etc. would be too high, Mexicali should consider licensing the beer to a South

African manufacturer. By licensing the product to a partner company the costs will not climb over the

estimated amount mentioned before. In case the amount remains at this quite low level there will be

a sufficient margin to cover other expenses.

6.3 Expenses

Major expenses for Mexicali will be promotion expenses. Therefore, a licensing agreement will state

that the potential partner company and Mexicali will split the costs for promotion in a way

corresponding with the profit distribution agreed on. As previously mentioned, the low

manufacturing costs will leave Mexicali with a sufficient high margin to cover the promotion

expenses. Mexicali and the potential business partner should anticipate with a promotion budget of

15-20% of the revenues in the first two years and afterwards this should decline to 10-15%.

56


https://www.pnponline.co.za/Product.aspx?CategoryName=Liquor and Wine&ProductId=576002&PageID=0 58

https://www.pnponline.co.za/Product.aspx?CategoryName=Liquor and Wine&ProductId=580582&PageID=0 59Advice from Mr. Ian Fitzgerald

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6.4 General pricing of Mexicali

Pricing of Mexicali beer is slightly different in each country. In the Netherlands for instance, the

‘Mitra’ shops offer a six pack of the beer for US$ 10.7 so US$ 1.79 per bottle. In England the price for

Mexicali beer is US$ 2.25 per bottle.60 In the USA the beer is sold for US$ 1.2961 which are 0.92 €.

Lastly in Mexico the price for Mexicali is 16 $ for a six pack or 2.66 $ per bottle, which is 1.90 €62.

After all, it can be said, that Mexicali uses in almost every country the premium pricing approach.

This is another reason that basically enforces Mexicali to market the brand as a premium beer in

South Africa in order to maintain its global image.

6.5 Final Pricing approach

After showing different comparison areas of the pricing a conclusion can be drawn as well as a pricing approach. It is recommended to see the Mexicali beer for 0.73 $ to the retailers. This amount covers all expenses and leaves a very profitable margin for both partners. The price for the end customer will be in the same area as the prices of the competitors. Including the VAT and the add-up for the retailer the price for the end customer will be 1.30$. The premium pricing approach637 shall be used for the Mexicali beer.

In the following table one could recognize the prices for the retailer and the customer selling price per bottle. Furthermore the table mentions the costs per bottle for each cost driver and the total costs.

Price and Cost Overview

Selling Price to Retailer $0.73

VAT (14%) $0.18

ADD UP by Retailer $0.39

Selling Price per bottle inclusive VAT and Retailer-add up $1.30

Expenses

Distribution costs $0.15

Promotion costs – First year* $0.26

Promotion costs $0.11

Production costs $0.15

Total Cost per bottle – First year $0.56

Total Cost per bottle $0.41

Profit Margin of Mexicali $0.05

*please refer to the Promotion cost table in the finance part

60http://www.marketingteacher.com/lesson-store/lesson-pricing.html 61http://www.hitimewine.net/istar.asp?a=29 62http://beerandfashionmexico.com/mystore/esp/detalle.php?id=79

63 http://www.marketingteacher.com/lesson-store/lesson-pricing.html

http://www.marketingteacher.com/lesson-store/lesson-pricing.html

http://www.hitimewine.net/istar.asp?a=29

http://beerandfashionmexico.com/mystore/esp/detalle.php?id=79


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7. Promotion

The following part concerns the promotion strategy which is a recommendation for the licensee

partner in South Africa. Of course it is taken into account that the South African partner has a broad

knowledge of the market and therefore possible promotion strategies. As a result of this, the

promotion strategy designed in the following part is a recommendation and not a static framework.

It is advisable to promote Mexicali in South Africa as a premium beer. For that reason it will be

focused on a promotion strategy concerning the upper class of the South African society. As

mentioned earlier, Mexicali should focus on mainly white educated target group of the age between

25 and 40. By following the promotion mix recommended this target group should be reachable.

As the beer is going to be introduced into a totally new market, great brand recognition and a good

image has to be build in the mind of the desired target group. The brand Mexicali needs a big start-

up and an extensive promotion campaign.

Therefore an extensive marketing campaign should be launched in the seven biggest cities in South

Africa: Cape Town, Johannesburg, Durban, Soweto, Pretoria, Port Elizabeth and Pietermaritzburg64.

The marketing campaign would consist of various advertising channels, a sponsoring campaign and

direct sales promotion.

7.1 Advertising Channels

7.1.1 Internet

7.1.1.1 Webpage

First of all, a Mexicali web page should be created for the South African market. Even though, there is

an already existing English web page from Mexicali, there is a need for an extra one for South Africa.

This is mainly because of two reasons. Firstly, the target group in South Africa is not completely the

same as in other countries for Mexicali. For that reason the design and the message of the internet

base have to be adjusted. Secondly, Mexicali penetrates the South African market for the first time

and for that reason needs special attention, whereat it is important to be 100% up to date and 100%

accurate.

64http://www.geonames.org/ZA/largest-cities-in-south-africa.html

http://www.geonames.org/ZA/largest-cities-in-south-africa.html

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The webpage will be designed especially to attract the upper class of the South African Society and

should support the image of the brand and corresponding to that strengthen it.

7.1.1.2 Social Media

Social Media in South Africa is now becoming stronger and stronger like in the rest of the world.

Nowadays, ‘Facebook’ has over 2.4 Million users in South Africa65. This fact basically requires Mexicali

to use the social media channel in order to reach potential customers and it also takes customer

65 http://www.socialmediastrategy.co.za/index.php/general/why-social-media-in-south-africa-will-not-fail/

Source: www.socialmediastrategy.co.za

Source: www.mexicalibeer.com

http://www.socialmediastrategy.co.za/index.php/general/why-social-media-in-south-africa-will-not-fail/

http://www.mexicalibeer.com/

http://www.mexicalibeer.com/

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relationship management into account. The already existing ‘Facebook’ advertisement from Mexicali

will build up on a marketing tool focusing on delivering an outstanding experience and developing a

South African ‘Mexicali-community’. Furthermore, by using Facebook advertisement it can be

reached out to especially younger people of the desired target group, males between 25 and 35

years. This action should help to establish a clear image in the mind of potential customers.

7.1.1.3 Web-page Advertisement

A further step in extending the internet section of the promotion campaign is the well-directed

placement of web banners on popular websites, for example on Music, Sport or Lifestyle magazines.

7.1.2 Television

Television commercial are considered as very costly. But since a huge range of excellent working low

budget TV commercial agencies are on the market, at least the price for the shooting of such

commercials reduced tremendously. The screening of one commercial can cost up to US$ 143,038 for

approximately 60 seconds among normal TV hours. Whereas, a commercial screening can cost

several million Dollar or Euro, during special events on TV for example Olympia etc.66

To conclude, this means a TV-commercial in general is still very cost intensive. Because of that

Mexicali is advised to focus more on internet marketing. Not only because of the costs, but also

because of the fact that online-marketing is more effective than TV-commercials67.

But to strengthen the image of Mexicali further through a lot of advertising channels at the same

time it is still recommended to use TV commercials during the introduction of the new beer into the

market. The best contact regarding TV commercials in South Africa is called ‘SABC’, which operates

the biggest three TV channels in the country68. The commercials should be run between either sports

games or prime time shows in the evening, which might ensure reaching the desired target group.

7.1.3 Cinema Promotion

Another way of using commercial clips would be to broadcast them in cinemas. It is suggested to use

this opportunity frequently, especially during the start-up time, because it will be highly focused on

the desired target group.

Therefore, it is best to get in contact with an extra cinema promotion agency which is specialized in

this matter. For South Africa this agency would be ‘the Cinemark agency’. The agency represents 61.5%

of the South African cinema audience69.

66 http://www.gaebler.com/National-TV-Spot-Ad-Costs.htm 67 http://www.bild.de/BILD/digital/internet/2009/09/14/online-werbung-so-wirksam-wie-tv-spots/sagt-eine-us-studie.html 68 http://www.sabc.co.za/ 69 http://www.cinemark.co.za/co_info/

http://www.gaebler.com/National-TV-Spot-Ad-Costs.htm

http://www.bild.de/BILD/digital/internet/2009/09/14/online-werbung-so-wirksam-wie-tv-spots/sagt-eine-us-studie.html


http://www.cinemark.co.za/co_info/

29


7.1.4 Billboards and Poster

Another visual aid to develop a good brand recognition and image in the public are so called

billboards and poster. It is recommended to establish a comprehensive billboard and poster

campaign. The legal restriction for such public alcohol advertisement are right now quite liberal.70

But there is an ongoing politic discussion about further restriction of such advertisement in the public.

For that reason, changes in the legal system in South Africa have to be observed in the following

month. The poster campaign should focus on places including pubs and clubs. If the legal restriction

still allows billboards, they should be placed always nearby crowed, lifestyle places. For example the

fancy, as cool perceived lifestyle districts of Cap Town and Johannesburg. The costs for such an

advertisement campaign are relatively high, therefore the places of the advertisement have to be

discussed briefly and an recruitment of an experienced advertisement agency should be taken into

consideration.

7.1.5 Direct Sales Promotion

The direct sales promotion is considered a very important part of the promotion. It is advisable to

split the direct sales promotion into three different parts. Firstly the Mexicali club and pub promotion,

secondly promotion facilities at huge music festivals and lastly direct sales promotion placed with

retailers.

7.1.5.1 Club and Pub Promotion

In order to create great brand awareness, it is recommended to organize so called ‘Promotion Parties’

in cafes, pubs and clubs. These locations should attract a comparable target group like Mexicali’s. The

parties should always be connected with the Mexicali message and transport a cool lifestyle image

but as well a touch of exotic. For that reason several different tools should be used, for example gifts

or special promotion teams of young and attractive looking women and men.

Another part of our club promotion is the supply of Mexicali beer to the most-wanted night clubs in

South Africa. By supplying these clubs with Mexicali beer the brand awareness will be increased

steadily among the exact target group. Customers of these clubs will have the chance to enjoy

Mexicali beer with their friends while having a great time in some of the best clubs in South Africa.

This way the people that test Mexicali will be able to experience exactly what Mexicali beer is

offering – having a great time with friends.

Research was already conducted about possible locations for such promotion parties. For further

information about each location, please refer to Appendix 1.

70 http://www.icap.org/portals/0/download/all_pdfs/ICAP_Reports_English/report9.pdf

http://www.icap.org/portals/0/download/all_pdfs/ICAP_Reports_English/report9.pdf

30


7.1.5.2 Music Festival Promotion

For this type of promotion the use of a mobile tent or promotion truck is suggested. The promotion

should take place through a young attractive team of women and men. A lot of free gifts and

promotion articles are necessary in order to promote the beer successfully but in comparison, the

possibility to reach a large scale of Mexicali’s target group at music festivals is highly given. More

specific, it is recommended to use this type of promotion for example at the Cape Town International

Jazz Festival71. This festival takes place every year and includes performances of international and

national jazz stars. Furthermore, the audience of almost 34,000 people could be reached at once72.

Because of the music style and the quite expensive festival passes73 (420 Rand or US$ 63) it is safe to

assume that the audience consists mostly of people with a higher income and therefore mainly the

desired target group. The representatives of the festival were already contacted beforehand and a

sponsorship and/or a promotion activity is possible for Mexicali.

In order to target the younger part of the desired target group, it is advised to promote Mexicali also

at the Woodstock Music festival, which is the largest annual lifestyle festival for the youth 74in South

Africa.

7.1.5.3 Retailer Promotion

As mentioned previously in the distribution part of this report, it is from high importance to promote

the Mexicali beer at consumer touch points. To ensure a great amount of promotion through

retailers, the ‘Liquor World’75 chain was chosen, which has 25 stores in South Africa and the ‘Metro

Liquor’ chain, which has 8 stores in South Africa.

7.1.6 Promotion Articles

The image of Mexicali can also be strengthened by promotion gifts. These gifts undermine the

products claim to be a premium beer with an exotic touch.

Please refer to Appendix 2 to view additional promotion materials.

7.2 Sponsoring

Rugby and Cricket are some of the most popular sports in South Africa and the fan base of these

sports represent pretty much the desired target group. As South Africa hosts several national

tournaments in both sports a sponsorship agreement should be considered, for example as a side

sponsor or even a title sponsor of such an event. As Mexicali might find that the costs and benefits of

such a sponsorship are not reasonable, a sponsorship of a single cricket or rugby team could be

another option. The benefits of either sponsorship shall be displayed in the following section.

71 http://www.capetownjazzfest.com/ 72 http://www.capetownjazzfest.com/Festival.aspx 73 http://www.capetownjazzfest.com/Festival.aspx 74 http://www.southafrica.info/travel/cultural/392152.htm 75http://www.metroliquor.co.za/ml3.html

http://www.capetownjazzfest.com/

http://www.capetownjazzfest.com/Festival.aspx


http://www.southafrica.info/travel/cultural/392152.htm

http://www.metroliquor.co.za/ml3.html

31


Firstly, the product ‘Mexicali beer’ will be made public to a very large audience which represents the

target group. And secondly, through contracts with the sponsored partners, Mexicali could supply

the stadium which even enforces the brand experience and the link to a positive experience.

Currently the association CSA (Cricket South Africa Association) is urgently looking for a new sponsor

for the tournament P20 because the former sponsor called the Standard Bank pulled back due as a

result of the financial crisis76. The P 20 competition is domestic and run 4 weeks77 in total. This could

be an example for an attractive sponsorship in the future.

7.2.1 The Promotion – Findings

As mentioned before, this part of the report is just a recommendation for the licensing partner in

South Africa. Various different advertising channels were mentioned and possibilities for direct sales

promotion and sponsoring. The cost constrain of such an extensive promotion campaign will be

discussed in the financial part

76http://cricket.zeenews.com/fullstory.aspx?nid=33779 77http://www.standardbank.co.ls/SBIC/Frontdoor_02_02/0,2454,10293765_10295724_0,00.html

http://cricket.zeenews.com/fullstory.aspx?nid=33779

http://www.standardbank.co.ls/SBIC/Frontdoor_02_02/0,2454,10293765_10295724_0,00.html

32


8. Financial Part

The following section of this report will show the financial results of Mexicali’s actions in South Africa.

The pro forma income statements for the first five years are given and a further explication of the

promotion costs.

8.1 Pro Forma Income Statements

Most important for the creation of the pro forma income statements were the division of costs and

the distribution of the profit. As mentioned on in the licensee agreement the promotion costs should

be split in a 30/70 % ratio. Mexicali is supposed to pay 30% of these costs. All other costs are the

responsibility of the licensee, Brandhouse Beverages Ltd.

Furthermore, Mexicali is entitled to a share of the profit, which is 0.05 $ per bottle sold.

Pro forma Income statement 2011


VAT (14%) $0.18



Total Liter of beer sold 2,071,639.00

Total Bottles sold 6,277,693.94

Revenue $4,570,161.19

Expenses

Distribution costs $914,032.24

Promotion costs $1,635,000.00

Production costs $941,654.09

Total Cost $3,490,686.33

Net Income $1,079,474.86

Total Profit per bottle $0.17


Total Profit of Mexicali before Promo deduction $313,884.70

Total Profit of Mexicali -$176,615.30

33


Description

Selling price to retailer: As explained in the pricing part of this report, the retailer will be charged

with 0.73$ per bottle.

VAT: The VAT accounts for 14% of the retail price in South Africa78

ADD up by Retailer: The add-up on the product from retailers accounts for 0.39$. This is an over 50%

add-up for the retailers, which should support the acceptance from them when selling the Mexicali

beer in their stores.

Selling Price per bottle inclusive VAT and ADD-up: The price an end-consumer has to pay for a

Mexicali beer is 1.30 $ or 8.49 Rand. For detailed information about the bottle price, please refer to

the pricing part of this report.

Total Bottles sold: Estimated total litres of beer sold (1% of the premium market share) divided by

0.33 l (bottle size).

Total Litres of beer sold: Referring to the market share section, it can be assumed that 1% market

share will be reached in the first year which is 2,071,639.00l of beer, increasing to 1.75 % in the

second year and in the third year the market share might represent 5,179,097.50 l of beer. From the

fourth year on, it is estimated that the market share will increase by 0.1 per year.

Revenue: Total bottles sold multiplied by the selling price to retailer.

Distribution costs: 20% of the revenues which is an estimated number.

Promotion costs: First year please refer to the table of promotion costs; second year and all

following years 15 % of the revenues. Mexicali and Brandhouse are advised to share these costs in a

30-70% ratio. Mexicali would have to pay 30% and Brandhouse 70%.

Production costs: Total bottle sold multiplied by 0.15$79 (production cost per bottle).

Total Costs: Sum of all expenses.

Net Income: Revenue minus expenses.

Profit per bottle: Net Income divided by Total bottles sold.

Profit Margin of Mexicali: As stated in the liscensee agreement 0.05$ per bottle.

Total Profit of Mexicali before Promotion cost deduction: Profit margin multiplied by total bottles.

Total Profit of Mexicali: TPMBPCD minus 30% of the Promotion costs.

78http://www.sars.gov.za/home.asp?pid=194 79Source: Mr Fitzgerald

34




VAT (14%) $0.18




Total Bottles sold 10,985,964.39

Revenue $7,997,782.08

Expenses

Distribution costs $1,599,556.42


Production costs $1,647,894.66

Total Cost $4,447,118.39

Net Income $3,550,663.69

Profit per bottle $0.32


Total Profit of Mexicali before Promo deduction $549,298.22

Total Profit of Mexicali $189,398.03



VAT (14%) $0.18




Total bottles sold 15,694,234.85

Revenue $11,425,402.97

Expenses




Total Cost $6,353,026.27

Net Income $5,072,376.70



Total Profit of Mexicali before Promo $784,711.74


35




VAT (14%) $0.18





Revenue $11,436,828.37

Expenses




Total Cost $6,359,379.29

Net Income $5,077,449.08







VAT (14%) $0.18





Revenue $11,448,265.20

Expenses




Total Cost $6,365,738.67

Net Income $5,082,526.53





36


8.2 Promotion costs

Promotion Tool Description Costs per year

Internet Promotion The Internet Promotion includes the set up of a webpage and online advertisment -social network.

35,000 $80 81

Billboard and Poster Advertising

Our recomendation is the usage of 40 billboards at different locations in the biggest towns of South Africa, 40 Billboards cost 40000 $ monthly82. Printing cost of poster with the format of 59,4 cm x 84,0 cm is expected to cost 1800 $ for 10000 Posters.83

500,000 $

TV& Cinema Advertising

The budget for the TV-Ads is an estimation of 600,000 $ for clips especialy in the first term of our start-up phase.84 We consider a budget of 100,000 $ for the screening rights in selected cinemas.85

700,000 $

Sponsoring The estimation for a sponsoring activity like mentioned in the Sponsoring part is 250000 $ per year.

250,000$

Sales promotion

We estimated 100,000 Dollar for the decribed Sales promotion activities ( Promotion part) . 50000 are considered to create a stock of promotion articles.

150,000$

TOTAL COST 1,635,000$

8.3 Financial Conclusion

In the start-up year Mexicali has to invest a minimum amount of 176,615.30$ due to the fact that the introduction of a new product has high promotion costs. However, this investment should be already retained in the second year, due to the profit shown in pro forma income statement 2012. After the second year, the profits are estimated to develop in a positive way.

80http://www.searchmarketingsales.com/website_promotion.html 81http://www.globalmarketexposure.com/facebook.html 82http://searchwarp.com/swa238593.htm 83http://www.flyeralarm.com/de/produkte/7194/plakate-plots/plakate/135g-mit-einseitigem-uv-lack-glaenzend/din-a1 84http://www.gaebler.com/Television-Advertising-Costs.htm 85Www.cinemark.co.za

http://www.searchmarketingsales.com/website_promotion.html

http://www.globalmarketexposure.com/facebook.html

http://www.flyeralarm.com/de/produkte/7194/plakate-plots/plakate/135g-mit-einseitigem-uv-lack-glaenzend/din-a1


37


9. Conclusion

As this preliminary marketing plan was written in order to discover if it is profitable for Mexicali to

launch the ‘Mexicali Pilsner’ in South Africa or not the following can be concluded.

It was revealed that there is a great demand for beer in South Africa and therefore a licensing

agreement with Brandhouse Beverages Ltd. would be an opportunity to increase Mexicali’s earnings.

The investment risks are considered rather low due to licensing, as Mexicali would not have to pay

for manufacturing, shipment, and distribution itself. However, the costs for promotion shall be split

corresponding to the profit (30/70%) which is 0.05$ per bottle sold for Mexicali.

The promotion strategy of this report is a guideline for the licensing partner of Mexicali and reveals

also the possible costs of introducing a product into a new market. However, as it is shown in the

financial part, even though Mexicali has to pay for 30% of the promotion costs, the company will still

make profit after the second year. In addition to that, it is predicted that Mexicali will also gain a

profit up to the year 2015.

Therefore, after analyzing both, marketing and financial aspects in depth, it is recommended to

launch the beer in South Africa with Brandhouse Beverages Ltd. as licensing partner.

38


Appendix 1: Chosen Clubs for Promotion

Club Image Adress

Alba lounge Cocktail lounge, very beautiful location at a small harbour in Cape Town, upper class

V&A Waterfront Cape Town http://www.albalounge.co.za/home/

169 on Long Night Club, New York Style, so called best club in Cape town

Centre of Cape town

Blink Night Club Very trendy, with a large karaoke screen.

Claremont. 80 Main Road , Cape town

Bossa Nova Latino american focused music, minimum age is 25.

In Green Point. 43 Somerset Road , Cape Town

Rocca Bar

Part of a nationalwide chain of night clubs, 3 inside bars, a specialised shooter bar, a veranda bar and private bar situated upstairs86

Durban city centre

Cool Runnings Melville Located in one of the hippest cities in South Africa.

Johannesburg

Privilege Relativly new lifestyle club. Johannesburg

86 http://www.topclubs.co.za/Nightclubs/Rocca-Bar.aspx

http://www.albalounge.co.za/home/

http://www.albalounge.co.za/home/

http://www.topclubs.co.za/Nightclubs/Rocca-Bar.aspx

39


Appendix 2: Promotion Materials

1. Logo-shirts

These shirts will be available in different colours and could be used as a gift or a prize during

promotion activities.

2. Buttons

The buttons are as well available in different colours and could be used as give-aways.

40


3. Zippo

Zippo is a well know brand and its image represents luxurious and elegance products. Connected

with the Mexicali label, it might be possible to connect this image with Mexicali beer. The ‘zippo’ is

available in gold, silver and black. This item could be used as a prize.

4. Oso Osito -Teddy bear

Oso Osito is a product to attract women. Could be used as a prize and as give-aways for parents.

41


5. Inflatable Palm

A gift which represents the exotic part of Mexicali’s image and it could be used for promotions

around pools or the beach.

6. Bikini

Furthermore, a gift which represents Mexicali as an exotic brand, the bikinis could be either a gift or

a prize.

42


Appendix 3: SWOT Analysis

Strengths

- Adequate financial resources - Access to economies of scale - Skills for the innovation of products - Strategies identified or well conceived

and designed functional - Managerial capacity - Organizational flexibility

Weaknesses

- Higher unit costs compared to direct competitors

- Performance below average - Weak distribution network - Weak market margin - Lack of experience and talent

management

Opportunities

- New Market - Meet additional groups - Fast growing market - Vertical integration (forward or

backward) - Elimination of trade barriers in

attractive foreign markets - Complacency among rival firms

Threats

- Competitors with lower costs - Increased sales of substitute products - Growth of the bargaining power of

suppliers - Increased barriers and expensive

regulatory requirements

43


Appendix 4: PESTL Analysis Political

The political system of South Africa is organized as a parliamentary governmental system. Subdivided

into nine provinces, South Africa operates under federal laws and adopted its constitution in 1996 in

order to ensure equality.

The president of the Republic of South Africa is also the head of government. Elected by the national

assembly, the president can be dropped by the members of the congress in form of a non-confidence

vote. A new president has to be elected in between 30 days; otherwise the House of Parliament can

be liquidated.

The House of Parliament has two chambers; the national assembly with 400, elected by the nation,

Congressman and the National Council with ten Congressman from the nine different provinces.

The African National Congress (ANC) was able to gain the majority of the votes a second time in a

row in 2009th election in South Africa. The party has currently 264 seats in the national assembly,

followed by the Democratic Alliance (DA) with 67 seats.87

The government of South Africa is planning to prohibit alcohol commercials on television because of

the rising alcohol abuse among young inhabitants. Besides of stricter supervision regarding alcohol

distribution the government suggested also to increase the drinking age from 18 years to 21 years.88

In order to make the right marketing decisions, Mexicali has to keep itself informed about new

possible laws regarding alcohol consume in South Africa.

Economical

As a result of the financial crisis hitting the world in 2008, South Africans GDP recorded a loss of 1.8%

in 2009. By hosting the FIFA World Cup in 2010, South Africa was able to bounce back and was

reporting an economic growth of 2.4% at the end of 2010.

As mentioned before, due to the global crisis, South Africans exports, which account for more than

half of the country’s GDP, declined. As a result, the crisis also caused a decrease in manufacturing as

well as producing.

Even though the government invested into the country’s infrastructure to meet the requirements for

the FIFA World Cup in 2010, there is still a lack in transport and energy infrastructure which make

daily business operations difficult. As a matter of facts, businesses have to deal with limitations in

growth potential and increasing energy costs during production.89 By incurring a joint venture with

an existing company in South Africa, Mexicali would be able to contain possible business risks.

87

http://www.uni-protokolle.de/Lexikon/Politische_Situation_in_S%FCdafrika.html 88

http://allafrica.com/stories/201103100843.html 89

http://www.africaneconomicoutlook.org/en/countries/southern-africa/south-africa/

44


Social

The graph below shows, the total population of 49 million people in South Africa is dominated by

black Africans, followed by white, Indian/Asien and colored people. This data is based on statistics

from the last census from the democratic elections in 2001.

Graph: South African Population90

As of the last decade, the growth rate of the population increased another 11.54% from 2001 to

2010. The two provinces Gauteng and KwaZulu-Natal have the highest density of population and are

therefore considered significant sales areas for Mexicali.

With its eleven different languages, the country is considered multilingual, but the two languages

mostly spoken from the inhabitants are Afrikaans and English. South Africans religion is dominated

by the Christian church with a fraction of 79.8% of all inhabitants.91

As South Africa is a developing nation, the government is still building a sufficient social security

system for its inhabitants.92 Many families are dependent on grants as child support, unemployment

benefit and retirement payments from the government. By investing more and more in a efficient

welfare system the government tries to eliminate circumstances as poverty and unemployment.

Technological

Manufacturing

The manufacturing industry administers 18.5% of the country’s GDP and is considered one of the

biggest employers of the nation. The South African government realized the significants of this sector

and therefore launched in 2001 two different strategies in order to support the industry in R&D. The

NRDS (National Research and Development Strategy) and the IMS (Integrated Manufacturing

Strategy) are both responsible for further development and innovation of technologies by taking

competiveness and the capacity of the industry into account.93 As a beer manufacturer the progress

90



http://www.ipc-undp.org/pub/IPCCountryStudy8.pdf 93

http://www.info.gov.za/view/DownloadFileAction?id=127106

79%

9%

3% 9%

South African Population

Black Africans

White

Indian/Asien

Colored

45


of manufacturing technology is very important for Mexicali and therefore an essential factor for the

decision on launching a new beer in South Africa.

Internet

The internet is currently used by approximately 4.59 million inhabitants of South Africa, whereas

young males between 18 and 29 years are considered key users. The population utilizes the online

platform mainly for information and social network purposes. As a consequence of this, online

marketing has been increasing rapidly over the past years.94 This development is important for

Mexicali as online advertisement is cost-saving and more consumers can be reached at a time.

Legal

Value Added Tax (VAT)

As many other countries, South Africa has also a VAT on products and services. The current rate of

the indirect tax revenue is 14% whereas in some exceptional cases, i.e. food or exports, the VAT is

0%.95

Income Tax

The income tax for foreign companies with headquarters outside of South Africa is 35% of their

profits made in South Africa.96

Legal restrictions on alcohol

South Africans restrictions on alcohol consume are the same as in many other countries. It is not

allowed to drink alcohol under the age of 18 years. Furthermore, the government has limited the

distribution of alcohol by prohibiting restaurants, bars and hotels to serve alcohol on Sundays or

Holidays.

In addition to that, restaurants, bars and hotels are required to acquire a liquor license in order to

serve alcoholic beverages to customers and guests. The following liquor licenses can be acquired:

‘Y’ beer and wine consumption only in conjunction with food served

‘YY’ beer and wine consumption during entire opening hours

‘YYY’ authorization to serve beer, wine and hard liquor

By violation of any of the restrictions mentioned, the government of South Africa will react with strict

fines.97

94 http://www.pr-inside.com/new-market-report-now-available-south-r2008323.htm 95

http://www.southafrica.info/business/investing/regulations/tax-investors.htm 96

http://www.southafrica.info/business/investing/regulations/tax-investors.htm 97

http://www.suedafrikatour.de/allgemeines/alkohol_und_drogen.htm

46


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ml

8. Financial Part

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Source: Mr Fitzgerald



http://searchwarp.com/swa238593.htm

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uv-lack-glaenzend/din-a1

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Documents

MexicaliBeer_SouthAfrica_ImportProject