Angostura Strategy Most Profitable Rum Company

Angostura Strategy Most Profitable Rum Company Analysis of Angostura In this chapter the information gathered from primary and secondary resources will be used to analyse the marketing strategy and performance of Angostura SBR. The vision of Angostura Ltd is to be the most profitable rum company in the Caribbean and continuously improve their position as the largest aromatic bitters company in the world. And their mission is to bring the spirit of Trinidad Tobago to every customer experience by providing preferred products and excellent products and excellent customer service. From these statement it is believed that Angostura would like the company to be the flagship brand or product of the country and that they would incorporate these statements when developing their strategies to market their products .Over the past five years the company have been through a lot which would have affected their existence and performance within the market. They have overcome disastrous obstacles such as having their old (CLICO) parent company filing for bankruptcy w hich would have affected their reputation and their business operations. In this chapter the information and results collect from the interviews, observation and surveys will be analysed and compared with those of the competitor. Angostura strategy Past Present In the past it could clearly be determined that the previous strategy was not about having a dominant presence in the market but more trying to have their products in the foreign markets. It can safely be said that Angostura adopted a strategy of a merger and acquisition type because they were purchasing and forming agreements with other distilleries. In 1999 they bought the minority share in Bacardi Ltd, in 2002 they bought Burn Stewart a scotch distillery in Scotland. And they also formed relationships/alliances with Dewars Ltd. These developments assisted in the distribution of the Angostura brands into untapped markets. They were capitalising on the brand names and the association of the brands to penetrate the markets. It can clearly determine that they adopted a strategy from the Ansoff matrix to the best of their ability to become a leader in the alcohol industry in the world. At that time of the company existence, then chairman and owner of Angostura Lawrence Duprey who is a visionary saw these products as being world class and it should be available to the world. This strategy could be considered to be successful because some of the products won international awards in the GermanysMundus Vini Competition and International Spirits Challenge UK, but there was some neglecting to their home market as there was little awareness of the brands in the local market . There was little advertising over those years that are when the foreign competitors penetrated the market with their intensive marketing tactics and influence a significant number of consumers to switch from rum to scotch. The foreign competition came into the market through distribution via local distributors. The main product that affected Angostura market share which they held for years was scotch. Starting in 2010 the new CEO decided to implemented a new strategy to take the company back to its rightful position in the market and eradicate all competition. The companys CEO Wayne Yip Choy said â€Å"he saw an untapped opportunity to increase rum sales in what had been a stagnant market for the last 25 years or so. The growth of rum over the last 25 years has been flat at about 500,000 case per year while whiskey sales went from 34,000 to 267,000 cases.† The CEO has endorsed this campaign professing that it was successful (Newsday 19th May 2011 page 3) He employed a market penetration strategy which consisted of several changes to the companys structure and products. These changes include an immediate stop to distribution of all competitor products such as Bacardi and Dewars and a repackaging of their rums and repositioning the brands. Albarran et al (2006) states that the industry life cycle helps in understanding the dynamics of a market structure and the entry, exit and survival patterns of firms. The rum industry can be considered or characterized as being in its decline phase as they have not been active in the market like they should. There is a moderate entrance of competition into this industry; however the industry is favourable to Angostura as they are the leaders in the rum distribution which makes it difficult for any new company to sell rum and penetrate the market. However there is a heavy threats in the alcohol market from brands such as Johnnie Walker Black (JWB) which is a scotch beverage and has capture a significant segment of the market. The company responsible for the marketing strategies of this product is AS Brydens who follow the strategy The present strategy being employed by Angostura can be best identified as a Differentiation out of the porter generic strategy. The product differentiation strategy in any market gains competitive advantage from being able to offer additional value to their customers that they may in some way appreciate and value. Differentiation strategies are not about pursuing uniqueness for the sake of being different it is about understanding customers and how the product can meet their needs, differentiation is about uniqueness, establishing differentiation advantage requires creativity. They have achieved this by offering a premium product with a unique taste and new packaging to the consumers. Presently in the market Angostura have fierce competition by foreign competitors who have entered the local alcohol market via distribution channels such as AS Brydens and Alstons Marketing Company who control the powerful brands such as Johnnie Walker Black and Dewars respectively. The Angostura Singl e Barrel Rum (SBR) is product that the company is actively marketing currently. This product is an old product that has been rebranded and re-positioned to a new target audience to regain its market share from scotch. The main competitor for the SBR is JWB. JWB is the most preferred drink for upcoming professionals and socialites between the ages of 18- 35 which is also the same target audience that angostura is also seeking after for SBR. The JWB has been able to captivate this market after persistent years of active marketing strategies over the last 10 years and how they have positioned the product in the minds of this target group. Angostura have realised that this target group will be the future leaders of the country and decided to focus SBR on this target audience. There are many marketing strategies that they may have evaluated to deliver the best approach to reach with this group. But from observations and analysis it can be determined that they may have adopted the challenger strategy whereby they develop a strategy that is similar to the market leader (JWB) and try to capitalise on it. This strategy is effective because it tends to feed off the energy or success of the market leader. However it can be safely said that the strategy that they adopted to allow them maximum mileage and infiltrate the market without much hindrance is between the market penetration or product development strategy out of the Ansoff Matrix. The market penetration would be a suitable strategy to adopt because it contributes to the increase in market share and it is a great growth strategy as it contributes to the increase usage of the product. The marketing mix that angostura used for SBR used can support the justification of the market penetration strategy. They implemented extensive advertising via newspapers, billboards, radio and event sponsorships. They flooded the market with the SBR adverts aggressively targeting scotch particularly JWB. The pricing strategy that they also used would allow the product to penetrate the market because it was cheaper than the competitor making it more affordable and attractive to the consumers. The product development strategy may have been more align to the overall strategy, and it justifies by producing a high quality rum for its consumer hence the reason for an entire repositioning of the product. SBR was given a drastic change from the bottle to the way it was presented to the public. The packaging of the bottle improved to a sleeker smooth and sexy look that would to appeal to the specific target group as its similar to the shapes of their competitors in the market. These changes were slowly introduced to the country using the â€Å"BOLD† concept to explain the approach that they adapted. The marketing mix that they used supported this by the use of having a launch event to introduce the new packaging of the SBR .This was then was supported by intensive print and billboards advertisements describing the shape and look of the bottle. The ads also describe the flavour of the rum and why its better than the scotch. Angostura can be deemed to seek a type of innovation in implementing this strategy and introducing a forgotten secret from their distillery. This product is not a new product as it has been in existence for at least 4 years and it was not marketed to the public. It was the decision of the previous CEO to share this secret with the public rather than having it on their shelves that the House of Angostura as an ornament collecting dust. Mr Yip Choy felt that the product deserved and audience and this was the catalyst that began the introduction of a new old product into the lives of alcohol consumers of Trinidad and Tobago. Angostura have core competences that they can use to their advantage to give them the competitive edge over their competitors. Core competences such as they have the factory readily available to them as they have highly skilled staff to produce these rums. They have the history of the company which is known to produce high quality products, that have received world class awards and they dont have the to pay excessive taxes to import an finished goods compared to the competitors who are faced with high taxes and duties that they need to pay to import a finished product into the country and pass on these cost to the consumers. In analysing the strategy a random survey was conducted online to measure the effectiveness of the campaign to date. The results of this survey is discussed below .Based on the results from the survey it can be assumed that the strategy has not been totally effective. They have been able to develop a discussion or buzz about SBR that probably led to a considerable amount of persons trying the product at bars, clubs, events where ever the product was available after its mega launch and print intensive campaign. The target group for this campaign is one of an elite nature. The target audience for SBR are males who are within the age group of 25-35 years old who are professional or upcoming managers, who live in urban or well developed areas. Their income ranging between -20k 30 k per month belonging in the social class of A and B. This target audience tends to be the trendsetters of the new generation; the mangers, the upcoming executives, leading accountants, and the influential people within the society. There is some concern if this is the ideal age group that Angostura should be focussing their strategies to as with this audience they are seasoned and have peculiar and specific needs and they really change unless influence by something very drastic. Also to note that Angostura will have a tough challenge to persuade all ready established scotch drinkers to switch to rum because it two different types of alcohol . However with this new strategy that they have employed it may be successf ul. Their marketing strategy also consist of a branding strategy which conveys the entire image and direction of the brand so that the target audience can relate and create a connection with the product. The brand strategy is a part of the marketing strategy because this is responsible for the positioning the brand and the other attributes of the brand. This will play a significant role into the development of this strategy because of the target audience and the competitor that they are going up against they need to have a very fierce and aggressive strategy to accomplish this feat. In analysing the brand profile it can be assumed that the Brand Identity Prism created by Jean-Noà «l Kapferer model was used to develop this framework. Physical Facet of SBR- Simple packaging, smooth taste, sweet aroma premium rum dark rich colour Brand personality -Rich, complete, Independent and distinguished Customer Reflection It entices the consumers palate , satisfies them, helps them re-calibrate Customer Self Image-Discerning, Unique, part of a select group and well educated The image of the brand has to be well positioned as to have great influence over the target audience. Some of the attributes of the brand that were indicated above do apply to how the consumer drinking it wants to be seen because they are image driven because of the status that they hold within society. They mostly associate themselves with products that are align to the character. SBR have the necessary brand profiles that twill meet the needs of the target audience. Angostura has positioned the product as a premium product to compete with JWB which is also positioned in that bracket. It is imperative that the Angostura Ltd employ active and aggressive tactics to persuade this group because what they are trying to do is a drastic switch of a consumers taste. From this strategy it was also observed that Angostura is trying to influence consumers behaviours by providing facts and additional information about the distilling process about rum and scotch to convince the consumers to switch. It can be deemed that they use the black box model to influence this change of behaviour. The concept of the model is that it suggests consumers will respond in particular ways to different stimuli after they have processed those stimuli in their minds. These messages were conveyed in their ads such as â€Å"Because Spirits mature faster in warm climates a 5 year old rum has a better aged flavour than a much older scotch.Age has nothing to do with maturity.† Statements like this will cause the consumer to think and processed the stimuli in their minds. Alcohol Sales In Trinidad Tobago alcohol is associated with most rituals or events because the culture is a celebrating and socializing culture. When looking at the sales of alcohol it can be seen that sales continue to rise for the period of 2008-2010 even though the Governor of central bank stated that the country was going thru a depression. This statement was not a reality as it was seen that even though the economy was considered cash strapped the population was still purchasing these products as regular. The chart below, illustrates the sales within the alcohol industry over the past years. There was a slight decline in sales in 2007/ 2008 but from end 2008 the industry gained momentum and have increased and plateau till 2010. During this period of 2007 2009 Trinidad Tobago was considered to be going thru a decline in economic activity other known as a recession and according to philosophy, goods of this nature tends to increase in a recession as these products are used as a way of comforting due to financial hardship. Most consumers had switch brands and purchase a cheaper brand which gave them more value for their money. During this period beers such as Carib and Stag had significantly increased during this recession and posed a threat to Angostura Table 1 Yearly litre cases in 000s Spirits 2005 2006 2007 2008 2009 2010 Rum 513.5 525.9 502.1 497 501 497 Vodka 27.75 29.5 31 33.5 36.65 37.85 Scotch 207 238.5 240.5 244.9 224.7 211.65 Beer 395 400 420 438 452 465 Source IWSR 2010 At this present time Trinidad Tobago is said to be experience an increase in productivity which indicates there is an increase in disposable income. An increase in disposable income leads to increase purchases of items that are not necessities such as alcohol. Angostura would have accessed these conditions when developing their strategy to influence consumption. The sales of SBR have increase significantly for 2009 where only 250 bottles were sold compared to 2010 where they sold 4594 bottles . The sales in 2010 could have increase significantly due to the launch, events and high level of awareness that was happening for the period of September to December. This is a good sign for the brand as it show that there is a possible market for the product. Johnnie Walker Strategy JWB marketing strategy can be determined to be an aggressive strategy but through a focus approached. They use world-class marketing capabilities to combine with flair and agility to delight consumers with both a trusted brand favourites and the introduction of new and exciting innovations. JWB thrives on innovation as they believe thats the way to the consumers especially with all the available technology .They have also adopted a Premiumization strategy which position it as an elites product which is what Angostura has implemented with the SBR. JWB has put a lot of emphasis on testing different aspects of the marketing mix so that they can understand what the consumers wants when advertising or on-premise or digital. They have clearly identified who their target audience and have developed the necessary strategies to consume this group. The clientele that they are chasing after are selective just like the SBR so they have developed a framework within their strategy to attract this audience which is known as FACE. (Flair, Agility, Customer centric and Evolving) These are the watch words that they use to effectively acquire and maintain their customer base. This strategy has been proven to be effective because the sales of this product have increase continuously year after year. Table 2 Scotch Yearly litre cases in 000s in Trinidad Tobago Brand 2005 2006 2007 2008 2009 JWB 26 29 29 36 40 Black White 30 35 33 36 34 Dewars White Label 6.85 7.85 8.15 8.25 7.75 Chivas Regal 4 4.8 4.95 5 3 Source IWSR Report Johnnie Walker campaign is as less aggressive print wise but they capitalize on digital and relationship building in their campaigns and this is how they execute the FACE frame work. Flare is particularly important in this category because consumers care about it. Every time they select a brand theyre making a statement about themselves its not about functional performance.The brand has flair in the way they execute the ads, the promotion they way they present the product to the consumer, it is executed in a manner thats appeals to the target audience that distinguishes itself from the others. They have implemented campaigns that are fully integrated campaign across multiple channels, above the line and below the line that motivates and engages consumers and builds affinity and loyalty for the brand. They also use a premium pricing strategy to position the product as a high end product that distinguishes from the other brands. Analysis of survey A survey was carried out online to evaluate several issues and the effectiveness of the campaign. The sample size of 100 was used based on a random sampling where 73 % percent of the respondents were male and 27 % female of which 75 % were the suitable age profile for SBR. Based on the educational background profile that meets the criteria of SBR 58% of the respondents had a degree or even higher qualification which meets the profile. This is based on the profile given on the brand profile for SBR. In the survey questions were asked to get the factual, felling and emotional statements about the product and their experiences. When asked the question if they have every tasted the single barrel rum 69.2% indicated that they have but when asked if they will drink the drink again 34% said no ,while 40.3% indicated that they may try it . This is not positive signs for SBR as they want to stimulate repeat purchase as this is what will take the product to the pinnacle to surpass scotch. Figure 1 Figure 2 When asked how they found out about the product the most popular responses were from word of mouth and TV. However the word of mouth can only happen because someone saw an ad. From my interview with Ms De la Rosa VP Marketing Manager, she indicated that part of the strategy was to create a conversation and buzz about the products, it can be said that they achieved this because of the percentage of persons were informed by word of mouth. It can also said that the aggressive print campaign which included newspapers and billboards contributed to this discussion, but some of the comments about the ads were not that compliment as some of the respondents indicated that the ads were not that appealing. Figure 3 The art of marketing is to influence ones behavior to try a new product and this is done by creating a strategy utilizing the marketing mix and tactics that that will appeal to the target audience that will encourage them to try the product . During the Christmas and carnival 2011 Single barrel rum is in most if not all of the events promoting the rum in an attempt to push the product on the consumers and maintain awareness. However this strategy may not have been the contributing factor that influenced persons to try the drink as the main reason for trying it was curiosity and friends. When new products arrive in the market people are hesitant to try it unless they are heavily influence by some factor, they tend not to come out of their safety net. But recommendations by peers have can influence their behavior as they will trust their friend who has endorsed the product. The ads that appeared would have contributed in some way but it was not a major influence. The product was introduced received some great reviews for its new shape an packing as this was one of the highest ranking issues that the audience like about the product . The taste was the leading choice of what they like about the product. The new taste is differently and it seems to be a key ingredient for this product. Angostura has used the taste to clearly justify their existence and why scotch should be a second option to that brand. This taste can be used as their competitive advantage along with the health benefits for consuming those beverages. The brand attributes associated was not communicated because when asked how they felt about the drink or association with the brand 60% said they felt nothing and another 20 % felt refreshing. The brand has specific attributes associate with the image of the product, feelings of independence, noteworthy, leader, trendsetter are the some of the words associated with the brand. It can be determined that it may be too early in the products awareness cycle for these attitudes to be conveyed in the targets audience mind but, with fierce and persistent competition on the outside. From the 100 respondents it can be clearly stated that the marketing /advertising campaign was effective as overall 65% found that the campaign was good or excellent. This is a very good rating for the company and their agency, but the campaign being a good one may not translate into the figures that the company would like for their sales because the overall objective for the campaign is to increase the sales of the SBR and move into the market share of the scotch market. Figure 4 In the survey it was important to find out what the public thinks about rum so questions were asked to get this rating. The leading drink to be a first choice was scotch. Rum was 3rd 4th choice to beer and wine. Angostura has tried to influence the target audience to switch the use of rum as a first preference. This change is a behavior change that they need to address to get the target audience to switch. When asked why they like this preferred drink the most favorite response was taste. Taste is important to the consumer; as a result Angostura can look at this capitalizing on the taste to gain an edge over their competitors. Table 3 When socialising what is your preferred drink of choice? Answer Options 1st 2nd 3rd 4th 5th 6th Scotch/Whiskey 22 16 7 4 4 1 Rum 9 6 13 9 7 6 Vodka 7 10 11 12 11 3 Beer 11 17 11 10 2 1 Wine 9 7 10 10 14 3 Other 4 2 4 2 2 6 Digital Marketing In the 21 century where there is so much different technology and ways for communication and reaching a target audience a company should utilise the. In 2007 Heineken decided to create a marketing campaign that would â€Å"rejuvenate its brand among Puerto Rican youth,† it recognized that 30-second TV spots and other forms of traditional media would not be the most effective means of reaching its target audience. Instead, the company seized upon the architecture of the online world to build a powerful, interactive â€Å"virtual universe† named Heineken City . They were able to fuse the digital world along with the traditional media to develop a campaign. From research conducted for this paper it was concluded that Angostura has not utilised these digital marketing tools to their advantage to date and these tools are used by the target audience on a regular basis. They have access on a daily basis as they are have it available to them at home , in the office or on the go on their Smartphones such as blackberry and iphones. Campaigns like this one are transforming the nature of advertising in the digital age. Today, alcohol brands are promoting their products across a wide spectrum of new platform from social networks to mobile phones to immersive, virtual communities. This marriage of communications and commerce has benefited from a â€Å"perfect storm† of converging developments: the rise of a global generation of Internet-savvy users; the growing capability to access online content at any hour, especially through mobile devices; powerful new digital marketing platforms such as Facebook, Google, and YouTube; and the growing sophistication and power of both online advertising techniques and the companies that offer them. Angostura has only utilised YouTube to upload two of their TV ads and no presence of a facebook page. Their immediate competitor JWB, have developed extensive tactics utilising the digital world. They have developed mobile applications for Smartphones, they have utilised all the social media which includes facebook and twitter to keep their customer current on all promotion and events that are happening with the brand. They have embraced the technology and expanded on it using it to the