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Molson Canadian – Marketing review Assignment

Molson Canadian has had past success with the patriotic “The Rant” advertising campaign, and is considering how to further increase market share in the future, as each market share point translates into $15 million in profit. There are several concerns that Molson needs to evaluate prior to deciding on an alternative. The mature stagnant beer industry in Canada makes the ability to increase market share difficult, especially with the increased consumption of imports, as well as overall reduced consumption of beer on an individual Canadian basis. Molson’s future advertising campaigns should focus on continuing the patriotic theme that made the Rant so successful, especially with the 2001 Winter Olympics approaching. After the Olympics, Molson’s advertising campaign should focus on increasing the frequency of beer consumption of Canadians, thereby increasing market share, and well as focusing on retaining current customers and securing a life long commitment of brand loyalty toward Molson Canadian.

List of Alternatives

1. Continue Molson Canadian patriotic promotion theme

2. Increase breadth of brand awareness to increase frequency of beer consumption in Canada

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3. Secure life long brand loyalty of target market

Qualitative Analysis (refer to exhibit 1 for SWOT analysis)

Market Analysis

The domestic beer industry in Canada is a mature market, with only 3 large competitors: Molson, Labatt, and Sleemans. These three companies represent 90% of the market share, with imports making up the remaining 10%. The industry can be separated into two parts: A consolidated industry characterizes the 3 larger competitors, while Microbreweries and Brewpubs are characterized by a highly fragmented industry and are pursuing niche strategies. Nevertheless, the beer industry is a stagnant market, where consumers are drinking less on average, even though more people are drinking.

The industry is also highly cyclical, with the summer months being most profitable for the beer industry. Molson’s position relating to marketing warfare strategies is on defense, where they are the market share leader in the industry, but with Labatt as close second. Market share at $15 million per point, is extremely profitable in the beer industry, and Molson is using a profitable survivor strategy to increase market share in this stagnant market. Pursuing a profitable survivor strategy entails maintenance or increased levels of advertising and sales promotion budgets in order to gain and secure market share.

Consumer Analysis

The target market for Molson Canadian is a young adult, age 18 to 29. It is this segment that possesses the greatest possibility of establishing brand loyalty with a particular brand of beer, and Molson Canadian believes it can capture and establish a life long brand loyalty by targeting this segment as soon as they reach the legal provincial drinking age. In Canada, across provinces, the legal drinking age varies from 18 to 19 years old. The consumption of beer by this segment satisfies social needs according to Maslows Hierarchy of Needs, as alcohol consumption accompanies the socializing aspects of these individuals. This shared social feeling also helps to build brand awareness and loyalty towards different types of beers, as peer pressure and advertising through word of mouth, is important in choosing a particular brand. Molson Canadian further segments this demographic by targeting males, due to higher their per capita consumption of beer over their female counterparts.

Additionally important is the patriotic feeling young adults boast for Canada. A major success for Molson Canadian has been “The Rant”, which garnered much media attention, awards, as well as increased Molson’s market share. “The Rant” has been extremely successful for Molson Canadian, as it featured Joe Canadian, a character that sparked national pride by setting straight the rest of the world of what it truly means to be Canadian. Capitalizing on beer sales with hockey, multiculturalism and the environment themes has tapped a national patriotic nerve that has proved to be extremely profitable for Molson Canadian. Meanwhile, Labatt has been able to capture its market share by selling sexual elements via their “Out of the Blue” campaigns.

Molson Canadian’s target market is also price sensitive, and will switch between different brands if prices vary greatly between competitors. In order to capture this profitable market, Molson has devoted large amounts of its advertising budget on this segment, in attempt to secure their market share, as well as entice consumers away from Labatt. Moreover, there are a number of trends that are occurring in this market and segment, which could have a large impact on Molson Canadian’s advertising objectives, and ultimately Molson’s market share and revenues.

The first is the overall decrease in consumption by these individuals, as healthier alternatives to beer are being sought out more than in the past. While more people are drinking beer overall, each person is drinking less beer. This has resulted in a stagnant industry that is not experiencing growth, unlike that of the wine and spirits industries that are steadily growing.

Second, “The Rant” that Molson was previously able to capitalize on in the past may not be an effective theme for advertising if Canada experiences changes in the economy, more specifically, if Canada experiences an economic downturn. This may be a concern in the future for Molson because of the link between patriotism and the economy in Canada. If Molson wishes to continue using a patriotic advertising theme, it must realize that an economic downturn may have an effect on the effectiveness of its’ advertising, as Canadians may feel resentment towards their national economic situation.

Lastly, a trend in Molson Canadians’ market that could be of concern is in relation to the knowledge that its customers are gaining of beer, in essence “beer I.Q.”. More people are becoming knowledgeable of different types of beers, and are trying imports and other beers, thereby abandoning their traditional choice of domestic brands. This has become evident with the increase of market share by imports and small breweries, and must be considered with any advertising that Molson Canadian is to introduce.

Marketing Mix

In the highly competitive domestic beer industry, Molson has been able remain competitive with Labatt by minimizing the difference in characteristics between the two brands. For example, in blind taste tests, consumers have a hard time telling the difference between Molson and Labatt’s flagship brands, Canadian and Blue.

Price differentiation has been minimized due to the price sensitive nature of consumers in this market. If either Molson or Labatt lowers their price of beer in attempt to increase sales, the other company will follow, ultimately creating a price war. Therefore, it is in both interests to remain price competitive and not attempt to undermine their rivals.

Due to extensive government regulation in the beer industry, the places where beer is allowed to be consumed is heavily regulated, and does not allow one company to assume a competitive advantage over another. Additionally, across provinces, there are currently varying Provincial taxes, advertising regulations and so on that may hinder Molson Canadian’s strategy and presence in different markets. Moreover, political forces such as drinking and environmental activists may pose a threat as these activists sharply watch over the moves and motives of this industry. This ultimately leaves promotion as the only way for Molson Canadian to differentiate itself from competitors.

Promotion has been the most successful way for Molson to increase market share, as seen by the success of “The Rant”, which helped increase Canadian’s market share by two points, thereby increasing profits by $30 million. Most of Molson Canadian’s promotion strategies have focused on either reminding consumers of Molson Canadian, or establishing a connection and instilling feelings between the brand and certain qualities and themes. “The Rant” helped link Molson Canadian with young people’s patriotic nature, especially against Americans. Molson Canadian advertising is primarily used to pull consumers to its product, but Molson does use push tactics towards the retailers to entice them to carry and sell their brand. For example, Molson will offer monetary incentives to particular restaurant chains to entice them to exclusively carry Molson products on draught, and will reward restaurants proportionately for meeting their Molson Canadian sales targets.

Other promotion strategies that Molson has introduced with varying success have been the Molson concert series, Molson House Party, and Molson Blind Date. These helped increase the Molson brand through alternative advertising mediums, while still targeting the profitable younger age market. Molson Canadian currently targets Canadians who primarily live in Ontario and British Columbia, and to a lesser extent other Canadian provinces. However, Molson Canadian has decided not to enter the market of Quebec. Finally, Molson Canadian extensively advertises via sponsorships and through demonstrating environmental compassion.

Quantitative Analysis

Currently, Molson Canadian is working with a media, advertising and promotion budget of approximately $250 million, while its main competitor, Labatt has a budget of $260 million. It is assumed (Exhibit 2) that Labatt will continue to have a budget that exceeds Molson’s as it has done in the past. Exhibit 2 shows Molson Canadian’s required media investment plus projections for investment throughout 2002-2004, and accompanied assumptions. Since securing market share is very important, advertisements and promotions will need to be of focus in the short-run, rather than in the long run. Market share is also extremely important since one point represents approximately $15 million in profit. It must be noted that Labatt will be following suit with budget allocations and strategies.

Thus, upon analysis, our criterion to measure Molson Canadian’s success is based on market share, and therefore profitability. Currently Molson Canadian has a market share of approximately 45% and its goal is to ultimately increase this percentage, and keep Molson Canadian as the number one beer in Canada. Exhibit 3, 4 and 5 depict market share projections for optimistic, most likely and pessimistic outcomes with the implementation of each of the three alternatives for Molson Canadian, Labatt and Import beer. The most likely outcome will be of discussion below.

Exhibit 3 shows what would happen to Molson Canadian’s market share, and its competitors respectively with the implementation of the strategy to continue the patriotic theme. In 2001, it is projected most likely that the market share will increase by 1 point primarily due the Winter Olympics in Salt Lake City. However the following years, it is estimated that market share will decrease, but will still keep above the original market share of 45%. This alternative is optimal.

Exhibit 4 shows what would happen to Molson Canadian’s market share, and its competitors respectively if the strategy to increase the frequency of consumption were to be implemented. The most likely scenario will experience an increase to 45.1% in 2001, 46.2% in 2002, 46.7% in 2004 and 47% in 2004 respectively. This is expected since overall consumption of beer will increase due to promoting beer drinking not just during the weekends, but also every day of the week. This alternative is also optimal.

Exhibit 5 depicts what would happen to Molson Canadian’s market share if it chooses to implement the strategy to retain brand loyalty, by securing current customers for the future. It costs less to retain current customers than attract new ones, and with this in mind, market share will increase slightly, but not dramatically. Between 2000 and 2004 market share will increase by .2%. This is a wise alternative because it not only focuses on short-term success, but rather success in the future for Molson Canadian.

Discussion of Alternatives for Molson Canadian

Alternative #1- Continue Molson Canadian patriotic promotion theme

The success of the Rant tapped into the patriotism of young Canadians, and was profitable for Molson. With the Winter Olympics occurring in 2001, Molson can continue with the patriotism theme, as there is a unique opportunity to attach Molson Canadian to the Olympics, which evokes considerable patriotic feelings in Canadians. Sports events normally attract a majority of Molson’s target age segment, and with sports fans consuming on average twice as much beer as non-sports fans, this can help increase the consumption per capita of Canadians.

Alternative #2: Increase breadth of brand awareness to increase frequency of beer consumption in Canada

Focusing of increasing the breadth of brand awareness will enable consumers to recall the Molson Canadian brand with ease, and can achieved through an increase in extensive advertising campaigns. This alternative will require approximately 10% more capital than previous advertising ventures, but will focus on an entirely different strategy. To combat the threat of decreased average consumption of beer per Canadian, the goal of this promotion will rather be to increase the frequency of consumption.

This can be achieved by marketing beer consumption as not just a weekend event, but also an activity for any day of the week. Extensive campaigns will promote an “Every Day is a Molson Canadian Day” theme and will continue target males, age 18 to 29 by sporting everyday events, such as friendly gatherings, extreme sports, the opposite sex, patriotism and more. The aim is to appeal to the philological wants and needs of this segment, while creating a fantasy-like social reality of what this segment will be missing out on if they choose not to drink Molson Canadian beer!

Alternative #3: Secure life long brand loyalty of target market

Molson Canadian can also try to retain young adult consumers further into their lives by establishing multiple marketing communication programs. Molson will have to use different ad campaigns for Molson Canadian and target these promotions towards different market segments. It must be noted that Labatts’ previous attempt to secure the adult market segment by gearing promotions specifically towards adults hurt Labatt; therefore it is not wise to focus entirely on this segment. It costs more to attract new customers than retain current ones, and with this in mind, it is important for Molson Canadian to continue to target their traditional segment, and follow this segment into their aging years by securing brand loyalty. This can be achieved by offering customer appreciation gimmicks that target older segments, though a system of honoring their loyal ties. This alternative is a long-term focus strategy for securing current customers.

Recommendations (Exhibit 7 Action Plan for detailed explanations)

1. Molson Canadian must continue to ride the wave of success that the Rant has provided it, and use the patriotic name of its flagship brand, Molson Canadian to lead its next advertising campaign.

2. After the 2001 Winter Olympics, in 2002 Molson may wish to reevaluate this campaign and begin a new advertising strategy aimed at attempting to increase the frequency of consumption Canadians consume Molson Canadian. This campaign would entice consumers to drink Molson Canadian not only on the weekends. By working closely with Bensimon Byrne D’Arcy, Molson will better target its core consumers and increase market share and overall profitability.

3. During this 4 year time period, Molson Canadian must implement a program to retain their current customer base by securing brand loyalty throughout their entire lives.

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