Saku Portfolio Solution

CASE ANALYSIS

Saku Portfolio Exercise

MARKETING-II

DATE OF SUBMISSION-07.11.2012

Sumit Bapuji Gedam- 2012PGP382 Vikash Kumar- 2012PGP438

Introduction

Saku has a product portfolio with categories as specified in pg-1 are Beer, Long Drinks, Beer Imports, Mineral Water, Cider, and Soft drinks. The category and the products have been placed in the BCG matrix as specified below:

Product category in Red

The criteria for placing the products & category in BCG matrix are : 1. Percentage Increase in sales

2. % Gross margin

The following are the attributes of the four quadrants of BCG matrix:

1. Star: The product categories have been placed based on high market share and high growth rate. The products that have been placed have a high percentage increase in sales and high contribution to GM.

High Share Low Share Slow Growth Fast Growth Beer Long Drinks Beer Imports Cider Soft Drink Mineral Water Rock Sports On Ice Original Valge Tume Hele Original light Carlsberg Guiness Kilkenny Mountain carb Mountain still VCC VCS

Saku ginKiss Cedars

Pepsi

7up

2. Question mark: The product categories have been placed based on low market share and high growth rate. The products that have been placed have a high percentage increase in sales and low contribution to GM.

3. Cash Cow: The product categories have been placed based on high market share and low growth rate. The products that have been placed have a low percentage increase in sales and high contribution to GM. 4. Dogs: The product categories have been placed based on low market

share and low growth rate. The products that have been placed have a low percentage increase in sales and low contribution to GM.

Product Portfolio

• Beers:

Local:

Saku lead the market with share of 43%. Other competitors are: (1) Tartu with 35% and

(2) Viru with 11%.

There can’t be much growth in this product as the market is saturated. (No CAGR Increase and minimal 4.3% increase in sales).

Imported:

Saku hold 24% Market share in this category. Three top international brands –

(1) Carlsberg (18% market share), (2) Guinness (5.89%) and

(3) Kilkenny (0.49%) (4)

• Long drinks:

SAKU still manage to hold market leader with a share of 13% while Tartu had 11% next to them.

• Mineral water, cider and soft drinks:

Mineral Water:

Saku and Tartu detained the market share of 15% each. The main player is Coca-Cola with 23%. Cider:

Saku lead the market with 24 % of market share where Tartu held 20 % and others 56 %. Soft drink:

Coca-Cola held 66 % of the market, followed by Tartu with 16 %, SAKU with 4 %. Product Portfolio Health Analysis

• The contribution of Saku beer is high to the gross margin but the sale growth is low. • Saku beer is a cash cow and should be used to generate cash and support the company. • Other Saku alcoholic including gins, kiss ciders contribute high to gross margin and also

have very high growth. Hence they are in ‘star’ quadrant.

• Imported Mineral water have a considerable growth and low contribution to gross margin. They are in question mark quadrant.

• Saku Mineral water is in dog quadrant. They have a low growth & low contribution to margin.

• Imported beer is in star quadrant as it has high growth and high contribution to margin • Soft drink as a category contributes very less to margin and also has low growth.

Therefore it is in Dogs quadrant. But zingo of this category has a high growth rate and considerable contribution to margin. Therefore company can continue to import this soft drink divesting others.

Recommendations

• Saku has to restructure and modify its beer product category. It has divest ‘Hele’ , ‘Tume’ , & ‘Sport’ which are dogs in this category.

• The ‘original light beer’ and ‘on ice’ is a question mark and the company can invest in both of them as they have high growth potential.

• Saku sport is in dogs quadrant and therefore is not generating cash for the company. It can be divested from the product category.

• Mineral water as a category has a lot of growth potential. At 15% market share, it can invest heavily in marketing & promoting its product in this segment and hence increase its market share.

• Saku is the market leader in Cider category with 24% market share. Saku should invest in this category so that it becomes a cash cow for the company in future and also maintains its leadership position.

• Long Drinks as a category have a high growth potential and the company can invest in this category to maintain its leadership position. The segment is highly fragmented with Tartu in the second position and no other player in dominating position.

Calculations

Product 2002 2003 CAGR BCG Class

Beer 43 43 0% Cash Cow

Long Drinks 10 13 30% Star

Beer imports 16 18 12.5% ?

Cider 20 24 20% Star

Soft drink 3.81 4 5% Dog

Mineral Water 13.89 15 8% ?

Increase in gross margin and gross margin %

Sales Gross Margin

Saku beer 2002 2003 % inc in _sales 200₂ 200₃ % inc in _GM GM % _TOTAL

original 1860₇ 1873₃ 0.70% 323₈ 333₄ 3.00% 78.60% rock 1739 2356 35.50% 306 441 44.10% 10.40% sports 452 353 -21.90% 88 67 -23.90% 1.60% on ice 294 424 44.20% 53 79 49.10% 1.90% valge 632 707 11.90% 127 148 16.50% 3.50% tume 248 165 -33.50% 45 30 -33.30% 0.70% hele 158 118 -25.30% 30 23 -23.30% 0.50% original light 452 589 30.30% 72 97 34.70% 2.30% prescidenti - 118 - 22 0.50% Total 2258 2 2356 3 4.30% 395 9 424 1 7.10% 18.00% Imported beer carlsberg 468 880 88.00% 95 194 104.20% 22.00% guiness 186 285 53.20% 43 74 72.10% 26.00% kilkenny 34 24 -29.40% 7 6 -14.30% 25.00% total 688 1189 72.80% 145 274 89.00% 23.00% Saku mineral water montavit carb 67 58 -13.40% 6 5 -16.70% 8.60% montavit still 52 47 -9.60% 5 4 -20.00% 8.50% Total 119 105 -11.80% 11 9 -18.20% 8.60% VCC 666 732 9.90% 100 116 16.00% 15.80% VCS 615 649 5.50% 92 105 14.10% 16.20% Total 1281 1381 7.80% 192 221 15.10% 16.00%

saku gin 690 963 39.60% 161 231 43.50% 24.00% kiss cedars 159 943 493.10% 37 252 581.10% 26.70% other 35 100 185.70% 6 -100.00% 0.00% Total 884 2006 126.90% 204 483 136.80% 24.10% Imported soft drinks Pepsi 512 344 -32.80% 97 68 -29.90% 19.80% 7up 489 244 -50.10% 87 44 -49.40% 18.00% zingo 137 333 143.10% 26 64 146.20% 19.20% limps - 111 22 19.80% kali - 78 15 19.20% Total 1138 1110 -2.50% 210 213 1.40% 19.20%