Marketing StrategyMarketing StrategySeagram in TaiwanSeagram in Taiwan

Melissa FegaridoMelissa Fegarido

Raphael FoglioRaphael Foglio

Cory LarsonCory Larson

Joseph LinJoseph Lin

Company BackgroundCompany Background

Pernod RicardPernod Ricard

Founded 1975Founded 1975 Worldwide operator in spirits and winesWorldwide operator in spirits and wines Corporate strategy:Corporate strategy:

– Concentrate on key brandsConcentrate on key brands– Develop strong local or regional brands and Develop strong local or regional brands and

wholly-owned distribution networkswholly-owned distribution networks– Motivate employees through highly Motivate employees through highly

decentralized organizationdecentralized organization Acquired Seagram in 2002Acquired Seagram in 2002

Pernod RicardPernod Ricard

Chivas RegalChivas Regal Clan CampbellClan Campbell Havana ClubHavana Club Jacob's CreekJacob's Creek JamesonJameson MartellMartell

Pastis 51Pastis 51 RicardRicard RamazzottiRamazzotti Seagram's GinSeagram's Gin The GlenlivetThe Glenlivet Wild TurkeyWild Turkey

KEY BRANDSKEY BRANDS

Chivas (12- and 18-year)Chivas (12- and 18-year)

Globally recognizedGlobally recognized Premium blended Premium blended

scotch whiskyscotch whisky 2.9 million cases in 2.9 million cases in

20032003 Key markets include Key markets include

Japan, Korea, China, Japan, Korea, China, Travel retail channelTravel retail channelPour two shots of Pour two shots of

Chivas Regal 12 over Chivas Regal 12 over fresh ice cubesfresh ice cubes

Martell (cognac)Martell (cognac) Since 1715Since 1715 Blended from rare Blended from rare

eaux-de-vie (distilled eaux-de-vie (distilled light white wine)light white wine)

Aged in private cellars Aged in private cellars 15 years15 years

1.1 million cases in 1.1 million cases in 20032003

Key markets include Key markets include Duty Free China, Duty Free China, Singapore, MalaysiaSingapore, Malaysia

Tango a Paris: In a long Tango a Paris: In a long glass, pour Martell over ice, glass, pour Martell over ice, top with fresh pineapple top with fresh pineapple juice, splash of tonic, and a juice, splash of tonic, and a cherrycherry

Martell rangeMartell range

Martell VSOP (s)Martell VSOP (s) Martell Cordon Bleu (p)Martell Cordon Bleu (p) Martell XO Suprême (p)Martell XO Suprême (p) Martell NobligeMartell Noblige Martell VSMartell VS MédaillonMédaillon Martell ExtraMartell Extra Classique de MartellClassique de Martell L'Or de J&F MartellL'Or de J&F Martell Martell CreationMartell Creation

Royal Salute (21 years)Royal Salute (21 years)

First produced in 1953First produced in 1953 World’s leading super World’s leading super

premium scotchpremium scotch Malt and grain from Malt and grain from

ScotlandScotland 76,000 cases in 200376,000 cases in 2003 Key Markets: Taiwan, Key Markets: Taiwan,

Korea, China, Japan, Korea, China, Japan, Travel retail channelTravel retail channelBest enjoyed neat Best enjoyed neat

and unmixedand unmixed

Market AnalysisMarket Analysis

Impact of DutiesImpact of DutiesSuper Premium Super Premium

ScotchScotchPremium Premium

ScotchScotchPremium Premium CognacCognac

Standard Standard CognacCognac

OtherOther

Cost per Bottle NT$Cost per Bottle NT$ Royal Royal SaluteSalute

J.W.J.W.

PremierPremier

ChivasChivas

RegalRegal

J.W.J.W.

BlackBlack

SeagramSeagram

XOXO

UD/HennUD/Henn

XOXO

SeagramSeagram

VSOPVSOP

UD/HenUD/Hen

VSOPVSOP

JapanJapan

WhiskyWhisky

CIF CostsCIF Costs 832832 832832 272272 272272 976976 976976 464464 464464 180180

Current DutyCurrent Duty 330330 330330 330330 330330 750750 750750 750750 750750 149149

Total Current CostsTotal Current Costs 11621162 11621162 602602 602602 17261726 17261726 12141214 12141214 329329

Current Target PriceCurrent Target Price 21702170 23002300 680680 650650 20802080 22002200 11001100 11001100 480480

Current Target MarginCurrent Target Margin 10081008 11381138 7878 4848 354354 474474 (114)(114) (114)(114) 151151

Proposed DutyProposed Duty

CIF Costs x 12.5%CIF Costs x 12.5% 104104 104104 3434 3434 122122 122122 5858 5858 2323

+NT $170 x *.75+NT $170 x *.75 128128 128128 128128 128128 128128 128128 128128 128128 128128

+5% VAT+5% VAT 1212 1212 88 88 1313 1313 99 99 88

Proposed DutyProposed Duty 244244 244244 170170 170170 263263 263263 195195 195195 158158

Potential Savings NT$Potential Savings NT$ 8686 8686 160160 160160 488488 488488 555555 555555 (9)(9)

Potential Savings US$Potential Savings US$ 2.612.61 2.612.61 4.824.82 4.824.82 14.714.7 14.714.7 16.716.7 16.716.7 (0.3)(0.3)

StrengthsStrengths

Globally recognized brandGlobally recognized brand

Range of product lineRange of product line

Highly decentralized organizationHighly decentralized organization

Wholly owned distribution networksWholly owned distribution networks

WeaknessesWeaknesses

No product in the standard categoryNo product in the standard category

Prestige brand name limits their Prestige brand name limits their pricing strategypricing strategy

OpportunitiesOpportunities No brand extension in standard categoryNo brand extension in standard category

Brand consciousness is highBrand consciousness is high

Consumers more price consciousConsumers more price conscious

Decrease in “on-premise” salesDecrease in “on-premise” sales

Duty regime changesDuty regime changes

Recent one yr ban on all U/D Hennessy productRecent one yr ban on all U/D Hennessy product

ThreatsThreats

Low brand loyaltyLow brand loyalty

Competitors spend more on promotionsCompetitors spend more on promotions

Traders and brokers - “unauthorized Traders and brokers - “unauthorized commercial activity”commercial activity”

Domestic lower-priced “look-alikes”Domestic lower-priced “look-alikes”

Entrance of Japanese whisky Entrance of Japanese whisky

Alternative EvaluationAlternative Evaluation

Distribution ChannelsDistribution Channels

Develop private distribution channelDevelop private distribution channel– Cuts costs down in long-runCuts costs down in long-run

– Initial startup costs are substantially highInitial startup costs are substantially high

Build plants to produce in TaiwanBuild plants to produce in Taiwan– Avoids tariffs and duties altogetherAvoids tariffs and duties altogether

Focus on hypermarket distributionFocus on hypermarket distribution– Growing trend shows increasing hypermarket preferenceGrowing trend shows increasing hypermarket preference

Introduce direct distribution from internet sellingIntroduce direct distribution from internet selling– Reduce costs by cutting middlemenReduce costs by cutting middlemen

Duty RegimeDuty Regime

Two options are availableTwo options are available

– Reduce pricing accordingly to increase sales volumeReduce pricing accordingly to increase sales volume

– Hold pricing strategy to capitalize on duty savingsHold pricing strategy to capitalize on duty savings

Ensure brand prestige imageEnsure brand prestige image

Adapt accordingly to environmental changesAdapt accordingly to environmental changes– React to competitors’ actions toward situationReact to competitors’ actions toward situation– Government regulations may change as political status variesGovernment regulations may change as political status varies

Promotional SchemePromotional Scheme

Increase mass media advertisingIncrease mass media advertising

– TV, radio, industry related magazinesTV, radio, industry related magazines

– Outdoor ads such as billboards within airports & subwaysOutdoor ads such as billboards within airports & subways

Design promotional packages to induce trialDesign promotional packages to induce trial

– Develop strategic alliance with different venuesDevelop strategic alliance with different venues

– Promote newly introduced revolutionary productPromote newly introduced revolutionary product

MARKETING STRATEGIESMARKETING STRATEGIES

Distribution StrategyDistribution Strategy Maintain relationship with exclusive distributorMaintain relationship with exclusive distributor

– Formosa Trading Ltd.Formosa Trading Ltd.

Develop compensation programsDevelop compensation programs

– Prevent “unauthorized activity”Prevent “unauthorized activity”

Focus on hypermarket distributionFocus on hypermarket distribution

– Trend displays drinking at luxury of own homeTrend displays drinking at luxury of own home

– Coordinate with introduction of new productCoordinate with introduction of new product

Direct distribution through new channelsDirect distribution through new channels

– Internet selling, mail-in cataloguesInternet selling, mail-in catalogues

– Cheaper pricing due to loss of middlemenCheaper pricing due to loss of middlemen

Pricing StrategyPricing Strategy Concentrate on “HOLD” pricing strategy reacting to dutiesConcentrate on “HOLD” pricing strategy reacting to duties

– Ensures prestige brand imageEnsures prestige brand image

– Capitalize on duty reductions to increase profitCapitalize on duty reductions to increase profit

Focus on selective pricing schemeFocus on selective pricing scheme

Undermine competitors with new standard productUndermine competitors with new standard product

New product prices stay competitive within its categoryNew product prices stay competitive within its category

Existing products’ prices will remain relatively constantExisting products’ prices will remain relatively constant

Promotional StrategyPromotional Strategy

Focus mainly on chain of referrals & word of mouthFocus mainly on chain of referrals & word of mouth

Launch promotional packages within different venuesLaunch promotional packages within different venues

– Executive suite gift packages within high-end hotelsExecutive suite gift packages within high-end hotels

– Duty-free premium packages within airlinesDuty-free premium packages within airlines

Mass customization towards major consumersMass customization towards major consumers

– Applies only to newly introduced standard productApplies only to newly introduced standard product

Promotional StrategyPromotional Strategy Alpha CampaignAlpha Campaign

– Promotional packages consist of high-end productsPromotional packages consist of high-end products

– Form strategic alliance with major hotelsForm strategic alliance with major hotels

– Targets commercial meetings & professional luncheonsTargets commercial meetings & professional luncheons

Beta CampaignBeta Campaign

– Economical combinations including all category goodsEconomical combinations including all category goods

– Promote through airlines & new internet distributionPromote through airlines & new internet distribution

– Targets home consumers & small businesses Targets home consumers & small businesses

Product AssessmentProduct Assessment Introduce new line of product within standard Scotch Introduce new line of product within standard Scotch

whisky categorywhisky category

– High growth rate marketHigh growth rate market

– Unexplored territoryUnexplored territory

Pricing of new product will remain competitivePricing of new product will remain competitive

Unique design of packaging to prevent duplicationsUnique design of packaging to prevent duplications

Target urban lifestyle consumersTarget urban lifestyle consumers

– Young adult businessmenYoung adult businessmen

– Home ownersHome owners

Chivas RevolveChivas Revolve