Environmental trends and their impact on James Boags Australian beer producer

Boag's

Australia is considered to be a major beer drinking country, something that has traditionally provide a robust market for producers. Inter-state trade barriers have allowed for brewers in each state to flourish, something that benefitted James Boag, with its small domestic market in Tasmania. Boag's was able to use this strength to support its expansion endeavours, which ranged from the rest of Australia to as far away as the United States (Gale Group, 2004). The company faces some major challenges in the environment, including a social trend away from industrial beer, something that is forcing breweries both in Australia and around the world to seek out new opportunities. There are opportunities out there, however, a function of globalization and the information economy that increases the ability of companies to expand overseas and lowers the costs associated with marketing and market entry when they get there.

Social Environment

There are a number of trends in the Australian beer market that are determining the course of competition. The first is within the social environment, as Australians are reducing their beer consumption. Fenner (2010) argues that the tastes of Australian consumers -- particularly of those traditionally felt to be part of the beer market -- has eroded the size of the market for domestic beer. The working class roots of the beer market, which helped drive the sales of brands like Victoria Bitter (Gluyas & Speedy, 2011), has turned to lesser beverages like pre-mixed spirit drinks and cheap liquor (Fenner, 2010).

The general decline in the beer market represents a significant challenge for all brewers, Boag's included. The response of some brewing companies has been to diversify into wine, though such strategies have not always been a success (Gluyas & Speedy, 2011). But with beer sales at a 60-year low per capita (Thomson, 2010), Australian brewers need to find ways to boost the market overall and counter this social trend. A brewery like Boag's can sell to international markets, but those sales will never counter soft sales at home, especially if those soft sales extend to the Tasmanian beer market.

There are a number of different approaches that can counteract this decline, which is similar to ones faced by industrial breweries in developed nations around the world. The first is to enter new product lines, such as wine, or even the sugary children's alcohol that is winning share away from beer. The lessons from the failure of brands like VB and Foster's are that the companies selling beer that tastes lousy need to find better ways of appealing to today's beer drinkers. Their messages may have resonated with Australian consumers in the 1980s and early 1990s, but those messages do not resonate with consumers today. Brands like Boag's need to find out how to reach today's drinkers in order to sell them beer. There is still room in beer markets for growth, if the company knows how to reach consumers.

In addition to the marketing message, product is probably the most important element of the marketing mix. Beer has faced this negative social trend for a couple of product-related reasons. The first is that the product is not good. It is boring, devoid of flavour and the major breweries have simply assumed that they could flog this stuff forever on the basis of lifestyle marketing, an assumption that is being disproven by the long downward trend in beer consumption.

Consumers today have myriad choices at their disposal when they want to drink. This includes all manner of wines, which have been generally increasing in popularity in Australia, in addition to sweet, flavoured and trendy beverages preferred by those who simply drink to get drunk. Industrial beer falls somewhere between the two, having neither of the complexity or shared culture of wine, nor the variety of sweet flavours favoured by many younger consumers. There are also microbrews, some of which are relatively high quality, and have unique flavours. These are not a major factor in the Australian market yet, but have made strong inroads in other developed countries, specifically at the expense of industrial beer. Boag's has a relatively high quality product for its segment, but that is all industrial beer is today -- a segment within the larger drinks industry. The social trend is away from the segment, so being a premium producer within the segment does not help much.

There are three ways to address this social trend, two of which are promotion related and one of which is product related. A product related strategy could involve brand extensions, using the Boag's name to market an entire range of beers with different characters. The company could choose to take the low road -- alcoholic confections with the Boag's name on it -- or the high road, with a line of high quality beers in different European traditional beer styles. Either way would make the Boag's brand more appealing to younger consumers.

The other two ways are promotion strategies. Boag's first needs to differentiate itself from its segment. The segment is in a state of long-term decline and Boag's is becoming dragged down with it, but if the company can reposition Boag's as something distinct from mass market yellow beer, the company has a chance to transcend the general trend that the category is suffering from. The other promotion strategy that Boag's can utilize to combat the social trend is to attempt to steal market share away from others within its category by highlighting the virtues of Boag's over other beers in its class. The company would still be competing in a diminishing category, but if it can take a greater share of the category could still see a net increase in sales.

A second environmental trend is has the potential to affect Boag's is the trend towards globalization, an economic trend. The company already sells in the U.S. And some Asian countries, but does not have much support for its products in these foreign markets. Yet, there are some brands that have become so successful in foreign markets that these markets are much more important that the domestic market (Stella, Heineken and Corona to name a few). Boag's, with a small home market in Tasmania and a struggling domestic market in Australia, can counter this trend by focusing all of its growth efforts and resources on overseas markets.

The market strategy would be a two-pronged approach focused on improved distribution and increased promotion in foreign markets. The company will need to fine a message that is somewhat universal. Australia has a good reputation in most parts of the world, and as a result this can be the basis of the campaign, combined with messages about the purity of the Tasmanian environment and the high quality of the beer. If the company is able to strike the right chord with foreign consumers, there are ample growth opportunities in foreign markets. Consumption in some is growing, while in others it is import beers or ones with premium positioning that are enjoying success. In either case, trade with foreign nations is becoming easier and that is something that can help Boag's to grow its market.