South African Drinking Industry Case Study

Introduction The South African market for alcoholic beverages has been rapidly expanding in the latest years. The company CULT A/S has tried to enter the South African market as it has a huge potential, but has not succeeded due to the barriers to entry, strong competition and bad choice of cooperation. The strong barriers to entry are due to a high tariffs which are implemented on imported goods and this resulted in creation of a beverage factory, from CULT A/S, specifically for South African market. The market has already a strong base of competition for ciders and other low alcohol content beverages, some of the strong competitors are Savannah cider, native brand, and Kopparberg with Rekorderlig, which originate from Sweden. These brands

The grocery stores are only allowed to sell wines. The sale of beer, spirits and high-strength premixes is limited to special retailers. Legal purchasing age and the legal drinking age in South Africa are the same,18 years of age. Retailers selling alcohol to younger people can be fined. There are also high sales of alcohol in unlicensed shops, mainly in low-income areas, but it is not allowed. Drink driving in South Africa is permitted till 0,24 mg in 1000 ml of breath and being caught over the allowed amount of the alcohol can result into penalties. There are not regulation for the alcohol advertising till today, but government already prepared Control of Marketing of Alcoholic Beverages

After looking at the criterias and the global trend of consuming alcohol beverages, we have decided, that the perfect target age should be people from 18-34 years as the size is bigger, population of 15.7 million, and the growth is significant. The access will be also easier as the younger population is easier to get attention from. The competition will be similar, as lot of alcohol beverage companies are trying to impress these two segments. The costs of entry will, however, be worse as there is need to have a specific strategy and good choice of partners. Now when we have chosen our perfect target group, we have to calculate the number of customers involved in this group. As for the major segmentation criteria, we looked at the GINI index of South Africa, which is 63.4, and on the Lorenz curve, we have evaluated from it, that 40% of the population owns 85% of total national fortune. That means that these 40% are more likely to buy CULT product. After calculating 40% of 15.7 million population of males and females between 18 to 34 years old, we found our target group of 6,280,000 inhabitants.

The SACC/SMUK table can be found in the appendix