NATHAN LION
Limited
By Tosca Bonardi, Tom Sweeney,
Valerie Potts, and Lila Schwarzbach
NATHAN LION LTD
THE BEGINNING

The Formation 1988


Lion Corporation and L.D. Nathan and Co. merge
Hire and outside guy in 1999
Kevin Roberts
 International experience


Australian and New Zealand markets
Hinder further growth potential
 several evaluations on different breweries in China
 LN entered China’s market two years later in April 1995
with a 60% joint venture Wuxi.
 The first investment was made in Yangtze River Delta,
China’s fastest growing beer market.

NATHAN LION
THE BEGINNING

Increasing ownership


1996: increase to 80% with plans to build a new $378
million brewery.
Licensing agreement
After the construction of their new brewery
 German brewer Brauerei Beck and Co. to brew the
premium beer, Beck’s.


Kirin Brewery Company
In 1998, KBC acquired a 45% share of LN
 ownership structure changed significantly
 By the end of 1998 LN’s growth potential was still
very promising.

CHINESE BEER
INDUSTRY

Beer is a beverage
Variety of flavors, colors and types.
 Different tastes, price range, and quality.


Technology
Slow paced changes
 Routine and automated process


Popularity- Attractive to international brewers
China’s population
 Immense growth potential


In 1998, 600 brewers produced 17.8 tonnes of
beer
GROWTH

Capacity of breweries in China in 1998




Market Growth




80 hold over 50 million liters
Of those 80, 18 breweries could hold over 100 million
liters.
The 10 largest companies only held less than 20% of the
market.
Through the 80’s: growing at a rate of 20% a year.
Between 1992 and 1997: rate of 12.5%.
1998and 2001: Projected to continue dropping to 6%.
Comparisons by liter per capita



New Zealand - 87 liters
Australian - 95 liters
Asian market as a whole - 30-40 liters
MARKET SEGMENTS AND DEMAND

China’s beer industry has four segments
Imported premium
 Premium
 Mainstream
 Low-end


Demand fluctuates
Levels of unemployment
 Disposable income
 Government rulings


Beer consumption
Analyzed by regions – many little markets
 Urban and rural areas

RAW MATERIALS, CAPITAL
REQUIREMENTS AND
ENTRY/EXIT EASE

Hops



Capital Requirements: Small Companies




Not high for small businesses
Building breweries is costly
Developing brand identity
Capital Requirements: Big Companies




Companies buy raw materials
Easier for companies
Brewing plants in every region
Economies of scale
Extensive marketing
Exit

Hard for small businesses – no market
CHINESE ECONOMY

Entering Chinese Market
Downward trend
 Advanced market
 World’s largest consumer market


China’s market looked very promising
Size of market
 Growth potential
 Low barriers to entry
 No established “big guy”


China’s consumer market

Exponentially growing consumer market
OTHER COUNTRIES

Presence in New Zealand and Australia
Lacked growth potential
 Dominated by supply and demand


Differences between economies

Growth potential
Population
 Economic growth
 Growth rate
 Promising market

NEGATIVES ASPECTS OF ENTERING
CHINA

Low GDP per capita


Australia and New Zealand’s higher GDP per capita
Infrastructure in China
Well developed on coast
 Weak inland transportation
 No public transportation system
 Few private auto owners


Infrastructure in Australia and New Zealand

Well developed nationally
BEER MARKET
Chinese Economy in downward spiral
 Competition in beer market intensifying



Premium beer market
Consumers buying habits
Willing to try new brands (low brand loyalty)
 Daily “Mom and Pop” visits


Culture
Beer is a social beverage, like tea or soda
 Accompanies a meal
 Enjoyed warm

BEER MARKET

Consumption Habits



Lower in China than others
LN must pay close attention to distribution
Marketing

Customers under 30 are more responsive to advertising
YANGTZE RIVER DELTA

Five Regions


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Shanghai
Suzhou
Wuxi
Nanjing
Changzhou
COMPETITORS
HUMAN RESOURCES AND
CORPORATE CULTURE

No problems finding qualified
employees
Previous retail experience
 Under 30
 2 years experience with MNC

Individual performance targets
 Bonuses negotiated.
 Status, reputation, reliability, and loyalty influence
position, promotion, relationships.
 Personal goals,
 Retention of staff
 Employee training systems

T
CHINA’S CULTURE
High-context culture emphasizes social
relationships between individuals
 Trustworthiness is a key trait in business dealings.
 Employee loyalty, building corporate expertise is
vital.
 Chinese dislike individual pressure.
 Occasionally LNC head office managers apply more
pressure than most Chinese workers are
accustomed to in order to meet financial targets.

T
MARKETING STRATEGY

Lion Nathan regularly:
Measures the health of their brand
 Examines the effectiveness of their advertising
 Uses past experiences for positioning and promotion


Positioning in each market:


River Delta and Shanghai – locality = comfort, affiliation.
High-quality premium beers are marketed
differently
price, bottle design, position, label, and placement.
 Ex: Beck’s and Steinlager

Affordable and acceptable pricing
 Event sponsorships.

T
MARKETING FOR THE FUTURE
15% market share in River Delta region, 8% in
Shanghai, 25% in Suzhou, 40% in Wuxi, 16% in
Nanjing.
 Distribution is an issue



Sales are directly related to their distribution
coverage


Focus on expanding in River Delta region and
Shanghai.
Build for the future.
Already have superior brand recognition

Create more effective distribution channels
T