Monday, April 29, 2013

No. 26: The importance of pursing the strongly established business domain to compete in the global market (April 30, 2013)

Suntory is very active in expanding the Southeast Asian market. The company currently has sales of several tens of billion yen in this market and plans to increase the sales to 100 billion yen in three years. Focusing on the Southeast Asian market is part of Suntory’s strategy to become a global company in the true sense of the word. The target company is Nestle of Switzerland. It is a long way to catch up with Nestle. Nestle has sales of 9,300 billion yen, while Suntory’s sales are 1,850 billion yen.   

Suntory grew rapidly by expanding the whisky business around 1930 by taking advantage of the westernization of Japanese dietary life. Actually, whisky characterized the company for a long period. In the 1980s and 1990s, its whisky business dwindled because it failed to understand the change of consumer behavior precisely. Realizing that youths do not drink hard drinks as much as their parents did, the company reorganized the business portfolio drastically and set the soft drinks business as the mainstay. Soft drinks increased the share in its business from 20% to more than 50% today. In fact, profit from soft drink sales accounts for 60% of its total profits. The company has established its business domain with the catch phrase “Suntory lives with water.” Its natural water sold about 6,400,000 cases, two times as many cases sold by the runner-up. In the soft drink market, Suntory has 22% share following the Coca-Cola group.

Suntory is also successful in the beer business. The company is now the third larger beer company, surpassing the Sapporo Beer. It has 16% share in the period between January and March 2013. Consumer behavior and taste change rapidly, and every company has making strenuous efforts to keep abreast of these changes. Even today’s bestselling products are destined to be one of the obsolete products sooner or later. The company will construct a laboratory staffed with 250 researchers in 2015. No company can maintain its competitive edge forever. Developing highly competitive new products needs a different approach free from the traditional way of thinking, the company reckons.  

Suntory’s traditional ad strategy in a new product launch is ad blitz with a decreased product price. The company spent about 450 billion yen on promotion and advertising in 2012. It spends about 24% of sales on promotion and advertising, as against competitors including Kirin spend between 11% and 15%. It is not too much to say that future of a company depends on new product launch. Suntory’s famous company attitude – Go for it – will help the company continue growing.    

Suntory’s canned coffee CMs starring Tommy Lee Jones

1 comment:

  1. Suntory's soft drinks business as the mainstay is the most crucial decision which gave them considerable profit in their business which had dropped due to whisky concentrated production.
    Smart move.

    Edward de Valle