Economic analysis of introducing Samuel Adams beer to Argentina

Marketing

Economic Analysis: Argentina Introducing

Samuel Adams to Argentina (CIA World Fact Book, 2004)

The Boston Beer company has requested an Economic Analysis report of a proposed opportunity to sell Samuel Adam's beer products in Argentina. "The Boston Beer Company is America's leading brewer of world-class beer." (Boston Beer Company, 2004)

The company, founded in 1984 by the sixth-generation brewer Jim Koch knows that it can do well in the Argentinean markets. Boston Beer has won over 500 international awards for its better-tasting beers such as Samuel Adams Boston Lager® which was the flagship brand. The company will utilize this report to understand the economic situation of the country and then will apply the 4 P's of marketing:

Product

Price

Placement

Promotion

Success for a business is a matter of attracting and retaining customers. "It is well recognized that a key issue in gaining brand awareness, trial, and subsequent loyalty is to reflect deep-seated values in advertising and augmented product offerings. When marketers address consumer values, target consumers sense that the product's purpose is to benefit their individual lives." (Durgee, O'Connor, and Veryzer)

Because our products are world renowned for their great taste, head to head competitions with local beers or other imports will be the product strategy. This approach had been successful in other South American nations where our product had to be introduced into the local markets and should continue to prove successful in Argentina.

Pricing will be dictated by tariffs, acceptance and marketing strategies. The aim of product pricing is to meet profitability objectives, to gain market share, and to make Samuel Adam's an acceptable alternative for current beers for the everyday life of all Argentinean citizens. "Brands and products can offer new benefits and play new roles in peoples' lives if marketers know how to identify and track key values, understand their impact on consumption behavior, and apply them to new products and advertising." (Durgee, O'Connor, and Veryzer) Placement however, will be a much targeted approach. Placement may affect pricing but the main objective will be to gain market share in the urban areas first and then advertise the success of the urban establishment to migrate into the suburban locals.

Through implementation of this plan, the country can be saturated through a duel marketing approach of word of mouth from urban dwellers out to suburban and rural markets which will be coordinated through our mass media approach. In regard to promotion, Argentina has experienced some periods of internal political conflict throughout its history but since a Peronist authoritarian rule was overthrown in 1976, the nation has lived with Democratic rule and has enjoyed a period of numerous successful elections since 1983. Argentina can be considered a modern democratic nation and a mass media marketing campaign would be highly successful in promoting our Samuel Adam's products.

II. Population

As of July 2004, Argentina has been reported as having a total population of 39,144,753. The nation sports a 1.02% growth rate and has an estimated birth rate of 17.19 births per every 1,000 members of the population. The nation has a normal death rate of approximately 7.57 deaths per 1,000 members of the population and also a normal distribution compared to world figures for it infant mortality rate: 15.66 deaths per 1,000 live births (male: 17.6 deaths/1,000 live births and female: 13.63 deaths/1,000 live births) Life expectancy from birth for males is approximately 75.7 years and 71.95 years for females.

Obviously the key statistic about Argentina is the drinking age which is 18 but in rural areas this age is not enforced as it is in urban scenarios. The national age structure is: 0-14 years of age is 25.9% of the population with a male 5,179,236 count and the female count is 4,947,234. The nation has 63.6% of the population between the ages of 15-64 years old with male making up 12,452,566 and females 12,457,451. Seniors 65 years and over equate to 10.5% of the population with a beak down of 1,685,371 males and 2,422,895 females. The overall population is young with a median age for males being 28.3 years and females 30.1 years old.

III. Economic Statistics and activity

The nation is highly literate and the GDP per capita purchasing power is approximately $11,000 U.S.. "Argentina benefits from rich natural resources, a highly literate population, an export-oriented agricultural sector, and a diversified industrial base." (CIA World Fact Book, 2004)

Over the course of the past twenty years or so, the nation has been suffering cyclic economic problems stemming from inflation, external debt, capital flight, and high governmental budget deficits. "Growth in 2000 was a negative 0.8%, as both domestic and foreign investors remained skeptical of the government's ability to pay debts and maintain the peso's fixed exchange rate with the U.S. dollar. The economic situation worsened in 2001 with the widening of spreads on Argentine bonds, massive withdrawals from the banks, and a further decline in consumer and investor confidence." (CIA World Fact Book, 2004) Record exports have fueled economic recovery with output up over 8% in 2003 and unemployment figures falling in direct proportion to the reduced inflation figures of that year.

The nation has raised its real GDP growth rate to near 9% and to therefore have stronger purchasing power parity, up to $435.5 billion. The mixed blessing of the nation having over 50% of its population above the poverty line could in fact boost sales of our products. With a labor force of over 14 million, household income or consumption by percentage share has a bell curve with the upper and lower income factions each supporting 10% and the middle of the nations income spread in proportion throughout the curve. The nation has been positively affected by a migration rate of.61% as power nations in the surrounding areas bring trained individuals into Argentina's labor force.

Ethnicity is diverse. The main nationality is Argentinean which is mixed with "white (mostly Spanish and Italian) 97%, mestizo, Amerindian, or other nonwhite groups 3%." There is a large German population which will enhance sales. The languages spoken are Spanish which is the official language, English, Italian, German and some French. Religious affiliations are proportionate to the language; Roman Catholic 92% (less than 20% practicing), Protestant 2%, Jewish 2%, other 4%.

As mentioned, the nation has high inflation and also very high unemployment figures of almost twenty percent. The nation's industries include: oil, food processing, motor vehicles, consumer durables, textiles, chemicals and petrochemicals, printing, metallurgy, steel. The country has high debt ratios of nearly sixty-six percent of GDP and an almost 30 billion dollar annual budget. The nation has high oil, natural gas and electric exports which have been supporting the nation's debts. Exports are near $30 billion in these resources with imports of goods ranging only around $14 billion. Export partners include Brazil 24.5%, U.S. 21.5%, Germany 6.8%, Italy 4.3%, Spain 4.2%

As mentioned, the true concern with working with Argentina will be the fact that as a nation, they have defaulted on numerous national debt loans to other countries and the nation continuously suffers with runaway inflation rates and devalued pesos. These concerns could easily eat away any potential profits. The nations 14 billion in gold reserves is locked as collateral for previous debts so the nations 145 billion in debt is a scary proposal.

IV. International Concerns

Argentina is in the Southern South America and borders the South Atlantic Ocean, between Chile and Uruguay. Argentina is about three-tenths the size of the United States and has an area of 2,766,890 sq km. The terrain consists of rich plains in the northern half of the country and flat rolling plateaus in the south. Along the western border are the rugged Andes Mountains. The climate is mainly arid in the southeast and sub-Antarctic temperatures consume the southwest.

Surrounding islands have caused some problems in the area. "Environment and international agreements party to: Antarctic-Environmental Protocol, Antarctic-Marine Living Resources, Antarctic Seals, Antarctic Treaty, Biodiversity, Climate Change, Climate Change-Kyoto Protocol, Desertification, Endangered Species, Environmental Modification, Hazardous Wastes, Law of the Sea, Marine Dumping, Ozone Layer Protection, Ship Pollution, Wetlands, Whaling signed, but not ratified: Marine Life Conservation." (CIA World Fact Book, 2004) The United Kingdom has rejected Argentinean requested sovereignty talks regarding the UK administered Falkland Islands (Islas Malvinas) and South Georgia and the South Sandwich Islands. Antarctica also partially overlaps the United Kingdom and Chilean claims which have lead to some armed disputes around Argentine, Brazilian and Paraguay borders. These disputes also bring an air danger because of money laundering, smuggling, arms and drug trafficking, and fundraising for extremist organizations in the area.

VI. Transportation

The nation has a very reliable transportation system in the urban extremities but neat the Andes Mountains terrain and transportation routes can be extremely rugged. Railways support 34,091 km of track and the nation's highways are well maintained in the majority of populated areas. Highway totals are from 1999 and those statistics showed a total of 215,471. Of those, only 63,348 km which includes 734 km of expressways were paved and thus 152,123 km of roads were unpaved. The nation's ports and harbors are world class due to the large amount of national exports in oil and goods. However, the nation's airport infrastructure is lacking even though there are 144 airports with paved runways out of a total almost 1400 around Argentina.