Bacardi Limited is an international firm that is one of the leading alcohol producers in the world. Company has expanded its product line from rum drinks for young, partying teens to expensive, “premium” drinks for sophisticated drinkers. The variety of products was gained from merges of several large liquor companies.
The purpose of this report is to analyze Bacardi Limited competition position and give recommendations on internationalising its products. It will include a description, competitive analysis of the company, analysis based on choice of potential market (PESTLE, SWOT) and product to enter with into the market with decision making on the choice of mode of entry.
1. Description of company
BACARDI Limited is the world’s largest privately held spirits company. With its headquarters in Bermuda and several operating subsidiaries around the world, BACARDI produces, markets and distributes a variety of internationally recognized spirits such as BACARDI rum, GRAY GOOSE vodka, DEWAR’S scotch whiskey, BOMBAY SAPPHIRE gin, CAZADORES tequila and many more (Bacardi Limited, 2009).
The company recorded revenues of $5,334.707 million during the fiscal year ended March 2009 (FY2009). The operating profit of the company was $1,071 million during FY2008, an increase of 12.9% over FY2007, however it dropped 4% during the FY2009. The net profit was $805 million in FY2009, an increase of 1% over FY2008.
Bacardi currently operates in 110 different markets worldwide with the 39% of sales less excise taxes in North America, 51% of sales less excise taxes in Europe, Middle East and Africa, 10% of sales less excise taxes in Latin America and Asia Pacific for Fiscal 2009 (Bacardi limited Annual Report, 2009).
Barriers to entry
The spirits industry is highly competitive business, where the major global spirits producers hold approximately 60% of the market share. There are often new entrants into the market as it is relatively inexpensive to enter the spirit market but the larger companies such as Diageo and Bacardi which already have established brand identities make it difficult for the smaller companies to succeed within the market place. So hence it would be fair to say that in this industry innovation plays a vital role. Even though not all the new innovations always succeed, the multinationals still hold the advantage of higher potential to invest large amounts of money into the market (ICAP, 2006).
Threat of substitutes
Bacardi has a range of non alcoholic drinks which is not included in its portfolio: beer, wine, cider and even non alcoholic drinks which could be a potential threat to Bacardi’s market share. Apart from the market rivals, the growing health awareness continues to have a negative impact on alcohol consumption and hence affects the alcohol market on the whole.
* “Healthier” types of drinks: low-alcohol and non-alcoholic beer, reduced-sugar, low-alcohol products such as wine with a lower ABV, beauty alcoholic drinks, added Fibre Beer.
* Rising obesity means consumers more aware of calorie content of alcoholic drinks: Light, Low-calorie and Low-carbohydrate beer, soy-based carbohydrate-and gluten-free vodka. Alcoholic drinks with flavor extensions: Pear, peach, pomegranate and grapefruit were popular flavor launches in 2006 and 2007 (Euromonitor, 2008a).
* Energy and soft drinks: Red Bull, Burn
* Traditional drinks: Chinese liquor, or baijiu.