Saku Case

Saku Brewery Case Analysis

Problem Statement:
The executive team in Saku Olletehase AS (Saku) discussed the product portfolio which can transform the company’s future. Located in Estonia, Saku has been leading the domestic beer market until 2002, when sales of its signature brand Originaal fell from 48% to 42.5%. Concerned with this decline, the executive team has to decide whether to:
*Focus on local target market and increase the sales of “Saku Originaal”.
* Expand the imported beer brands including: Guinness, Kilkenny and Carlsberg.
* Expand the imported Soft drinks including Pepsi and 7Up.
* Expand Saku product line including: Long drinks, Cider, non-alcoholic beverages
* Export Saku beer to Finland, where the population is familiar with the brand.
*Expand or discontinue bottled water/juice, which is growing, but will soon reach its saturation.
*
Product Portfolio:
Saku Originaal is the flagship brand for Saku in Estonia. Saku also captures 43% of the market share in the Estonia beer market. Recently it has expanded its beer portfolio with other brand names including: Saku Rock, Saku Sorts, Saku on Ice, Saku Valge, Saku Tume, Saku Hele,Saku Presidendi and Saku Originaal Light. Saku captures 43% of the market share in Estonia beer market. These different brands are formulated to target specific market segments. Saku’s cider brand “KISS” is targeted to women and it has been increasing in growth. Out of its imported beers, Carlsberg has increased in sales compared to the other two brands. Saku’s mineral water sales have beenstabilized for the past two years and it has less market share in the Mineral water segment. Estonia’s soft drinks market is dominated by Coca-Cola with Saku only holding 4% market share.

SWOT Analysis:

Strengths * Emerged “Saku” Brand name * Market leadership in domestic beer market * High margin and growth pattern in other alcoholic drinks including Gin and Ciders * Increased sales inimported beers, mineral water and few soft drinks * Best advertisement strategy targeting 18-35 year old and centered on light-hearted and active images. * Variety in beers ranging from strong to low alcohol drinks * Promotion of Saku brand name by providing license to a hotel * Promotion through sponsorship of music concerts, events and cross country skiing * First to target woman with itsKISS cider | Weakness * Competition from domestic brand as well as from imported brands * Low market share in following categories: Long drinks (13%), 5th place in Mineral Water (15%), Soft Drinks (4%) and Cider (24%) * Decreasing sales for the flagship brand * Out of Estonia’s population 1.4 Million, only 21% is in the age group 18-35. This is very low local market for future growth inbeer market. * Exporting Saku to Finland may influence the local sales through Finnish tourist. Out of 3.5 Million tourists from Finland, 85% take back “Saku” with them. * Struggle to adapt to “New Business model” during previous transformation |
Opportunities * Market share in other countries like Finland, Sweden and Norway is huge and attractive to “Saku”. * Familiarity with the brandname in Finland may facilitate “Saku” to capture the beer market there. Also, Saku beer is less expensive compared to Finland beers. * Entry into European Union made easier with Estonia’s accession. * Popularity of the foreign brands and also other alcoholic beverages in Estonia * Increase in growth rate for long drinks and cider. | Threats * Competition from local brands “A Le Coq” and“Viru”, targeting the same market segment * Imported famous beer brands like Hieneken, Carlsberg also target the local market share * The market for bottled water/juice is moving towards a saturation point. Currently, Coca-Cola is the market leader in Soft drinks (66%) and Mineral Water (23%) * Advertisement cost is increasing as more brands/product lines are added to the inventory |...