Distribution and Promotion of Beer

Distribution and Promotion of Beer (Redhook Ale) in Nigeria

Distribution and Promotion of Redhook Ale in Nigeria

Throughout the past recent years, the business community has been subjected to numerous mutations. Two of the most important ones revolve around globalization (and its adjacent market liberalization) and to an increased emphasis placed on marketing strategies. Since the customers became the central part in the organizational play, companies strive more and more to satisfy their needs. This means that they properly identify the target market, the product placement, promotion or pricing strategies. A vital role in the success of a corporate product is the selected distribution strategy. The opportunities in this direction have multiplied throughout the past recent years, generally as the corporate operations have expanded globally. To better understand the process, one should look at a clear example of an American company distributing their products offshore.

Beer in Nigeria

Beer and palm wine are the two preferred alcoholic beverages of the Nigerian population. The consumers generally prefer the national produced beers, but they also consume imported products.

From a marketing standpoint, beer is often included in the same category with cider and FABs. This market has been registering constant growth in the period 2001-2006; the annual average rate has been of 4.4%. The main player in the industry is Nigerian Breweries, followed closely by Guinness Nigeria and Consolidated Breweries (Research and Markets).

The sector has been struggling for years with the matter of counterfeits. The peak of the problem was achieved in 2002, when Nigerian buyers found it extremely difficult to get access to the original beers. Most of the products on the market were forged. The primary blame for this is put upon the major distributors - the only ones able to conduct such massive operations. "Only big time distributors are into this business and they mix the fake brands with the ones they have in stock. [...]the Nigerian government is aware of the problem and is reportedly taking steps to crack down on the fake brews" (Beaumont, 2002).

3. Distribution of Redhook Ale

Redhook Ale Brewery was established in 1981 in Seattle, Washington (whwre it is still headquartered) and it is internationally renowned as a successful beer manufacturer. They currently sell their nine types of beer (five active beers and four types of seasonal beers) into 48 countries across the globe. The core of their distribution strategy is that of using wholesale distributors (Website of Redhook Ale Brewery, 2008). Throughout its existence, the company has also engaged in franchise operations. The features of the two types of distribution strategies used by the Redhook Ale Brewery to promote their products onto the Nigerian market are succinctly presented below.

Wholesale distribution

The Nigerian wholesale distributor will attempt to purchase the American beers at a low price and sell it for a higher price onto the national market. This strategy has several advantages for the Redhook Ale Brewery. They could be succinctly presented as follows:

The American brewery faces reduced risks and losses if the beers are not welcome by the Nigerian market, as he has already received payment from the distributor

The costs of the American brewery are also significantly reduced as they do not have to become involved in the distribution process - all logistic and marketing decisions and strategies are implemented and financed by the Nigerian wholesale distributor

There are however limitations to the approach. These are briefly presented below:

Given the fact that the Nigerian wholesale retailer will purchase large quantities of beer, he has the ability to negotiate selling prices and other contractual terms

The wholesale distributors represent an additional party in the distribution process, meaning that they generate an increased distance between manufacturer and client - this is a net disadvantage as the possibility to retrieve feedback and improve the quality of the produced items is significantly reduced

Some of the most renowned Nigerian wholesale distributors to be used by the Redhook Ale Brewery could include the Jarison, LLC & PC Water, LLC, G-BIZlinks, Viniqum, Walt Delco Pty Ltd., Z. Makrides Trading Ltd. Or Questurn (BR Trade Holding, 2008).

Franchise

Franchising operations are still in their incipient forms between the Seattle-based headquarters and the Nigerian entrepreneurs. Continuing to expand these operations however would pose significant advantages for both parties. Some of these benefits are succinctly presented below:

The American brewery would face limited risks and these would be shared between franchisor and franchisee

Historical data on franchising operations reveal significant rates of success, explained primarily by the mutual interest of both parties franchise owner will be more inclined to promote the Redhook Ale beer than an average wholesale distributor

Disadvantages are also incurred in the process and some of them are presented below:

Redhook Ale Brewery would have to offer support to its Nigerian partners in the form of training or even funding

The American brand would be handled by foreigners and a negative result of the operations in Nigeria could materialize in a damaged reputation for Redhook Ale Brewery

Both cases of wholesale distribution and franchise operations present advantages as well as limitations. Their ultimate purpose however remains that of selling as many Redhook Ale beers as possible. The difference between the two distribution channels however remains the nature of the goal. While the wholesale distributor will primarily focus on simply selling the beers, the franchisee will place an increased emphasis on creating a stable and loyal customer base. He will therefore focus more on promoting the products through various channels, making the best informed logistics decisions and creating a campaign that adequately reveals the Redhook Ale values.

Transportation and other logistics decisions generally vary from one partner to the other and are established based on negotiations between the Nigerian entrepreneur and the representative of the American brewery. Each agreement is notified in a contract. In some cases, the transport of the merchandise from the U.S. To Nigeria would be covered by the brewery, whereas in other instances, it would be paid by the wholesale distributor or by the franchisee.

The specific channels used by the Nigerian entrepreneurs to actually ensure that the product reaches the ultimate customer are various. Franchisees generally use their own facilities as retail locations, where the customer is invited to purchase and enjoy the beer. In the case of wholesale retailers on the other hand, they generally sell larger quantities of beer to supermarkets, stores or entertainment facilities, such as bars or clubs.