NATHAN LION Limited

By Tosca Bonardi, Tom Sweeney,

Valerie Potts, and Lila Schwarzbach

NATHAN LION LTD THE BEGINNING

The Formation 1988 Lion Corporation and L.D. Nathan and Co. merge

Hire and outside guy in 1999 Kevin Roberts International experience

Australian and New Zealand markets Hinder further growth potential several evaluations on different breweries in China LN entered China’s market two years later in April

1995 with a 60% joint venture Wuxi. The first investment was made in Yangtze River

Delta, China’s fastest growing beer market.

NATHAN LIONTHE BEGINNING

Increasing ownership 1996: increase to 80% with plans to build a new

$378 million brewery. Licensing agreement

After the construction of their new brewery German brewer Brauerei Beck and Co. to brew

the premium beer, Beck’s. Kirin Brewery Company

In 1998, KBC acquired a 45% share of LN ownership structure changed significantly By the end of 1998 LN’s growth potential was

still very promising.

CHINESE BEER INDUSTRY

Beer is a beverage Variety of flavors, colors and types. Different tastes, price range, and quality.

Technology Slow paced changes Routine and automated process

Popularity- Attractive to international brewers China’s population Immense growth potential

In 1998, 600 brewers produced 17.8 tonnes of beer

GROWTH Capacity of breweries in China in 1998

80 hold over 50 million liters Of those 80, 18 breweries could hold over 100 million

liters. The 10 largest companies only held less than 20% of

the market. Market Growth

Through the 80’s: growing at a rate of 20% a year. Between 1992 and 1997: rate of 12.5%. 1998and 2001: Projected to continue dropping to 6%.

Comparisons by liter per capita New Zealand - 87 liters Australian - 95 liters Asian market as a whole - 30-40 liters

MARKET SEGMENTS AND DEMAND

China’s beer industry has four segments Imported premium Premium Mainstream Low-end

Demand fluctuates Levels of unemployment Disposable income Government rulings

Beer consumption Analyzed by regions – many little markets Urban and rural areas

RAW MATERIALS, CAPITAL REQUIREMENTS AND ENTRY/EXIT EASE

Hops Companies buy raw materials Easier for companies

Capital Requirements: Small Companies Not high for small businesses Building breweries is costly Developing brand identity

Capital Requirements: Big Companies Brewing plants in every region Economies of scale Extensive marketing

Exit Hard for small businesses – no market

CHINESE ECONOMY

Entering Chinese Market Downward trend Advanced market World’s largest consumer market

China’s market looked very promising Size of market Growth potential Low barriers to entry No established “big guy”

China’s consumer market Exponentially growing consumer market

OTHER COUNTRIES

Presence in New Zealand and Australia Lacked growth potential Dominated by supply and demand

Differences between economies Growth potential

Population Economic growth Growth rate Promising market

NEGATIVES ASPECTS OF ENTERING CHINA

Low GDP per capita Australia and New Zealand’s higher GDP per

capita Infrastructure in China

Well developed on coast Weak inland transportation No public transportation system Few private auto owners

Infrastructure in Australia and New Zealand Well developed nationally

BEER MARKET

Chinese Economy in downward spiral Competition in beer market intensifying

Premium beer market Consumers buying habits

Willing to try new brands (low brand loyalty) Daily “Mom and Pop” visits

Culture Beer is a social beverage, like tea or soda Accompanies a meal Enjoyed warm

BEER MARKET

Consumption Habits Lower in China than others LN must pay close attention to distribution

Marketing Customers under 30 are more responsive to

advertising

YANGTZE RIVER DELTA

Five Regions Shanghai Suzhou Wuxi Nanjing Changzhou

COMPETITORS

HUMAN RESOURCES AND CORPORATE CULTURE

No problems finding qualified employees

Previous retail experience Under 30 2 years experience with MNC

Individual performance targets Bonuses negotiated. Status, reputation, reliability, and loyalty

influence position, promotion, relationships. Personal goals, Retention of staff Employee training systems

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CHINA’S CULTURE

High-context culture emphasizes social relationships between individuals

Trustworthiness is a key trait in business dealings.

Employee loyalty, building corporate expertise is vital.

Chinese dislike individual pressure. Occasionally LNC head office managers apply

more pressure than most Chinese workers are accustomed to in order to meet financial targets.

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MARKETING STRATEGY

Lion Nathan regularly: Measures the health of their brand Examines the effectiveness of their advertising Uses past experiences for positioning and promotion

Positioning in each market: River Delta and Shanghai – locality = comfort,

affiliation. High-quality premium beers are marketed

differently price, bottle design, position, label, and placement. Ex: Beck’s and Steinlager

Affordable and acceptable pricing Event sponsorships.

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MARKETING FOR THE FUTURE

15% market share in River Delta region, 8% in Shanghai, 25% in Suzhou, 40% in Wuxi, 16% in Nanjing.

Distribution is an issue Focus on expanding in River Delta region and

Shanghai. Sales are directly related to their distribution

coverage Build for the future.

Already have superior brand recognition Create more effective distribution channels

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