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Page 1: International Marketing-- 1

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Ac-Dc Cider

Vivek Raj AnandID : 21501291

Whitieria

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Contents..............................................................................................................................2

1. Product Introduction: Cider.........................................................................................................5

2. Company Profile - Dominion Brewery........................................................................................6

3. United States of America.............................................................................................................8

3.1 Economic & Financial Environment: United States of America...............................................8

3.1.1 Financial Stability: USA.....................................................................................................8

3.1.2 Economic Development: USA.........................................................................................10

3.1.3 Economic Cycle Stage: USA............................................................................................11

3.1.4 Income Distribution: USA................................................................................................12

3.2 Resources availability, sustainability and management implications: - USA.........................13

3.3 Technology USA.....................................................................................................................14

3.4 Distribution Infrastructure USA..............................................................................................14

3.5 Political/Legal Environment USA...........................................................................................15

1.6 Social/Cultural Environment: USA....................................................................................16

3.6.1 Corruption USA................................................................................................................16

3.7 Cultural Environment USA.....................................................................................................17

3.7.1 The Power Distance......................................................................................................17

3.7.2 Individualism/ Collectivism..........................................................................................17

3.7.3 Masculinity...................................................................................................................17

3.7.4 Uncertainty avoidance:.................................................................................................17

3.7.5 Long Term Orientation:................................................................................................18

3.7.5 Indulgence:...................................................................................................................18

4. Thailand.....................................................................................................................................18

4.1 Economic & Financial Environment: Thailand.......................................................................19

4.1.1 Financial Stability: Thailand.............................................................................................19

4.1.2 Economic Development: Thailand...................................................................................20

4.1.3 Economic Cycle Stage: USA & Thailand........................................................................21

4.1.4 Income Distribution: Thailand..........................................................................................21

4.2 Resources availability, sustainability and management implications:- Thailand...................22

4.3 Technology Thailand...............................................................................................................22

4.4 Distribution Infrastructure Thailand........................................................................................24

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4.5 Political/Legal Environment Thailand.....................................................................................25

1.7 Social/Cultural Environment: Thailand..............................................................................25

4.6.1 Corruption Thailand..........................................................................................................27

4.7 Cultural Environment Thailand...............................................................................................27

4.7.1 The Power Distance......................................................................................................27

4.7.2 Individualism/ Collectivism..........................................................................................28

4.7.2 Masculinity...................................................................................................................28

4.7.3 Uncertainty avoidance:.................................................................................................28

4.7.4 Long Term Orientation:................................................................................................28

4.7.5 Indulgence:...................................................................................................................28

5. Conclusion.................................................................................................................................28

Bibliography..................................................................................................................................30

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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) .

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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.

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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.

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3. United States of AmericaUnited 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).

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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.

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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.

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3.1.2 Economic Development: USAAccording 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

Figure 4GDP Per Capita USA

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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,

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.

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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.

According to world fact book released by CIA, United States the Gini index, described in percentage terms is at 45%.

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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, 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.

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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.

Figure 7 Internet users

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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 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: 78.74Literacy 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.

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Figure 8: Population Growth USA

Infant Mortality Rate of United States is at 6.2.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

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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).

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/ CollectivismUSA: 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.

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3.7.3 MasculinityUSA: 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.

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. ThailandThailand is the world’s fifty first-largest area of 514,000 km2and 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.

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4.1 Economic & Financial Environment: Thailand

4.1.1 Financial Stability: Thailand

Figure 9 Thailand GDP

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.

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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. Thailand remains auto manufacturers and electronic industry’s point of low cost green production. Healthy foreign reserve position.

4.1.2 Economic Development: ThailandGross 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

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for Thailand for the year 2013 stands at 4839.07 Billion US Dollars (Trading Economics).

Figure 11 Thailand GNP

Figure 12 Thailand GDP 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).

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4.1.3 Economic Cycle Stage: USA & ThailandS&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%.

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Figure 13 GDP spread

4.2 Resources availability, sustainability and management implications:- ThailandThailand 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.

4.3 Technology ThailandThailand is also catching up with increased penetration of communication networks and it is more of download content on the

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innovation front and is a low cost manufacturing for hybrid automobile technology.

Figure 14 Internet users in Thailand

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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 ThailandThailand 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 functions with council of ministers. Thailand is ranked twenty sixth

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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: ThailandThailand is ranked 18th in the world by population, the women outnumber men in the country and inequality in income is pronounced (Office, 2015).

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Figure 17 Thailand Sex 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).

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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 ThailandThailand 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 ThailandThailand is heavily influenced by Buddhism.

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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/ CollectivismThailand: 20:- Collectivist country, if an idea picks up theme, it will steam through the society.

4.7.2 MasculinityThailand: 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. ConclusionNew 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, considering that Cider is a growing market in the developed

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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 the United States as the country is fairly even spread and has great internet connected population which is very decisive.

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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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