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Bulmers

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Bulmer’s Sunshine Effect

Addressing members of the Irish food industry at a national conference in 2006, the message, Maurice Breen, Marketing Director for C&C plc delivered was simple: building a successful brand takes time and money. As producers of Bulmer’s Original Irish Cider, C&C plc was well placed it seemed, to advise other Irish companies on branding. The beverages manufacturer had successfully repositioned the once tired Bulmer’s brand as a traditional handcrafted premium category drink aimed at up-and-coming professionals. In the process Bulmer’s had revitalised the entire cider sector, endowing the golden juice with respectability and aspirant values. With advertising capitalising on good summer weather and long evenings, cider sales had soared as consumers flocked to the prospect of socialising with friends over a refreshing bottle of Bulmer’s Cider poured over ice.

That halcyon association had been dubbed the ‘Sunshine Effect’ by the UK’s National Association of Cider Makers, its sparkle catching on in the UK as C&C stormed the largest cider market in the world during the hot summers of 2005 and 2006. While initially successful ultimately the Sunshine Effect proved to be both the making and breaking of the Irish company’s market strategy for the years that followed. After 3 years of sales decline, its new CEO John Dunsmore, recruited in mid-2008 from competitor Scottish & Newcastle , was left wondering what options did the Irish cider brand face in international markets.

Nothing Added But Time
Differentiating Bulmer’s from the typical prejudices surrounding cider, C&C had focused on four core concepts: Time, Heritage, Tradition and Nature. Values associated with these ideas were infused into all marketing communications for the cider, including packaging and price. The alcohol content was reduced from 6.5% to 5%, the packaging was upgraded and revamped and C&C invested heavily in creating high quality advertising campaigns around those four themes. With Nothing Added But Time, C&C developed the character and personality of their flagship brand along these dimensions of purity and quality. Primarily targeting young busy professionals, Bulmer’s represented a nostalgic link to quieter times before the frenzy of the Celtic Tiger economic boom in Ireland. Over successive campaigns the company began to explore and nurture the relationship with nature and purity. Advertisements evolved over the years, first set to pensive guitar music and depicting apple-pickers harvesting beautiful orchards by hand and eventually sunny evenings with friends, good times and pouring suggestions scored to upbeat soulful tracks. It was not long before the trend of pouring Bulmer’s over ice cubes in a glass caught on and was incorporated into the advertising to reflect the birth of an entirely new category of drink: ice chilled ciders .

Strategic Focus
The repositioning strategy was implemented in 1991 when cider had a 3% share of the market, taking just a few years to catalyse growth in cider demand. Bulmer’s dominated the category outright in both on-trade (pubs and bars) and off-trade (supermarkets and alcohol shops) commanding a premium price over competing brands. By 2000 it accounted for 88% of the Irish cider market, which itself grew to account for 10% of beer sales . It was C&C’s star product in a diversified portfolio which management began to reassess in 2004 with the prospect of a stock exchange listing. Bulmer’s contributed the vast majority of C&C’s revenue streams and the company felt confident that strategic focus on the brand’s international development offered C&C the best prospects for longer term profitability and growth. Soon after the firm’s IPO in 2004 it began divesting itself of ancillary businesses such as Tayto, an established Irish snack food. The sights had been set on the international stage and Bulmer’s Original Irish Cider was the star.

Internationalisation
The company had first internationalised in 1999, exporting to Northern Ireland. This was followed by entry to the US market, targeting ex-pats and American Irish living along the eastern seaboard. Prior to focusing on the UK in 2005, C&C plc had also test-marketed Bulmer’s Original Irish Cider in Munich and Barcelona as part of a five-year plan.

The UK was the largest cider market in the world with consumption approaching 1 billion pints in 2006 . It was however, one characterised by price-based competition. Breen summarised the situation in the UK as a “battle between two major brands, who had been in a fight to reach the lowest price…we felt we had to shake up people’s preconceptions, that it was okay to drink cider”. Culturally the two countries shared commonalities in terms of values and lifestyles. Research had identified four particular areas of convergence: ‘perceptions of quality’, ‘lifestyles’, ‘time vs money’ and ‘pace of change in life’. With a population of 60 million, the UK dwarfed the Irish market, however, and was far more complex in terms of the structure and dynamics of its alcoholic beverages industry.

Unlike the Irish industry, there was a significant degree of vertical integration in the UK drinks market. Only one third of the 60,000 pubs operating in the UK were independent businesses. Of the remainder, several breweries owned networks of pubs and bars. Scottish & Newcastle, a €6 billion brewer with dozens of brands in its portfolio including market leader Strongbow Cider, owned 2,000 licensed pubs nationwide. Similarly, franchising was another feature of the UK industry, with pub-companies accounting for about half of all pubs. Generally, even when breweries did not maintain exclusivity, their sales strategies and after-sales service were incentive enough to influence the pub landlord’s buying decisions.

Each of the leading brewers produced a range of brands targeting distinct segments, categories and price brackets. C&C plc would be competing with Aston Manor’s five cider brands, Scottish & Newcastle’s portfolio of ten and Gaymer’s Cider’s eleven brands. One of the reasons for the proliferation of cider brands was that in terms of tastes, UK consumers remained quite regionalised. In addition an old law stipulating that cider producers with output of less than 7,000 litres per annum were exempt from paying excise duty made local cider milling a popular cottage industry, producing cheap local brews at a community level.

It was clear C&C’s primary competitive threat would come from Scottish & Newcastle, however. Among the company’s arsenal of cider brands, the Strongbow range accounted for about 60% of all cider drunk in the UK. Furthermore, the brewer owned the rights to the Bulmer’s brand in the UK, a significant issue for C&C who only owned the rights to use the brand name outside of the UK market. This complicated history stemmed from the fact that the original HP Bulmer company had sold the rights to the Irish market to Irish cider maker William Magner separately to the UK market rights in 1937. As a result, Bulmer’s Original Irish Cider would be re-branded Magner’s Original Irish Cider for its UK launch.

Magner’s Original Irish Cider
Positioned as a premium cider to be distributed in its distinctive brown-glass pint-sized bottle, much of C&C’s advertising budget for the Magner’s launch was invested in placement to gain cut-through with the target market, affluent young males living and working in London’s financial services sector. Promoting the novel cider-over-ice concept was key to the success of the message: Magner’s was a sophisticated and fashionable refreshment. In addition to astute advertising and placement, Breen’s team engaged in sponsorship of London Wasps rugby club which he reasoned would make “people sit up and take notice of a brand and a category that has been under-invested in for the last five to ten years” . The deal soon paid off with London Wasps winning the high profile, televised European Rugby Championship for 2006-2007.

Sunshine Effect
The launch of Magner’s in the UK had been extremely successful. Sales in the new cider-over-ice category sky-rocketed 130% in 2005, virtually all of which was Magner’s. Its success had a catalysing effect on the entire sector where previously cider “had become extremely unfashionable, but Magner’s repositioned the cider market”. It was not long before Scottish & Newcastle reacted with its own proposition: Bulmer’s Original, Born For Ice. Flanked by a revamped image and new advertising campaigns for Strongbow, Strongbow Sirrus Ice and Strongbow Extra Cold, Bulmer’s Original would go head to head with Magner’s. Through clever and witty takes on nature documentaries, the campaign clearly claimed the position for Bulmer’s Ice as the Original ice chilled cider.

It was too easy for C&C to dismiss the Bulmer’s Original Born for Ice strategy as a ‘me-too’ product . From a distance, the two bottles looked very similar and even the labelling looked cut from the same cloth. But Bulmer’s Original retailed at a significant discount to its rival – selling at between 8-10% discount in pubs and at least 20% in the off-trade sector. Despite the threat, C&C had cause for optimism; by 2006 Magner’s sales had grown 225% and had captured almost 1.7% of the national market and a similar figure in London – figures nearly double its original objectives. The summer of 2006 was hot, with record temperatures and sunshine hours and it was well known that any period of good weather sent sales soaring . Turnover at the Irish plant in Clonmel had risen 27% to €981.5 million and margins had increased to almost 22%. The plan to capture 4% of the UK market over five years looked to be on track and the markets had responded well to financial statements from the company. Looking to 2007, C&C was forecasting 15-25% operating growth as it aimed to expand market share for Magner’s. To achieve these goals, management decided to commit €200 million to double capacity at the Clonmel plant to 500 million litres per annum. The future was bright and then of course, there was always the summer to follow.

Premium Category or Fad
Whereas 2006 was unusually warm and sunny for the UK and Ireland, 2007 brought a summer wetter if not drearier than average. Revenues and profits at C&C took a tumble, prompting commentators to speculate that cider over ice was simply a fad. Defensive to remarks that Magner’s was simply a “2005 thing”, a C&C spokesman was categorical,

“We have spent 15 years carefully positioning Bulmer’s in Ireland as a mainstream brand with no fashion cues. Consumers say they like it because it’s traditional, natural and has heritage. We have worked very hard to keep the fashion element out of Magner’s” .

Financial statements for the year-end 2007 cited three reasons for the disappointing results: poor weather, increased competition and increased costs. Loss of market share in the UK was exacerbated by the loss of exclusive distribution arrangements. Further, sales volumes for Bulmer’s Original Irish Cider in Ireland had dropped. Meanwhile cider as a category in the UK continued to grow – Scottish & Newcastle had estimated by about 15% while Magner’s sales in the UK had grown by just 2% by July of 2007. Bulmer’s Original supported by Sirrus Ice and Strongbow Extra Cold had been eating up market share in the over ice category. It was becoming increasingly difficult for Magner’s to justify its premium pricing, but that is what Pratt remained adamant the company would do instead opting to reduce costs so as to maintain the desired margins for the company. It seemed the problems facing C&C were more fundamental than simply bad weather or increased competition, however. The gloom hung over C&C’s stock market price as analysts downgraded the company’s shares from ‘buy’ to ‘hold’ . In autumn 2007, the company’s shares were trading at about half of their 2006 high and management embarked on a major share repurchasing scheme. It was a move later questioned by stock market analysts in light of subsequent profit warnings. Essentially, C&C plc was fast becoming a cheap takeover target for bigger drinks companies like SAB Miller and even Scottish & Newcastle. In an interview later in 2007, the company confirmed thta C&C was committed to a 5-year market strategy and as a result would be curtailing capacity investment to €115 million, cutting its workforce by 10% and reducing marketing spend on cider for 2008. But such moves could have been dismissed as attempts to restore investor confidence. To some critics, the priorities of the brand and the interests of the stock market had come into conflict.

Fortunes continued to worsen as sales declined throughout 2008 both in UK and the maturing Irish market. Irrespective of weather conditions, loyalty to the brand was slipping as consumer preferences changed and the choice of brands in the cider category expanded. In addition to the over-ice category, pear ciders were enjoying a renaissance with brands like Sweden’s Kopparberg engaging with both male and female drinkers.

With revenues and profits in seeming terminal decline, it was hoped a management shake-up at board level would help revitalise C&C’s prospects in an ailing cider market. John Dunsmore led a team of other ex-executives from Scottish & Newcastle tasked with reviving the company’s fortunes. Previously tarred as a one-trick pony, Dunsmore realised C&C was dangerously exposed to volatility in the cider market and competitive pressures. The first move toward a recovery was to instigate a restructuring of the company’s finances and operations, followed by several acquisitions of smaller but established players in the UK alcoholic drinks market including Tennents and later Gaymer’s Cider. Fleshing out the company’s brand portfolio, it appeared Dunsmore was emulating Scottish & Newcastle’s diversification strategy .
The Bulmer’s story had taken a significant turn. Its history in Ireland had demonstrated building a brand took time and investment, but other forces quickly eroded that added value in a matter of a year’s competition on the open market.
What could C&C have done to avoid such a situation? Should it have exploited other markets first? Did it misjudge the potential of Magner’s in the UK? Did it misjudge the sustainability of the over-ice category? Or was it simply unlucky? John Dunsmore was not prepared to wait and find out. Instead he preferred to hedge his bets on a portfolio of likely cash cows in a maturing drinks market.

Questions
1. C&C appeared to follow all of the rules of marketing in establishing the Bulmers/Magners brand, why did it not have the textbook outcome?
2. Is there a downside to strong brand equity such as that developed by Bulmers/Magners?
3. How would you advise John Dunsmore to proceed?…...

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The Irish Cider Industry

...The Irish Cider Industry Irish Cider Association is a business sector within IBEC Irish Cider Association The ICA is a new organisation which aims to build on the great success of its predecessor, the Cider Industry Council - founded over 20 years ago - which transformed the profile of cider in this country for the better. The Association is chaired by Aidan Murphy of Bulmers. Bulmers Irish Cider is produced in Clonmel for the Republic of Ireland by C&C Group and is exported as Magners Irish Cider to more than 25 countries worldwide. Our other members, like Diageo, Richmond Marketing and Barry and Fitzwilliam Ltd provide cider from all over Europe for Irish drinkers and are significant players in the Irish alcohol beverage industry. The ICA’s mission is to strive for an equitable taxation policy for cider and a sustainable, cost effective production environment. We engage in a fact based, inclusive and solution-driven public policy debate. We aim to establish the Irish cider industry in the minds of stakeholders. We show how the cider industry, like other alcohol categories, is dedicated to social responsibility, including responsible drinking. We also show how our industry provides jobs, generates government revenues and is committed to providing comprehensive and comprehendible information to consumers. Company logos and brand logos. BARRY& FITZWILLIAM LTD. PREMIUM DRINKS COMPANY Our business The Irish cider industry consists of manufacturing, import......

Words: 1509 - Pages: 7