Lion Nathan China

Brand Analysis of Lion Nathan China

November 27, 2003

von

Frauke Strathkötter

Table of Contents

Executive Summary  3
Problem Statement  4
Analysis  4
Decision Criteria  6
Alternatives  6
Recommended Solution  8
Implementation Plan  9
Short Term  9
Long Term  11
Future Outlook  11
Contingency Plan  12

Exhibits

Exhibit 1 – SWOT Analysis  13
Exhibit 2 – Consumer Analysis  14
Exhibit 3 – Product Analysis  15
Exhibit 4 – Production Capacity Analysis  16
Exhibit 5 – Competitive Analysis  17
Exhibit 6 – Three year forecast of alternatives  19
Exhibit 7 – Expected Revenue  20

Executive Summary

Lion Nathan China is experiencing losses in the Yangtze River Delta region as a result of economic downturn, declining expected growth rate, intense competition and an initial heavy investment strategy. These conditions are exasperated by a poor transportation infrastructure, multiple and various regional laws and regulations, and high import costs. Lion Nathan China must reverse their financial losses with a new strategy that will take into consideration these conditions. Building brand equity, reconfiguring profits and growth expectancy, recovering financial losses from the new brewery in Suzhou Industrial Park, and becoming the leading mainstream competitor in the YRD market are key objectives which must be considered in the new strategy. In order to achieve these objectives Lion Nathan must stabilize their current position in the Chinese market by slowing down overall growth and reducing expenditures. This can be achieved through focusing the promotion strategy on one premium brand: Steinlager and through licensing production capacity to other beer marketers. Also, a plan will be put into effect to reduce internal and external inefficiency costs. Lion Nathan is committed to stay within the Chinese market and YRD region due to their investments within the country and their limited growth potential in their home markets (New Zealand and Australia). It is a necessity for Lion Nathan to break even in a three year period, in order not to flounder or to fail within the Chinese market.

Problem Statement

Lion Nathan China is an international brewer who is currently experiencing a financial loss in their China unit. The financial loss that they are experiencing is a result of an economic down turn and instability within the beer market. LNC must create a business strategy that will allow them to produce profits in the long term, while surviving the poor present economic conditions.

Analysis

Lion Nathan China’s current business strategy has not been successful and they are experiencing problematic financial losses. Contributing factors of this problem are the economic decline of the Chinese market, the volatile beer market, intense competition, the difficult distribution and regulations, their fluctuating position within different segments, and an unexpected decline in the growth rate. 
LNC initially heavily invested in the Chinese market with a joint venture with Taihushui Brewery and an establishment of a 178 million dollars world class brewery in the Suzhou Industrial Park. This large initial invest has been difficult to recover due to the unexpected decline in the economy and a decline in beer market growth. In addition, this investment has caused LNC to be in a position of escalating commitment. This escalation of commitment is motivating LNC to stay in the market despite a large profit loss of 30.1 million annually.

In China there are more than 600 breweries, however, in the Yangtze River Delta (YRD) market there are 30. LNC must compete with very established brands in both the mainstream and premium markets. Compared to LNC’s competitors, they have a distinct advantage in profit margins as a result of their possession of the only wholly foreign production facility. LNC’s brand diversity and flexibility gives them another distinct advantage since no other competitors have such a diverse portfolio.

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