5. 5
1. Product Introduction: Cider
New Zealand is a major apple producer and exporter however it
holds a relatively minor position in global beverages outside the
wine category. The Cider is the key standout due to the recent
demand and today the country has a share of 1.6% of the
worldwide market cider market share (Corolis, 2013).
Cider consumption is growing in developed countries where
research has shown an increase in the consumption as the drink is
gaining popularity amongst the younger generation. It is a
combination of marketing and innovation that is driving the sales
in this category of beverages. Cider is not able to compete with
lager when it comes to a ‘session drink’ as it is still not a
mainstream drink however according to some leading researchers
if Cider can develop its taste profile and perception- to cover for
people who don’t like their drink sweet it has the potential for a
broader appeal (John Forsyth, 2012).
Cider is a unisex drink which carries perception of health
advantage amongst its millennial and those under the age of 35
are attracted by cider’s variety of sweet flavours. (John Forsyth,
2012).
There are approximately 910 Cider manufacturers in 23 countries
around the world; New Zealand has 10 cider manufacturers and
leader in Cider production is the United Kingdom (Guide) .
6. 6
2. Company Profile - Dominion Brewery
Cider is the fastest growing alcohol beverage category in New
Zealand and Dominion breweries operates the second largest
dedicated brewery in the country under the banner of ‘Redwood
Cidery’ in Nelson (The University of Auckland Business School). In
1788 Captain Cook carried cider to fight scurvy and popularised
cider in New Zealand however it was not until 1957 that popularity
of cider grew from Dominion’s Waitemata brewery founded in
1929 by Late Willam Jospeh Coutt.
The initial days of Dominion brewery were characterised by limited
access to capital which saw the Coutts family to join hands with
Sir Henry Kelleher, owner of Levers & Co resulting in new
production plant and access to expansion capital.
The year 1956 saw a paradigm shift after the founder’s son, Sir
Morton Coutt invented the globally acclaimed, now patented
automated continuous fermentation process popularly called the
‘Coutts process’, the process enabled consistent round the clock,
production and a paradigm shift to the fortunes of Dominion
Brewery (DB Group, 2012).
The success of the Coutts process opened gateway for
acquisitions and the group acquired over two hundred and fifty
hotel, breweries and retail outlets across the Asia Pacific.
7. 7
The vision of Morton Coutts to expand globally and continually
innovate on product, management and the technology side saw
the management join hands with Brierley Investment in the 80’s
and recently the management merged with global giant Asia
Pacific breweries to expand their marketable portfolio and the
management expertise, truly in line with the vision of their
founder, they make products with passion and have quality and
safety of products and respect for people and environment on top
of their agenda. The key result is an attitude of ‘play to win’ (DB
Group, 2012).
The cider brands marketed by Dominion breweries are Monteith’s
Brewer Series Cider, Monteith’s Crushed cider , Old Mout Cider,
Orchard Thieves and the Rekorderlig Cider (DB Group, 2012).
The journey of DB Brewery is a classic example of a corporate
capitalising on strength and leveraging the opportunities to
obliterate threats and weaknesses.
Considering the strength of the company especially their in-depth
understanding of the behaviour patterns of their consumers,
especially the millennials, global product quality, an attempt to
explore two markets is initiated, starting with the study of
political, social, technological and economic environments, United
States of America, a developed economy and Thailand, an
economy in transition.
8. 8
3. United States of America
United States market is abuzz with exponential growth in Cider
category of beverages. While the Boston Beer Company maintains
the monopoly with over three fourth market share, it is high time
for Dominion to understand the structure of this largest and make
inroads with the aim of capturing the sizeable market share
(Euromonitor, 20154).
9. 9
3.1 Economic & Financial Environment: United States of
America
3.1.1 Financial Stability: USA
Figure 1 GDP Growth USA
The GDP of United States is approximately 17416.253 Billion US Dollars
(Reseach, 2015). The GDP growth has been consistent above 2.5%
despite of a subprime crisis in 2009 and the base the above chart; we
can clearly see the continual growth despite a financial crisis and a
stimulus package given by the government to support their financial
institutions.
10. 10
Figure 2 Inflation Trend USA
Based on figure-2 the inflation has been sketchy however the economy
exhibiting the average figures of around 1 to 1.25% over a decade.
Stability is exhibited on following reasons (Coface, 2015)
Labour market flexibility
The Federal Reserve aims for full time employment for its citizens.
Dollar is the main exchange currency in the world trade.
Almost three fourth debt of the country is held by the public.
Largest untapped oil reserve in the world as well as largest producer of
oil and second largest importer.
Largest producer of sulphur, phosphorus, liquefied natural gas,
importer of oil in the world.
Ranked A1 in country risk assessment by leading rating agency which
is least risk
Ranked AAA in the country ratings by leading rating agencies,
Moody’s.
Ranked A1 in business climate or ease of doing business.
11. 11
3.1.2 Economic Development: USA
According to some economist the Gross National Product measures the
output of a given nation and the World Bank comes out with statistics
for GNP as it is a measure of increase in income over a period of time.
The World Bank figures of GNP for US for the year 2013 stands at 16.99
Trillion US Dollars (Trading Economics)
Figure 3 GNP USA
12. 12
Figure 4GDP Per Capita USA
The figure-4, GDP per capita PPP are fair indicators of total output of a
country by population considering the exchange rate. According to the
World Bank the GDP PPP of USA stands at $52117.76. The average of
GDP per capita PPI has been above $45000 from 1990 (Trading
Economics).
3.1.3 Economic Cycle Stage: USA
We can classify United States as a high-income country based on GNI
per capita, Figure-3.
According to leading credit ratings agency in the world, Moody’s, a
country is in any of the four stages;
Recession,
Recovery,
Expansion,
At risk,
13. 13
The USA is in Expansion stage according to the three leading rating
agencies of the world.
S&P rates US at AA+, Fitch:- AAA and Moody’s:- AAA and if we add
financial markets risk including bonds and yields, The Trading
Economics rating of the USA is at 97 which means no risk and
expansion mode of an economy (Trading Economics).
There are however other ways to assess the economic cycle stage, e.g.,
Figure 5 nonetheless considering the pent up demand for hard cider,
expected at 14% per annum, a $560 million dollar industry size in US
by 2019 (Winfrey, 2015), the cycle stage of the country will match the
latest technology used for production however Cider has a unique taste
based on region of growth, hence Dominion stands at competitive edge.
Figure 5 Economic Cycle Stage
3.1.4 Income Distribution: USA
‘Gini” index is statistical distribution between the number zero(0) and
one(1). Zero is perfect equality and 1 is the perfect opposite. In
practical world we all know this is never the case, be the country the
richest or the poorest, the income is usually a unfair spread.
14. 14
According to world fact book released by CIA, United States the Gini
index, described in percentage terms is at 45%.
Figure 6 GDP By State
3.2 Resources availability, sustainability and
management implications: - USA
USA is the second largest producer of Apples, the key ingredient in
Cider, in the world and most of its produce is exported however if we
observe the trends, the apples from New Zealand are very popular in
USA (Association, 2015). Also the leading producer of coal, nickel, gold,
15. 15
silver, arms and technology, a country which advocates the sustainable
use of resources however optimum utilisation is advocated for
maintaining the dominant position in the world.
3.3 Technology USA
In technological contest, even though the United States is a leader in
most of the areas however when it comes to research and development
especially the advantages the Coutts intellectual property rights and the
process functional efficiencies of Dominion are considered, the market
share for Dominion is imminent upon undertaking the venture.
Dominion Strengths include E-tailing and use of internet as a platform
and the data from the World bank sources suggest that 84.2%
population is having access to the internet in the United States.
16. 16
Figure 7 Internet users
3.4 Distribution Infrastructure USA
The USA has a well-developed and the largest train network in the
world. There number of airports in the United States run in the figure of
fifteen thousand plus and the population of United States is the most
upwardly mobile in the world, thanks to their developed sea, air and
road transportation network.
3.5 Political/Legal Environment USA
United States of America is a superpower fuelled by a federal
democratic structure with a President as the head of state running the
affairs of the 50 states and the geopolitics of the world. The land area of
17. 17
United States is 9,857,306 km2 with a population of 318.9 Million
(2014) (Agency, 2015). It is ranked as third in nations in population has
the most culturally diverse multicultural makeup with modern settings
and infrastructure. The target market of Cider is a huge 25-54 years:
39.9% (male 63,452,792/female 63,671,631), 55-64 years: 12.6%
(male 19,309,019/female 20,720,284) in United States for tastes and
for sensibilities and health the market looks like a 65 years and over:
14.5% (male 20,304,644/female 25,874,360) (2014 est.): Source
(Agency, 2015).
Life Expectancy United States, World Bank: 78.74
Literacy Rate: According to U.N. Human development report, the
literacy levels in United States is at 99% for both males and females.
Measures of Poverty: According to US Census bureau more than 16.1%
of population in United States lived in poverty.
Population Growth: According to World Bank source the population of
United States is growing at a slightly less than a percent per annum.
Figure 8: Population Growth USA
Infant Mortality Rate of United States is at 6.2.
18. 18
According to US Census bureau 80% plus population lives in urban
areas.
According to World bank more than 20% of population in US is under
the age of 20.
United States is ranked fifth on Human Development Index report by
United Nations and the index is at 0.914 (Program, 2015).
United States is ranked seventh in the ease of doing business (Group).
United States and Thailand are open to trade however in U.S if the cider
has more than 7% alcohol content, it is taxed at the rate of wine, the
tax per gallon in United States is $1.071and the tax per package is
$0.21.
3.6 Social/Cultural Environment: USA
3.6.1 Corruption USA
According to Business Anti-Corruption portal there is no business risk
for foreign investors in United States (GAN).
Foreign companies perceive the justice system of United States as
independent and efficient.
The police are perceived by half of the Americans as corrupt as the
border sharing with Mexico brings about the illegal exchange of drugs
(GAN).
The United States is ranked at number 17 in perception of corruption in
between the government and business (International).
19. 19
3.7 Cultural Environment USA
The buying behaviour of residents in any country is influenced by
religion, language, food and what they believe is right and wrong.
Americans have influence of reference groups
Hofstead analysis gives us insights into the pattern of thinking of a
particular country’s residents
3.7.1 The Power Distance
USA Score: 40:- indicates inequality is minimal, low dependence needs,
hierarchy is for convenience, superiors are accessible and all have equal
rights.
3.7.2 Individualism/ Collectivism
USA: 91:- indicated “I” conscious nature, private opinion and fulfilling
obligation to self before others. There is a high degree of geographical
mobility and Americans are the best joiners in the world however they
hardly develop deep friendships.
3.7.3 Masculinity
USA: 62:- Indicates that Americans are performance oriented and they
have a tendency to polarize and need to excel. Big and fast are
beautiful and they have admiration for successful achievers and are
very decisive.
3.7.4 Uncertainty avoidance:
USA: 46:- Mid-range uncertainty avoidance indicates that Americans
are not emotional, they accept dissent and have less need for rules.
They are flexible. Conflict and completion are seen as fair and hard
work is not a virtue per se however they are relaxed and less stressed.
20. 20
3.7.5 Long Term Orientation:
USA: 26:- A low score indicates concern for stability, there is one
absolute truth and people are conventional/ traditional.
3.7.5 Indulgence:
USA: 68:- Indulgence stands for society that allows relatively free
gratification and Americans exhibit work hard and play-hard attributes
4. Thailand
Thailand is the world’s fifty first-largest area of 514,000 km2
and
twentieth most populous country in the world. This Venice of East
is a constitutional monarchy headed by the King. The Thai’s
maritime boundaries includes Vietnam, Indonesia and India. It is a
newly industrialized country.
4.1 Economic & Financial Environment: Thailand
4.1.1 Financial Stability: Thailand
Figure 9 ThailandGDP
21. 21
The GDP of Thailand is approximately 373.891 Billion US Dollars.
The GDP growth from the year 2012 to 2015 is recorded at percentage
(6.5%,2.9%,0.5%,3.5%) respectively, after witnessing a major political
upheaval in 2014, the GDP of Thailand is recovering and is expected to
scale new peaks.
Figure 10 Inflation pattern
Inflation turning to deflation due to political turmoil and now recovering
back indicates growth returning with improved confidence.
Stability is exhibited on following reasons (Coface, 2015)
Efficient and diversified agricultural and industrial production
Surrounded by developing and dynamics of surrounding countries and
buzzing tourism.
Governments focus on strengthening the banking system.
Ranked A4 (acceptable risk) in country risk assessment.
Ranked A3 in business climate.
Ranked Baa1 rating by country by Moody’s.
22. 22
Thailand remains auto manufacturers and electronic industry’s point of
low cost green production.
Healthy foreign reserve position.
4.1.2 Economic Development: Thailand
Gross National Product measures the output of a given nation and the
World Bank comes out with statistics for GNP as it is a measure of
increase in income over a period of time. The World Bank figures of GNP
for Thailand for the year 2013 stands at 4839.07 Billion US Dollars
(Trading Economics).
Figure 11 ThailandGNP
23. 23
Figure 12 ThailandGDP PPI
The GDP per capita PPP are fair indicators of total output of a country by population
considering the exchange rate. According to the World Bank the GDP PPP of Thailand
stands at $13986.5 (Trading Economics).
4.1.3 Economic Cycle Stage: USA & Thailand
S&P rates Thailand at BBB+. Fitch:-Baa1 and Moody’s:-BBB+ which is
stable however in expansion and if we add financial component, The
Trading Economics rating of Thailand is at 62 which means a risk can be
taken in business here and the economy is in expansion mode (Trading
Economics).
4.1.4 Income Distribution: Thailand
‘Gini” index is statistical distribution between the number zero (0) and
one (1). Zero is perfect equality and 1 is the perfect opposite. In
practical world we all know this is never the case, be the country the
richest or the poorest, the income is usually a unfair spread.
Gini index score for Thailand at 53.6%.
24. 24
Figure 13 GDP spread
4.2 Resources availability, sustainability and
management implications:- Thailand
Thailand on the other hand is a minnow in Apple production and has
some resources of production in the North of the country however it is a
net importer of Apples. A developing country with growth coming for
outsourced manufacturing and tourists visiting the country for scenic
beauty.
25. 25
4.3 Technology Thailand
Thailand is also catching up with increased penetration of
communication networks and it is more of download content on the
innovation front and is a low cost manufacturing for hybrid automobile
technology.
Figure 14 Internet users in Thailand
26. 26
4.4 Distribution Infrastructure Thailand
Figure 15 Port Network in Thailand
Thailand has an international world class airport in Bangkok and two
major ports and a reasonable connectivity in its 76 provinces however
from a business point of view, the capital city is where the business is
and if the product catches steam in the city, it has a trickledown effect
on the rest of the country.
An overwhelming majority of Chinese migrants are present in Thailand
which causes the product to cross the border and have wider audience.
4.5 Political/Legal Environment Thailand
Thailand is a constitutional monarchy with the longest serving King who
manages the reigns of the country however the Prime Minister of
Thailand is a democratically elected leader and heads all the important
27. 27
functions with council of ministers. Thailand is ranked twenty sixth
according to the World Bank report on doing business and specified
areas of redresses relating to the business (Group).
Figure 16 Thai political Uncertainty
Thailand remains fragile nonetheless the business confidence remains
intact.
New Zealand has a free trade agreement with Australia, Malaysia,
Singapore, Thailand, China Brunei and has an in-progress trade
agreements including India and transpacific partnership.
The sales tax in Thailand is 7%.
1.6 Social/Cultural Environment: Thailand
Thailand is ranked 18th in the world by population, the women
outnumber men in the country and inequality in income is pronounced
(Office, 2015).
28. 28
Figure 17 ThailandSex Ratio
Life Expectancy Thailand, World Bank : 74.19
25-54 years: 46.9% (male 15,685,882/female 16,097,245)
55-64 years: 10.9% (male 3,468,620/female 3,893,925)
65 years and over: 9.5% (male 2,830,418/female 3,625,336)
(2014 est.) (Agency, 2015).
Literacy Rate: According to U.N. Human development report, the
literacy levels in Thailand is at unexpected high of 96.7% for both
males and females (Statistics, 2012).
Measures of Poverty: According to CIA world fact book more than
13.2% of population in Thailand is below poverty line (Agency,
2015).
29. 29
Population Growth: According to World Bank source the population
of Thailand is growing at a 0.3%.
Infant Mortality Rate of Thailand is 12.
34% Thai population lives in urban areas (Trading Economics).
The density per square kilometre of Thailand’s population is 131
with fertility rate of 1.41 (Worldometers)
Thailand is ranked eighty ninth on Human Development Index
report by United Nations and the index is at 0.722 (Program,
2015).
4.6.1 Corruption Thailand
Thailand has a legal system however there is corruption at all
levels including the present prime minister’s government which
faces the charges of corruption; the military rule in Thailand is a
result of money politics (GAN).
According the Investment Climate Statement 2013, the
corruption in Thailand is significant and exists at the interface
between the government and the business.
The Transparency international ranks Thailand at number 38 in
2014 and 85 amongst the 175 countries (International).
4.7 Cultural Environment Thailand
Thailand is heavily influenced by Buddhism.
30. 30
Hofstede analysis gives us insights into the pattern of consumer
behaviour
4.7.1 The Power Distance
Thailand: Power Distance : 64 : Indicating culture of inequalities
4.7.2 Individualism/ Collectivism
Thailand: 20:- Collectivist country, if an idea picks up theme, it will
steam through the society.
4.7.2 Masculinity
Thailand: 34:- Considered a feminine society, caring for others and
quality of life.
4.7.3 Uncertainty avoidance:
Thailand: 64:- In order to minimize or reduce this level of uncertainty,
strict regulations are adopted and implemented.
4.7.4 Long Term Orientation:
Thailand: 32:- Culture is more normative than pragmatic, respect for
culture
4.7.5 Indulgence:
Thailand: 45:- Preference cannot be determined, although we all know
Thai economy also thrives in an alternate business.
5. Conclusion
New Zealand is a country gaining reputation of quality in the
realms of Wines and beverages, it is gaining the boutique
positioning in the minds of customers across the world,
31. 31
considering that Cider is a growing market in the developed
countries and the usual desire to catch up and be in the scene
exhibited by consumers in the developing country, the product has
good chance for making a mark for itself in Thailand and grab a
larger portion of market in the United States.
New Zealand has a free trade agreement with Thailand and has
in-progress trade agreements including the much debated
transpacific partnership.
Exporting cider from New Zealand requires export certificates and
meeting the Overseas Market Access Requirements and
compliance with destination market requirements, e.g. for Unites
States, the Alcohol and Tobacco Tax and Trade bureau lists the
requisites to be completed and Thailand Customs has the listed
licensing and paperwork requirements.
The study done by various experts and behaviour analysts also
confirms the uptick in the Cider category especially the millennial’s
and considering the large population as the prospect countries.
The fact that in Thailand most of the upmarket brands are
available in Bangkok and the frequency of travellers in the region
is extremely high also gives the high chance of success to the
product.
The social media and association of Cider brand with success will
determine the extent of penetration the brand is able to make in
32. 32
the United States as the country is fairly even spread and has
great internet connected population which is very decisive.
The conclusion in the actual picture taken by a friend in London is
a proof of undertaking expansion into Thailand and the United
States.
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