Bailey

A detailed Summary of Bailey

The global liquor market has changed immensely in the last 20 years. Since the early eighties, people have discovered that it is better for their health if they drink in moderation, as opposed to heavy drinking. Due to this change in consumers drinking habits, people generally drink less liquor than they used to. According to our text, the per capita consumption of liqueurs (liters per person over 18) dropped from 1 liter in 1986 to 0.90 liters in 1990. In addition to consumers drinking less, liquor makers, like Baileys, were faced with increasing tariffs and taxes.

At the time of this case study, the tax margins between retailer and distributor were fairly close in the US: 15-20% for retailers and 10% for distributors. The United States also imposed a $22 per case import duty, and state excise taxes were as high as 20%. If you were a foreign liquor producer at the time and you sold a case of liquor at a price of $150 to a retailer in the US, you would see $128 after the import duty, which forces liquor makers to greatly increase their prices up to $177. For example, the retailer has $177 case of liquor that he has to pay a 20% Paddington tax, which makes the case cost him $212.40. Now the retailer gets to add his or her profit

Another issue in the global liquor industry is dealing with copycat competition. Due to all of the expenses involved with developing a foreign market, it is easy for other companies to make a similar product within a given country for substantially less. Five years after Baileys had been introduced to the market, their market share had dropped considerably. A market that they created was now so large that they barely owned 50% of the market share in the US.

Having tasting promotions in Japan and China might prove useful. In the streets of Tokyo, vendors walk around and hand out cigarettes for free. Why not set up a few booths for a month and let passerbys of legal age taste a Baileys mixed drink? This would serve three very important functions: 1. The public is exposed to a new product that it has little or no exposure to. 2. Baileys gets to see which drinks are more liked by new market, and can incorporate those drink recipes into the promotion of the product. And 3. Baileys gets its name into the new market, both by the big booth that says Baileys Irish Cream on it, but also from word of mouth; I know if someone was giving away free mixed drinks around here I would tell everyone I know.

It seems that Baileys is focused too much on the magic number of 4,000,000 cases rather than having set a realistic goal based on current industry trends. For the company to reach its sales goal, there needs to be at least a 10% sales increase in both the US and Europe. Tara and Ken feel that it will not happen, but the odds are better for it to happen in Europe due to recent growth in the southern countries such as Spain.

Baileys should not try to narrow their target market down to the young to middle-aged, professional, educated 21-49-year-olds. Even though they have tried to focus their advertising in that direction, it appears that more drinkers of Baileys are from a slightly more middle-class: in the technical field and making less than $40,000 per year.

Baileys is in a difficult situation. They are trying to increase their sales significantly in a saturated market. On the one hand, they want an 11% sales increase-this year. On the other hand, they have an opportunity to develop the markets in the Far East, and it can take as much as 5 to 7 years to develop a new market.

Just as flavors of food are different in each culture, drinkers in different regions have different tastes. As discussed in our text, Cheetos changed the flavor a

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Approximate Word count = 1652
Approximate Pages = 7 (250 words per page double spaced)

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