Great Leap Brewing: The Marketing Strategy

Topic: Marketing Words: 1997 Pages: 7

Executive Summary

The paper is a business environment audit report that examines the marketing strategy for Great Leap Brewing to enter the draft beer market in Russia. The work includes considering key aspects, including situation analysis and marketing objectives, aimed at assessing the company’s development potential within a new market. Further, the marketing strategy and marketing tactics are considered, the purpose of which is to form the most effective distribution and product promotion system. Finally, the marketing action plan allows you to consider all the key aspects of building a promotion strategy and its use within the market. The conclusion of the report is the most suitable strategy for Great Leap Brewing expansion.

Introduction

Developing a marketing strategy for expanding a company globally is much more challenging than domestic planning. This paper examines the prospects for the Chinese-based craft beer manufacturer Great Leap Brewing to enter the Russian market. In particular, a business environmental audit is carried out to develop the most effective marketing tactics that would allow the company to maintain a competitive advantage in a new market. As a result of the research, the main characteristics of the company, which may be the basis for the promotion of products, are the uniqueness and cultural identity of beer. Additionally, the audit is carried out within the draft beer segment, which brings its own characteristics to the marketing planning. Thus, the report reflects the key aspects of the business environment that must be taken into account when entering the Russian market.

Company Overview

There is a growing interest in craft beer in China and around the world. Additionally, draft beer occupies a special place due to the popularity of beer bars and pubs. Great Leap Brewing is SME Chinese-based located in Beijing and founded in 2010 (Great Leap Brewing, n.d). The company produces both bottled and draft beers that are available at their signature beer bars (Beers, n.d). Great Leap Brewing offers over 40 different types of draft beer with unique recipes (Beers, n.d). The advantages and features of the company are that they are positioned as pioneers in the creation of craft beer in China and also use traditional Chinese ingredients in brewing (Great Leap Brewing is one of the leading, n.d). Thus, the company has the ability to expand into Western markets thanks to its competitive advantage and strong position in the Chinese market.

Situation Analysis

Political Factor

The craft and draft beer market in Russia are constantly expanding, which increases the market share. Since 2017, US craft beer has been actively imported into the country (US Department of Commerce, 2017). However, the global political environment may adversely affect this cooperation, which opens up opportunities for manufacturers from other countries, in particular China, to enter the market (Barners and Sanger, 2021). On the contrary, political relations between Russia and China are actively developing, which seems to be a favorable condition for entering the market (Šćepanović, 2021). Political relations between Russia and Europe, the country’s main beer exporter, are also in decline due to economic sanctions (Russia, 2021). Although there is no embargo on this type of alcoholic beverage, this factor may have an impact on assessing the situation.

Economic Factor

Russia is currently a growing market for alcoholic beverages. It is noteworthy that the share of beer in this segment is more than 80% (Russia’s alcohol market, 2019). Additionally, since 2015 there has been a significant increase in the consumption of imported alcoholic beverages. In 2017, the import of beer in the country increased by 57%, which is the highest indicator among alcoholic beverages (Russia’s alcohol market, 2019). The main exporters of beer in Russia are Germany, Belarus, and the Czech Republic (Russia’s alcohol market, 2019). However, the share of beer imports from China to the country in 2021 also increased significantly (Exports of beer in China, n.d). Draft beer currently occupies a special place in the market; its share has doubled since 2015 (Beer business #2-2019, 2019). The draft beer market in 2018 reached more than 12% of the entire beer market in the country (Beer business #3-2018, 2018). However, importers are dominated by large European companies, making it difficult for smaller producers to enter the market.

Legal Factor

One of the most significant legal factors of beer export to Russia is the presence of excise taxes on this type of product. In 2021, this tax is 23% for a beer with an alcohol content of up to 8.6% (Excise rates on alcoholic beverages, 2021). Another legal requirement is “registration of data about the alcoholic beverages and products containing alcohol in the Unified Federal Automated Information System (UFAIS), which tracks production and turnover of ethyl spirits” (United States Department of Agriculture, 2020, p. 29). However, with the accession of Russia to the World Trade Organization (WTO) in 2021, imported alcoholic beverages do not require licensing (United States Department of Agriculture, 2020). Thus, the legal framework for importing beer to Moscow is quite favorable.

Social Factor

The primary issue is the current socio-economic situation in the country. GDP per capita in Russia continues to decline annually, which is negatively affected by the recent pandemic (Cordell, 2021). Additionally, the real incomes of the population of the country have decreased by more than 10% since 2013 (Cordell, 2021). It is important that the employment rate in Russia also continues to fall (Cordell, 2021). This trend can be dangerous for the alcoholic beverages segment.

Marketing Objectives

First of all, in order to successfully enter the Russian market, it is necessary to find effective distribution channels. For the draft beer segment, the most preferable is cooperation with craft beer bars and pubs. The most rational solution would be to search for distribution channels to Moscow since the demand for this type of product is higher in the capital city. Thus, to enter the market, it is necessary to establish partnerships with 2-3 large retailers of craft draft beer.

To promote within a new market, it is also necessary to increase the brand’s media presence. To achieve this goal, one should cooperate with specialized portals and media channels in Russia. In particular, social media pages such as on Instagram should be more active. During the go-to-market period, partner with local craft bars for ad integrations. It is necessary to involve at least 10 local influencers in this activity.

To increase brand awareness in the new market, several product launches should also be held at the most important craft beer centers. The Chinese beer market in the country is underdeveloped, but there is an increased interest in imported craft beer. However, local production includes many breweries, which presents a marketing challenge. Flanders (2020) notes that “the craft industry was noted by the keen interest of the domestic consumers who take a growing interest in non-standard beer sorts” (p. 13). Thus, it is necessary to conduct at least 5 product presentations before launching it on the market.

Marketing Strategy

Portfolio Analysis

The Growth Share Matrix can be used to analyze a company’s portfolio. This matrix involves considering the market share, as well as its growth rate for strategy development (What is the Growth Share Matrix? n.d). In accordance with this tool, the company enters a rapidly growing market but does not yet have a share in it. Consequently, it needs significant investments at this point in development to enter the market.

The Attractiveness of Allocated Country

Currently, the Russian beer market is experiencing not only active growth but also devitrification. It is noted that in various segments, “the share of mass brands and sorts is decreasing, but small and original sorts are becoming more popular and growing more faster” (Flanders, 2020, p. 13). These factors make Russia attractive for expansion since the market has favorable conditions, in particular for foreign SMEs.

Competitive Strenght of Selected Company

Great Leap Brewing has several competitive advantages that are key. First of all, the company offers unique recipes using local Chinese ingredients that meet the needs of consumers in new craft beer sorts. Additionally, owning several beer bars, the company has experience working directly with draft beer, which will allow it to function effectively in this niche. Finally, Great Leap Brewing produces a variety of popular varieties in the world in a unique manner to meet the needs of a wider audience.

Mode of Entry

Exporting is the preferred mode of entry for several reasons. First of all, this approach is the least costly since the company does not need to open production in a new country. Additionally, this type of entry has the lowest risk since it does not involve additional investments. However, the cost of transporting the product is a challenge. Russia and China are on the same continent and have a common border, which makes this factor less significant. Marketing spending is a priority in this case, what should be paid attention to.

Segmentation, Targeting, Positioning

Market segmentation should be done by age, gender, and geography of the target audience. Currently, both men and middle-aged women are consumers of craft draft beer (Watson, 2018). Generally, consumers have a high level of education and live in industrially, and economically developed regions, which makes the geographical segmentation of the product in Moscow justified (Watson, 2018). Thus, marketing targeting is fully consistent with this segmentation, as it is aimed at all consumers of craft beer. Positioning will be based on two variables: the level of uniqueness of the product and the price of the product. Both of these indicators should be high, as they will allow you to acquire a competitive advantage.

Marketing Tactics

The main products for export are sorts with the largest amount of traditional Chinese ingredients. The more common in the world types of beer should not be used to maintain a competitive advantage. The pricing policy should be aimed at the premium segment, which means setting a higher price of the product compared to the average typical for the market. The place for the distribution of the product should be located in the cultural centers of Moscow for the greater attention of the target audience. Promotion, in this case, is the most important aspect of marketing tactics. The product needs to be positioned as unique in terms of Chinese culture and traditions, as well as focus on the draft. This tactic will create a high-end product that consumers will consider an event, not a routine.

Marketing Action Plan

According to the marketing strategy, the emphasis is on the cultural characteristics of the product offered for export. However, successful promotion requires the direct participation of the company at all stages of entering the market. This provision is key since the basis of promotion is the personal sales of both the manufacturer and the distributor. Social media, in this case, plays the role of support at the initial stage. For successful promotion, it is necessary to create a certain level of excitement around the product, which is achieved through product presentations. Pricing policy is based on the assumption of the cultural exclusivity of the product. Distinctive features of the product are the unique taste and origin of the beer, as well as its availability through the draft. Both of these qualities constitute the advantages of the product that make it outstanding in the existing market.

Conclusion

The entry of Great Leap Brewing into Russian is a promising solution since this segment is currently growing and experiencing diversification. The marketing strategy is thus based on emphasizing the uniqueness and premium quality of the product, which is achieved by promoting the idea of using traditional Chinese ingredients. Within the Russian market, this tactic is also associated with the establishment of a higher price compared to other manufacturers. Distribution of draft beer should be carried out in beer bars located in the cultural centers of the country’s capital in order to attract the largest target audience. Thus, Great Leap Brewing has the opportunity to enter the Russian market with the lowest investment costs by exporting its product.