Saku Brewery Essay

Saku Brewery is a beer company that has the reputation of being ran by different hands along the years of existence. The company officially started producing beers in 1820 under Count Karl Friedrich von Rehibinder. The brewery was passed along to the Baggo family, who converted it to a modern industrial steam-fired brewery. At the end of the cold war the Estonian government owned the company then in 1991, Baltic Beverages Holding group bought sixty per cent of the company, with the remaining forty per cent still being controlled by the government.

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With BBH being owned by Prips Beverage Company and Hartwell Brewery, they understood that Saku needed to revamp its image and overall quality. Saku continued to struggle as they were having problems appealing their product to their market. The company had experienced a decline in this popular line, domestic beer because Estonians were choosing import beers such as Heineken. Domestic competitor such as Tarta, also challenged Saku Brewery’s market share then they introduced A Le Coq .

With these concerns Saku began to search for answers. Saku had several different varieties of domestic and imported beer to choose from.

Their line consists of Saku Original, Saku Tume, Saku Sorts, Saku Rock, Saku Dark Presidendi Pilsne, and Saku Original Light. Saku’s complete portfolio of beer brands command about 42% market share, with its most prominent beer being Saku Original. Saku also developed other alcoholic products such as long drinks and hard ciders. Saku does carry non-alcoholic lines such as, water and soda. Saku’s most successful products are the long drinks because of their rapid popularity and the domestic beer line, where Saku holds their largest market share. Saku’s water and soda lines neither have very much market share nor produce many sales.

* Saku can market and sale their product in Finland where potential customers live. * Increased tourism with E.U. would require fewer trade restrictions making it easier to get their product into the rest of Europe * Women target is growing. Products: long drinks, hard cider, light beer. * Growing young, affluent, professional class. Products: import beers, Saku Rock, and Saku Dark * Discontinue soda and mineral water lines to free up money. Threats

* E.U membership could obstruct Saku transportation regulations to Finland * With EU membership sales may decrease because may lose the price advantage they currently hold * Long drinks, although highly profitable now, may become saturated and level out * Competitors, such as Tartu may increase their quality of beer and lower their price to pull market share away from Saku.

Saku is an overall strong company that has a good name for itself, but certain products are beginning to lose attraction and sales are starting to decline. Saku needs to be aware that they have high potential, but need to focus on the lines and segments that are making them money. Some of Saku’s products aren’t driving customers to make purchases. They are acting as dead weight to the company and are costing them money. I think Saku needs to address the dead weight possible by just ending the segment outright.

This will save the company money that they can use on other more profitable lines. Saku I feel has the opportunities to expand their target market and even sales in different countries such as Finland. The BCG chart is a tool Saku can use to investigate their product lines in detail. The BCG chart compares the Market Growth Rate and the Relative Market share. The four sections in the chart are labeled: Star, Cash Cow, Question Mark, and Dog. Cash Cows are the product lines that can be relied upon, they have steady growth that bring in lots of profit. Stars have high growth rate, but need to operate with high cash investments in order to sustain their spot in the market. Question marks have high growth rate, but their success is uncertain in the market. Dogs are product lines that aren’t working out and need to be considered for termination.

I feel in order for Saku to be successful, they need to continue to push their domestic beer line. It is one of their strongest and well-known segments but advertising for Saku Original dropped four per cent from 2002-2003. I think they need to continue to strongly advertise Saku Original as well as keep advertising for the imported beers and other alcoholic drinks. As an alcohol brand Saku needs to increase their promotions in order to created buzz and hype for their products. Saku should use promotions directed towards women to influence buys of hard ciders and long drinks. As we can see from the chart above, long and cider drinks would be very good product line to focus on and to put money into. Doing this Saku may be able to sustain growth in the market and maybe develop the line into a cash cow one day. Also from the chart we can clearly see that soft drinks and mineral water are hurting product lines.

I believe that Saku should sell off or discontinue these product lines because it would free up money for other lines and also could give Saku the capital needed to expand into new markets. I think that Saku should seriously consider expansion into Finland. The Finnish people already make up a good piece of sales. They already are making the ferry ride over to stock up on the cheaper Saku beer. I think that the transition to Finland would be an somewhat easy process as the Finnish already are aware of and purchase the Saku brand name.

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