Case Asahi Breweries

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Asahi Breweries, Ltd.INTRODUCTION In a noisy Tokyo pub in late 1991, Yasuo Matsui, head of Asahi-Beers Marketing Department, took a long, slow drink from his mug of Asahi Z draft beer and pondered his companys product strategy. The previous five years had been the most successful in company history. A revamped product development system had produced in 1989 the most successful new beer in industry history, Asahi Super Dry, whose record-breaking sales had more than doubled Asahis market share and lifted the brewer past rival Sapporo into second place in the industry for the first time in over two decades. Success had created its own problems, however, as by 1991 Super Dry accounted for 95 percent of Asahi beer sales. Subsequent new product introductions, Super Yeast (1989) and Z (1991), had not met sales expectations, and with Asahis rivals responding with upgraded product development efforts and some new hit beers of their own, the question for Matsui was how to maintain and further build on the success his company had gained with Super Dry. COMPANY HISTORY: POSTWAR TO EARLY 1980s Todays Asahi Beer was created in 1949 when the occupation forces, headed by General Douglas Macarthur, introduced Japans anti monopoly law to break up dominant companies in excessively concentrated industries. Dai Nippon Breweries, which at the time controlled 75 percent of the beer market, was split in half, with its breweries and distributors in western Japan becoming Asahi Beer and those in eastern Japan becoming Sapporo. The story of Asahi Beer from its postwar origin until the early 1980s was essentially one of steady decline, from a market share of 36.1 percent at the time of the breakup of Dai Nippon Breweries to a low of 9.5 percent (barely above the 9.3 percent of last-place Suntory) by 1985. Four reasons are commonly given for the companys poor performance: 1. 2. Asahi developed the complacency that often characterizes large, established companies. Because of the way Dai Nippon Breweries was broken up, Asahi was strong in western Japan but weak in the higher-growth eastern Japan (which includes Tokyo).

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Asahi was strong in the commercial market but weak in the growing home-consumption market. Asahi allowed whiskey maker Suntory to share its distribution network when Suntory entered the beer market, thereby losing sales to the financially more powerful distiller.

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Asahi hit bottom in 1981, when poor performance forced the company to implement an early retirement program for 550 employees and a stock repurchase rescue by Sumitomo Bank and a friendly chemical company were needed to save Asahi from a greenmail attempt. Sumitomo was Asahis main bank, and since 1971 all Asahi presidents had come from Sumitomo. In 1982, continuing this tradition, Tsutomu Murai was sent from Sumitomo Bank to become Asahis new president. Murai had a reputation as a turnaround manager, previously having been dispatched by Sumitomo to save car maker Mazda from bankruptcy following the 1973 oil crisis. The organization that Murai found when he arrived at Asahi was rigid, risk-averse, and dominated by the accounting department and a cost-cutting mindset. Employee morale was low and there was a high degree of sectionalism, or mistrust between the different functional areas. Relations were especially bad between the production and sales divisions, with each blaming the other for the companys poor performance. Production people felt: No matter how good the beer we make is, it doesnt sell because the sales force does such a poor job that it sits in the distribution channels and the taste deteriorates. Salespeople felt: If the production people were less egocentric and more in touch with consumer tastes, our beer would taste and sell better. To revitalize the company, Murai initiated a corporate identity (CI) program which produced a new corporate philosophy trademark. He also sought to improve cross-functional relations within the company by forcing managers from different areas to work together. Cross-functional task forces, made up of seven to eight managers from different departments, were put in charge of designing and carrying out the corporate identity activities and given responsibility for dealing with issues such as data use, employee suggestions, and customer complaints.

Company retreats were also used to break down functional walls. Asahis 600 managers of section chief or higher rank were split into six groups of 100 and sent on four-day, three-night outings of business (discussion about Asahi and what was needed to revive company fortunes) mixed with pleasure (eating, drinking, hot spring soaking). Participants reported that production and sales-people, thrown together, were at odds the first day or two but by the end had come to understand each other better and to feel closer, more like fellow Asahi employees and less like mistrustful adversaries. NEW PRODUCT DEVELOPMENT AT ASAHI By industry standards, Asahi had been relatively active in product innovation prior to the 1980s. Industry firsts by Asahi included Japans first canned beer in 1958 and the mini-barrel that touched off the container war in 1977. Due to strong brand loyalties and rapid imitation by competitors, however, these innovations tended to cannibalize Asahis own products rather than boosting Asahis market share. Looking back at this type of innovation, Asahi product development manager Makoro Sugiura said, Its significant that this was niche marketing, competing around the edges, not a frontal attack at the center of beer taste range. The taste of Asahi beer prior to the 1980s was the exclusive domain of the production side, that is, the brew masters in charge of R&D and brewing at the beer plants. This was territory that was off limits to marketing, as Makoro Sugiura explained. When it came to the matter of our beers taste, production was in charge and we marketing people couldnt say anything. The production people were the specialists, the pros, and they used a lot of technical terms for analyzing beer that we didnt know. When we did ask them something concerning taste, they would pull the wool over our eyes, speaking in a technical language that we couldnt understand. They had a monopoly on the matter of what good taste was; theyd say This is good taste, this is Asahi beer. The system was theyd make it and wed try our hardest to sell it. The measure, or criterion, for how Asahi beer should taste was the personal preference of a certain high-level manager on the production side.

Everyone adjusted to him; if he said a certain kind of beer was delicious, then that became, for Asahi, what delicious beer was.

While such a system may have been adequate for niche marketing or packaging-based innovation, it completely stymied the kind of consumer needs driven product development that Asahis marketers, sensitive to changing consumer tastes and behavior, felt was called for in the marketplace of the 1980s. The door to marketings participation in new product development at Asahi was opened by the CI campaign and new corporate philosophy that president Murai established in 1982. The basis of the new philosophy was to consider the wants and needs of our customers. Sugiura explained. The CI concept itself was to give the consumer what he wants most, so from this point on making delicious beer was something both the production and marketing sides were deeply involved in. For the first time, we had a voice; we were the consumer. In order to implement marketings involvement in the development of new beers, a new product development system was established, which remained in use in 1991. Managing director Hisashi Usuba explained how it was set up: There are two ways we could have changed the organization. One was to create three separate departments; one in charge of brewing beer, one in charge of selling, and one in charge of product development (see Figure 1B). But if you do this, and Ive experienced this a number of times, this sort of thing happens. The product development people, for example, would get completely involved only in new product development and wouldnt think much about production or sales. They would end up creating their own world. Sales and production people would feel that the product development people know nothing about whats going on in the marketplace or at the plants and are just following their own whims in product

development. As a result, the product development department would get no cooperation from sales or production. So instead we created a larger Production Division and Sales Division and within each set up an independent section in charge of product development: the Production Project Section within the Production Division, and the Marketing Departments Producer Planning Section within the Sales Division (see Figure IC). New product development is carried out by these two sections playing catch with each other. This way the Production Division is one sphere, and the feeling among production people is that Production Project Section people are part of us likewise, the Sales Division is one sphere, whose workers feel that Product Planning Section people are part of us. This makes the cooperation of production and salespeople much easier to get. The biggest change that this brought about was that market and taste surveys were now done not just by the production people but by the Production Project Section and the Product Planning Section in concern. This is important. When you do a taste survey, the data is not always clear, not easy to interpret, so different people read it quite differently. So if, as before, production does the surveying, they read the results in a way that is most convenient for them, that matches their beliefs and thinking. The change was made to prevent this; having marketing and production carry out surveys together resulted in a change from a what suits producti