Course code: BUS 5112: Marketing Management
Course Name: Channels of Distribution
In this Marketing Management course, you have learned advanced concepts and tools for marketing products and services. These are the same concepts and tools that marketing managers use around the world. However, it is worth considering how marketing is perceived in your country and what the ethical dimensions of these marketing strategies are. For example, in the Diageo case discussed in Unit 3, we saw that the company has reduced the prices for many of its liquor brands in Africa as well as selling them in smaller, less-expensive packages.
In a page or two, please reflect on the role of marketing in your country and putting on the ‘marketing manager’ hat, give some specific examples of where you think marketing “crosses the line” into unethical behavior, and make some recommendations for what should change.
This paper will be graded by the instructor
Print Diageo (NYSE:DEO) Historical Stock Chart 3 Years : From Dec 2014 to Dec 2017 Thirsty for Growth, Liquor Giant Taps African Market By Peter Evans NAIROBI, Kenya--For 20 years, Leonard Odhiambo has run a thriving business off a dirt path in Kibera, the biggest slum in sub-Saharan Africa. He brews changa'a, a potent spirit made from molasses and mashed grain. A half-liter bottle sells for just over a dollar. Changa'a is illegal, but the police aren't his biggest threat these days. Diageo PLC, the world's largest spirits company, is selling inexpensive liquor barely a hundred yards from his door. The cheapest, a whiskey called Jebel Gold, costs about 10 cents for a 30-milliliter "tot"--about two-thirds of a shot. Mr. Odhiambo says he is losing customers to the nearby liquor shack, which also offers non-Diageo branded products such as Napoleon Gold Brandy and King Horse Vodka. "They sell cheaper than they used to," he says. International spirits companies are expanding across Africa, targeting even the poorest consumers with liquor made locally and sold at dirt-cheap prices. In major cities and, increasingly, in rural areas as well, the world's biggest liquor makers are launching low-price versions of big-name brands, forming partnerships with independent distillers and creating their own versions of local spirits. Africa has emerged as a rare bright spot for London-based Diageo, which said Thursday that operating profit for the fiscal year ended June 30 fell 0.8% on weaker sales in North America, the Asia-Pacific region, Latin America and the Caribbean. In Africa, discounting the effect of acquisitions and currency fluctuations, sales rose 6%. Earlier this week, Diageo moved to wield more control over its growing business in South Africa, terminating a joint venture with Heineken NV. The global spirits industry sees Africa as the final frontier--a potentially huge market that is largely untapped. Only 2% of the industry's profits came from Africa and the Middle East in 2013, according to Sanford C. Bernstein & Co. Between 2013 and 2017, the continent's liquor market is projected to grow by 45%, to $2.39 billion, Diageo has told investors. There are wealthy consumers in Africa who can afford expensive Western liquor. But cheaper local brands dominate the rest of the legal market. Global giants such as Diageo and Pernod Ricard SA of France now realize that to compete effectively in Africa, they need to move down-market. http://ih.advfn.com/p.php?pid=nmona&article=67961057# http://ih.advfn.com/p.php?pid=qkchart "All the real action is when you go below 200 Kenyan shillings," around $2, says John Williams, marketing director at Kenya Breweries Ltd., a Diageo subsidiary. Slum sales To compete head-on with changa'a merchants like Mr. Odhiambo, Diageo is selling low-price products out of shacks in some of Kenya's poorest slums. Jebel Gold is its cheapest brand, but others don't cost much more. A tot of Liberty, a whiskey, sells for around 20 cents, while Kenya Cane, a white rum, goes for around 35 cents. Diageo says most sales of those brands have been to drinkers moving out of the illicit market. Competitor Pernod Ricard offers its Passport Scotch whisky for $4 per half-liter bottle in many African countries. The brand has had the most success in Angola, where it sometimes was used in place of currency during the country's decadeslong civil war, according to Laurent Pillet, Pernod's top Africa executive. Beer companies also see opportunity in the market for high-alcohol-content products. SABMiller PLC, the world's No. 2 brewer by sales, last year started selling in Tanzania a blended three-year-old Scotch whisky called Fyfe's. SABMiller already holds a nearly 30% stake in South Africa-based Distell Group Ltd., the No. 2 distiller in Africa by sales. Diageo has invested more than $1 billion in Africa over the past five years. It controls about 25% of legal-spirits sales on the continent, according to research firm Euromonitor International, almost double the market share of Distell. Pernod Ricard is third with 6%, while other big names, such as Brown-Forman Corp., Bacardi Ltd. and Rémy Cointreau SA, have less than 2% each. For Diageo, much of the rest of the world isn't looking as promising. Sales growth has abated in the U.S., Western Europe and China. A global bourbon boom has largely passed the company by. Revenue from North America, Diageo's biggest market, declined 1% in the year ended in June, excluding the effect of currency movements. Last month, Diageo said Chief Financial Officer Deirdre Mahlan would take over as president of its North America unit , replacing Larry Schwartz, who announced his retirement earlier in June. The company also is contending with a U.S. Securities and Exchange Commission inquiry into whether it has been shipping excess inventory to U.S. distributors in an effort to boost its results, The Wall Street Journal reported last week. Diageo said it is "working to respond fully to the SEC's requests for information in this matter." Diageo's competitors also are staking claims in Africa, and Kenya has become a battleground for the world's two biggest spirits companies. Diageo has operated for nearly a century in the country, which has one of sub- Saharan Africa's largest economies, but now faces pressure from Pernod Ricard, which opened a Nairobi office in 2012. Massive billboards for Pernod's Jameson Irish Whiskey and Diageo's Johnnie Walker Scotch dot the city's skyline, while salesmen compete to get their brands into the hundreds of new bars and stores that open each year. The battle for Nairobi is likely to be replicated across Africa in the next decade. "Africa is Asia in 15 years," says Alexandre Ricard, Pernod Ricard's chief executive. "That's how important it can become for us." Diageo hit some bumps on its initial foray into the low end of the market. Three years ago, the company launched Jebel, a predecessor to Jebel Gold. It was packaged in plastic pouches to save on costs. When a smaller competitor introduced a rival brand in glass bottles, which are perceived as safer and more hygienic, Jebel's sales collapsed. Jebel Gold is now sold out of a keg so customers can see the liquid being poured, alleviating concerns it has been tampered with. Diageo thought it could apply global marketing techniques to its African spirits brands. "We've been guilty in the past of coming at it from a Diageo perspective of premiumization and total focus on the brand," says Nick Cook, Diageo's commercial director in Ghana. "It's actually more about keeping a brand locally relevant and keeping the costs down. That's something we're not used to." Now, branded mugs and tablecloths are provided to bars in poor areas. In Ghana and Nigeria, herbs--regarded as essential for good health--have been added to products. In Kenya, liquor makers market to the lowest rungs of the economic ladder by advertising on radio stations known as slum radio, which play to settlements across the country on constantly changing frequencies. Radio is the "medium of choice" for many of Diageo's lower-price brands in Kenya, said the company's Mr. Williams. The distiller has reached customers who have never before consumed legal alcohol by using what it calls vernacular radio-stations broadcast in one of Kenya's 67 different dialects, often to a single tribe or town. "We can use dialect or slang to reach tribes or areas we'd never have got to before," Mr. Williams said. The company is using motorbikes instead of trucks to transport its liquor to remote Kenyan communities. In East Africa, one of Diageo's top five global markets, the company's liquor sales doubled in the last two years. In the last six months of 2014, sales of what Diageo calls emerging spirits--products sold for between $1 and $2.50--increased 28% in East Africa. During that same period, sales of beer priced at the same level fell 12%. Health campaigners say the rapid expansion of spirits brands is compounding an existing problem. Although nearly half of African men abstain from drinking alcohol, those who drink have the highest prevalence of "heavy episodic drinking" of any region in the world, according to a report by the World Health Organization. "In our society, drinking is a big problem," said William Ntakuka, program officer for SCAD, a Kenya-based nonprofit organization that campaigns against alcohol and drug abuse. "It's bad, and it's getting worse." Diageo, Pernod Ricard and other international spirits companies operating in Africa all run responsible-drinking programs and say their products should be consumed in moderation. Billboard ads In many African countries, laws about marketing alcohol aren't as strict as they are in much of the developed world. Many African governments, for example, allow billboard advertising of alcohol brands directly outside schools. In the U.S., Diageo and other alcohol companies are prohibited from placing ads within 500 feet of schools. In Africa, some countries allow ads to be placed anywhere. Diageo says it abides by local laws and works with governments to improve advertising standards. The growth of the African market has taken international liquor companies--many of them with emerging-markets experience in Asia and Latin America--by surprise. Pernod Ricard in 2011 wanted to begin selling in Angola but had no local expertise. It moved an executive from Poland to Angola and start the business from a hotel room in Luanda, the country's capital. In Uganda, Diageo needed to increase capacity quickly. Without waiting for approval from headquarters, executives ordered a $40,000 production line from a local supplier. It was delivered and operational within weeks. In 2013, Diageo opened a mobile distillery in Accra, Ghana, that it calls "the cube." Made from five 8-by-40-foot shipping containers, the cube produces 1,500 plastic bottles of liquor an hour. Setting up a new distillery with full production capacity would have cost around $45 million. Building the cube cost about $3 million. It operates 24 hours a day, six days a week. Subscribe to WSJ: http://online.wsj.com?mod=djnwires If one area of Africa becomes saturated with a particular brand--or if consumers don't take a liking to a new product--the distillery can be packed up and moved to a new location. Diageo currently operates mobile distilleries in Ghana, Nigeria and Mozambique, and has plans to expand throughout Africa. In Ghana, the main product made in the cube is Orijin Bitters. It was created to satisfy local tastes. Ads for it around the city read "Herbs, Fruit, Alcohol." A 750 milliliter bottle sells for just over $2. "We could run three cubes and still not have enough," says Eric Botchwey, the distillery's production manager. In Ghana, as in many African countries, liquor companies are trying to take market share away from beer brewers, which have long had a solid foothold on the continent. Around 10%