FORE School of Management

Case II - Stroh’s Non-alcoholic Beer

Due date: 19/10/2010

Submitted on : 19/10/2010
 CASE SUMMARY

Stroh’s brewery company was established in 1850 at Detroit, Michigan. The company
produces various alcoholic and non-alcoholic beverages. Among them Stroh’s beer possesses
a strong market-hold. The product is successful due to its distinct taste. But due to changing
lifestyles and health and physical fitness issues alcoholic beverage sales have suffered. Stroh
already has presence in the non-alcoholic beverages market. It offers non-alcoholic malt
beverages, coolers and juice-added soft-drinks. There appears to be a major change in U.S.
taste away from the distilled alcohol such as vodka, bourbon, and scotch to products which
have less alcohol and a more pleasant flavour. But it is facing challenge from a new product
i.e. non-alcoholic beer. Various other companies like Clausthaler, Kalibar, Moussy, Warteck
etc have launched their product in this category. They all emphasize the fact that the buyer
gets the same taste as a normal beer (or even better) but without alcohol content. So now their
direct competition lies with beer. The stagnant sales of beer over the years have also forced
the company to look into other markets. In addition the company is facing increased pressure
from various social groups with regards to marketing of alcoholic beverages Action groups
have formed against alcoholic abuse, which focuses on Alcohol Awareness Program and
student against drunken driving. There are already a few target markets suggested for non-
alcoholic beer which the company can hope to cater. The case points towards the question
whether there is any need for Stroh to launch its own non-alcoholic beer or not. Also there is
issue regarding the ethicality of marketing non-alcoholic beer to youngsters and other
segments.
Questions and Answers-

Q.1) Is there a non-alcoholic market segment in the beer market? If it exists, should
Stroh attempt to serve it? Why? Any research your group did that can provide current
business scenario in Indian or global environment?

Yes, there is a non-alcoholic beer segment in the beer market. Stroh should attempt to serve it
as it offers high potential of growth .as we have analysed the number of non-alcoholic
consumption is increasing by almost 5% every year .so herein lies huge potential for the
company to tap this sector as this caters to huge population base This may be due to
changing lifestyles and the change in preferences of the consumers towards a health-
conscious choice, as youth now are more health conscious. So it’s even good for people who
want to have the taste of beer but do not want to drink alcohol and not get drunk. Non-
alcoholic beer will compete with beverage products like soft- drinks, juice added soft drinks
etc.

Q.2) what sales forecasting techniques should Stroh’s management use to predict sales
of non-alcoholic beer? How should it go about assessing the non-alcoholic beer market
forecast? Suggest a possible method/ technique?

A sales forecast is a prediction based on past sales performance and an analysis of expected
market conditions. So Stroh’s management can look at the future objectively by reviewing
the past data of consumption of yearly sales by volume and precisely analyzes that
information to see into the future. The responsibility of forecasting and ordering product at
the distributorship basically lies with a Forecast Analyst. There are two main approaches to
sales forecasting: quantitative and qualitative. As we might not be having much data on
consumption of non-alcoholic beer, so we can use DELPHI METHOD to get the best result.

Q.3) what in your group’s opinion are bases of a good segmentation effort?

Market segmentation means to identify the consumer market on the basis of common needs
and then decide as to which segment needs to be served. Bases for a good segmentation effort
are:

a) Geographic segmentation- Under this, the market is divided into various units such as
nations, states, regions, counties, cities or neighbourhoods. The organization can then
select the areas where it wants to operate.
b) Demographic segmentation- Here, the market is divided into groups on the basis of
variables such as age, gender, income, occupation, education, religion, family size,
lifecycle stage, social class.
 c) Psychographic segmentation- In this, buyers are divided into different groups on the
basis of lifestyle or personality or values.
d) Behavioural segmentation- Here, buyers are divided on the basis of their knowledge,
attitude, usage, and the variables are occasions, benefits, user status, buyer readiness,
usage rate, attitude toward the product.

Qualities of an effective market segment -

i) Measurable
ii) Substantial
iii) Accessible
iv) Differentiable
v) Actionable

Q.4) Can Stroh cultivate the new customers with non-alcoholic beer and retain its old
customers?

Stroh can cultivate new customers with non-alcoholic beer due to changing lifestyles and the
change in preferences of the consumers towards a health-conscious choice, as youth now are
more health conscious. Now trends are changing and even people who want to get a taste of
beer and not drink alcohol will look for non alcoholic beer. Further it is also used by people
who want to drink but not get drunk.

But, the existing customers of beer are used to the taste and hangover of beer. There might be
a possibility that they do not like non-alcoholic beer if they do not feel high .Any alteration
with their regular drink might be disliked by them. As we have seen in recent past, when coke
changed the formulae of their concentration, it was disliked by people by USA and the
company had to get back to its original formulae as they people were addict to it or rather
they were emotionally connected with the product. So Stroh can achieve the balance between
new and existing customers by offering both the products. But it would be challenging for
Stroh to convert the customers preferring beer to the non alcoholic ones.

Q.5) What prospect do you see for marketing of non-alcoholic beer in India? How large
or small is the opportunity? State your response within the framework of a situation
analysis that takes stock of relevant Indian statistics if possible.

The prospect is huge for marketing of non-alcoholic beer in India. Increasing GDP, favourable
growth in the demographics with a growing urban middle class, growth of modern retail
formats, hopeful rationalization of the taxation rules and ban on local country liquor and
rising health consciousness, age preferences will act in favour of the growth of both alcoholic
(specially beer) and non alcoholic (specially fruit juices, energy drinks etc) beverages in India
in the near future.

According to recent statistics non-alcoholic beer is the fastest growing beer segment
globally, registering double-digit beer sales. The non-alcoholic beer market gives us access to
a larger consumer base. Attractive packaging and strong promotion could make non-alcoholic
beers as strong a product as light beer. The current market for non-alcoholic beer is growing
at a rate of 150 per cent annually. The fruit juices and fruit-based drinks market is close to Rs
5,000 crore ($1.13 billion), growing at 35-40 per cent annually. The per capita consumption
of non-alcoholic beer in India is estimated far below compared to China, Europe and the US ,
but with changing trends and with huge population base of India , scope of non-alcoholic beer
goes manifold .

Q.6) Is it ethical to market non-alcoholic beer to young and other segments of the
market? Why? Discuss.

Yes, it is ethical to market non-alcoholic beer to the young and the other segments as the
product is alcohol- free. Also, in conservative countries like India, where consuming
alcoholic products is culturally not acceptable, this product can serve the purpose of being a
good substitute. Further we see that, non alcohol beer caters to segment of youth which are
health conscious as this beer contains minimum quantities of fat and calories. It is more
suitable to the changing mindset of consumers from social, cultural and health aspects. And
also we know that the decision to accept an individual product or category is always at the
discretion of the owner but at the same time patronage and sustaining is required from the
consumers themselves to make the world a better place to lead a quality life.

Relationship to Concepts

From the above case we can see how marketing concepts such as STP i.e. Segmenting,
Targeting and Positioning come into play in the real world. Segmentation is very important
for any brand, as we have seen the continuous rise in the non-alcoholic consumption in the
given years. As seen by their forecasting strategies of launching non-alcoholic beverages in
the market sensing the need for the same and capturing the advantages.

The company looks for new market to expand in non alcoholic beverages market and expand
its market share while at the same time the competitors attack it at its core competency which
is beer, by creating a new variant of non-alcoholic beer. Here a new need is being created by
the competitors and a challenge is being thrown to the company to take immediate necessary
actions.

Branding is very important for a company as it is more than a product, it can have dimensions
that differentiate it in some way from other products designed to satisfy the same need. The
Stroh Brewery Company should decide to brand its products in a manner so that its existing
customers do not feel the change in their original brand of beer because Any alteration with
their regular drink might be disliked by them as they are used to the taste and hangover of
beer. So Stroh can achieve the balance between new and existing customers by offering both
the products.