Synopsis of the Situation
Saku offers products in six different product categories. Some of their products are doing well while sales of some products are declining. Certain segments are experiencing market growth while some others are close to stagnation. The company wants to determine a product portfolio for the next few years that will take advantage of opportunities for expansion without negatively impacting the current sales of its products. Key Issues
Sales of Saku Originaal, the company’s trademark product, has been declining. Saku want to determine if the profit from exporting the product to neighboring countries such as Finland and Sweden will outweigh potential loss of domestic sales of this product to tourists from these countries. Since the growth of cider and long drinks markets is reaching saturation point, the company has to decide if it should reposition or discontinue these product lines. The company also has to take steps to increase its market share in the growing bottled water, soft drinks and imported beer segments. Solutions
To increase sales of Saku Originaal, the company’s trademark product, Saku can export it to other countries. With 43% market share, Saku is the market leader in the domestic beer segment. With increased marketing and promotion of its premium beer brands in domestic market, especially to tourists, Saku should be able to make sure that its domestic sales is not impacted by the exports. Saku can consider discontinuing its beer products whose sales have been consistently poor. Saku can also consider introducing new beer brands catering to specific consumer age groups.
With 24% market share, Saku is leading the Cider market, with Tartu at 20% being the only significant competitor. Since the cider market is expected to stagnate after a couple of years, Saku can continue to offer these products but should not spend much money on this product.
Even though the soft drinks market is growing, it is heavily dominated by Coco-Cola. Consumers are increasingly opting for water and energy drinks with caffeine, instead of soft drinks. Since Saku barely has 4% of market share in this segment, it can withdraw from the soft drinks market and spend that investment and money to promote other profitable segments such as beer and bottled water.
The long drinks market still has some growth potential. At 13%, Saku is leading in this segment. But looks like this segment is very fragmented with no other company besides Saku and Tartu having any significant market share. This is a good opportunity for Saku to capture more of this segment. Saku can probably buy some of the other products in this segment to consolidate its share of this segment.
The mineral water market has lot of growth potential. At 13%, Saku has the second largest market share and the market is not significantly dominated by any one company. Saku can invest heavily in marketing and promoting its products in this segment and increase its market share.
Since Estonians seem to increasingly prefer global beer brands, Saku can continue to offer its imported beer brands. While Carlsberg has 18% of the market share in this segment, Guinnness and Kilkenny don’t seem to have any significant market share. Saku can make Guinnness and Kilkenny also available in all channels, not just HORECA. Saku can also use its current investments and distribution channels to bring in additional popular imported beer brands that can compete with Koff.
Viru, one of Saku’s domestic competitor, offers products in almost all market segments that Saku operates. Since Saku and Tartu have almost equal market shares in most of the segments, Saku can look into the possibility of a merger with Viru to improve its lead over Tartu.
Saku should export Saku Originaal to other countries. To reduce investments and resources required to enter foreign markets and to minimize risks, Saku should...
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