Case Analysis Saku Olletehase AS

The case explains the scenario of Saku Olletehase AS on the moment that the management group is discussing their product portfolio plan. Recently the sales of their flagship brand, Saku, fell from 48 percent to 42. 5 per cent of market share. During this decrease of beer usage, they have actually made gains with other alcoholic and none alcoholic beverages. At this point the management team has to pick how to proceed with their product portfolio.

• Start exporting Saku to Finland
• Shift focus to other alcoholic products with growing market demand, cider and long drinks
• Shift focus more to bottled water or divest this item line (disappointing outcomes)
• Innovate and try to boost sales for their flagship brand name once again
• Broaden their function as distributor of imported beverages Analysis of the concerns.
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If we analyze the Estonian drinks market we discover that the beer market tends to support lately, this in combination with the fact that imported beers are growing with 12,5% leads to a decrease of usage of domestic beer.

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On the other hand we see a boost of alternative drinks: cider, long drinks, bottled water and soft drinks. With the data from the exhibitions we see that the overall potential market of alcohols amounts to a little over one million individuals.

A more in depth analysis through a SWOT matrix:

Strengths

• Strong Flagship product Saku
• Market leader in beer market (market share: 42%)
• Promo through shows and events
• Consumer commitment is high in beer market
• Growth in cider and long beverages, which are high-margin products
• Growth in alternative markets: the imported beer, bottled water and soft drinks
• Cost benefit with regard to Finland on liquors

Weaknesses

• Dissapointing performance in mineral water market (15%)
• Decrease in sales of flagship item
• Not a global brand
• Competing with domestic players and global players
• Rather low market share in soda market (4%) and Long beverages market.
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Opportunities

• Growth opportunities in neighboring countries
• Active in domestic growth markets for cider, soft drinks, bottled water and long drinks
• Price advantage in Estonia for beers compared to prices in Finland
• Entry in European Union makes export easier|

Threats

• Though competition from domestic brand “A Le Coq” and “Viru”
• Increasing competition from imported quality beers such as Heineken, Carlsberg
• Bottled water market is expected to saturate
• Increased competition leads to declining margins.

The growth share matrix or also known as the BCG-matrix allows us to analyze how to allocate resources in a company. Applied on Saku the BCG matrix would be as following: The cash cow of Saku is clearly Saku beer since they are generating almost 80% of the sales. The stars or the beverages that are in the growth stage are the imported beers, the long drinks and the ciders. These are not yet creating a lot of cash flow but there is certainly an opportunity here to generate big cash flows from these product lines in the future.

Mineral water is seen as the question mark, since this product line is expected to saturate and has been giving disappointing results. The soft drinks can be seen as the “dog” because for this product line there is already a mature player in the industry. Saku doesn’t have the means to compete with Coca-Cola and will probably not be able to increase its market share significantly. Recommendations Based on the our in-depth analysis we conclude the following for Saku; First of all we think Saku should take the risk to expand to Finland.

They have already the brand recognition there and with Estonia entering the European Union, exporting to Finland will be fairly easy. Thanks to the higher prices in Finland, they will also be able to discriminate their prices in the Finn market. In this way they will also maintain the beer tourism in Estonia. Secondly they should maintain their cash cow so they can keep financing advertisement for their stars with these steady cash flows. So complementary to this decision is the call to use cash generated by Saku’s flagship products for advertising cider, long drinks and imported beers.

In this way Saku enables itself to capture as much as possible from the growing trend of these products. As soft drinks is a market where there is a mature player this is not a priority for us. They can maintain the sales of imported soft drinks, because the margins on these products are rather on the high side but they don’t have to try capturing more market share. Coca-Cola can easily outcompete them, so this would be a waste of the advertisement budget.