Business internationalization is a process that contributes to the gradual transformation of a company from a local to a global player in the respective product markets. Through internationalization, the company crosses the borders of one country and expands its business to a new market or the markets of several foreign countries (Savell et al., 2016). Since there are often differences between the national and foreign markets, it is impossible to use national marketing strategies when expanding business. In foreign jurisdictions, a company, as a rule, is faced with different conditions, which requires the use of more complex marketing tools (Savell et al., 2016). The alcohol industry is an important component of the economy. Thus, the high economic importance of the alcoholic beverages industry can help to form a strategy for the development of the international alcoholic beverages market. This paper aims at discussing the effect of legislation, social responsibility, customers’ preferences, and culture on an international marketer within the alcohol industry.
International Legislation in the Field of Alcohol Industry Regulation
International marketing should take into account the existing legislation, the interests of the authorities, social movements, the media, and act in a wide social context. Moreover, the socio-psychological impact of the alcohol industry on consumers, especially in terms of promotion, is significant (Stoeva, 2020). The practice of using marketing and communication tools is determined by the existing public opinion in relation to alcohol, the level of market development, the culture of consumption, and other factors (Savell et al., 2016). Wrong marketing can create various social problems, including alcohol addiction. Therefore, a public need arises for more or less strict regulation of the alcohol market that is specific in different countries. It often leads to a complication of the production and distribution system and creates a need for new marketing solutions. Governments directly participate in international marketing in the form of regulating market conditions and consumer protection. States control the quality of alcoholic beverages, fight anti-social consumption, monopoly, protectionism, and create a legal framework for marketing.
Business internationalization is associated with increased risks; therefore, the company must calculate all possible consequences and try to avoid the mistakes of expanding the business to foreign jurisdictions. If the entry of an alcoholic brand to a new market is poorly prepared, this can lead to setbacks, including financial losses, and, as a result, the company’s quick exit. Thus, entering a foreign market, especially if the organization has not had the necessary experience before, should be a systematic process, consisting of several stages (Sun et al., 2016). It must include a clearly defined goal, strategy, and methods for its implementation, as well as the correct choice of time and place to start operations. It should also use the necessary marketing tools and forms of doing international business. The success of a company also depends on well-planned tactical activities.
International marketing should take into account the minimum strength, as well as the classification of alcoholic beverages for each individual country. Since this product must be sold under an excise stamp, and is, as a rule, a high-margin product, the entire process, from the purchase of raw materials to its final sale, must be controlled (Stoeva, 2020). It is an important aspect since the alcohol policy is focused primarily on the prevention of excessive alcohol consumption. Due to high consumer demand and high profitability, this market segment attracts substandard and illegal manufacturers (Stoeva, 2020). Alcohol regulation services have the right to establish their rules for the issuance of an alcohol license and have the right to withdraw this license for non-fulfillment of conditions.
Licensing is carried out at the national level by the relevant government authorities. In the European Union, having obtained a license in any member state, the manufacturer has the right to distribute its products throughout the EU, even if other member countries have stricter requirements for licensing (McCambridge et al., 2019). Thus, by registering its production, for example, in Germany, the manufacturer has the right to distribute his product in Italy, regardless of local requirements for this product. In many countries, a unified state automated information system for recording the volume of production and turnover of alcoholic beverages has been introduced to automate control over the turnover of alcohol. Such a system exists in the EU and is called the Excise Movement and Control System (McCambridge et al., 2019). It is designed to control the turnover of excisable goods for which the excise tax has not yet been paid. Thus, the EMCS is designed to improve the efficiency of accounting for the turnover of alcoholic beverages.
Problematic Aspects of Legal Regulation
The practice of developed countries, such as the United States, the European Union states, and Japan, shows that the implementation of international branding allows companies to create barriers in the market for local competitors. It simplifies the introduction of new products to foreign markets and makes it easier to develop new niches (McCambridge et al., 2019). A strong international alcohol brand that has already gained consumer loyalty in several markets, has tremendous scope for expansion. However, the value of an international brand may be reduced as a result of falsifications that use its reputation and experience to create a product of inferior quality. Therefore, protecting international brands at all levels will help to preserve the reputation, brand value, and image of multinational companies (McCambridge et al., 2019). In this regard, international agreements on the protection of trademarks, developed by the World Intellectual Property Organization, contribute to the legal protection of international brands, taking into account the national laws of the participating countries.
However, the registration and protection of trademarks remain the most problematic aspect of the legal regulation of international alcohol brands. These difficulties are due to the operation of first-to-use and first-to-file principles (Solberg, 2017). The first one is applied in the United States, Great Britain, and Canada, while the second principle is used in the European Union countries, China, and Japan (Solberg, 2017). In the context of the growing globalization of the world economy, there is a tendency for a gradual transition to a registration system that determines eligible users of alcoholic brands, terms, and scope of protection. This system also assumes the unification of the basic requirements for international brands and contributes to the development of intercorporate relations of transnational corporations in the world market.
It is important to create a safe and competitive international alcohol brand and ensure the degree of its protection as a factor in its capitalization. Therefore, it is necessary to pay attention to the national rules for registering brands in the countries of production and sale of branded goods (Solberg, 2017). Certain international principles and the system of global trademarks registration should be taken into account as well. The latter also guarantees the protection of brands and their value, as well as harmonizes their registration procedures.
The development of global information technologies, in particular, the Internet, opens up wide opportunities for increasing the international competitiveness of brand portfolios. However, on the other hand, new problems appear in the field of their protection. The electronic environment has become one of the key tools for doing business in modern conditions. However,
the absence of unified international legislation with regard to intellectual property protection makes international brands and domain names on the Internet vulnerable (Solberg, 2017). It determines the need for closer global and regional integration on the specified range of problems.
Social Responsibility of International Marketers in the Alcohol Industry
The cases of three popular international brands that represent premium alcohol can be reviewed and analyzed. These trademarks are the Swedish Absolute, the French Gray Goose, which belongs to the American alcohol producer Bacardi Limited, and Ciroc, which belongs to the British and world’s largest alcohol producer Diageo (Mialon and McCambridge, 2018). These companies highlight that drunk driving and the danger of alcohol overdose are the main problems. The following cases show that the social responsibility of large global brands plays a key role in international marketing.
The overall corporate social goal of Absolute is to achieve responsible drinking among consumers. This brand implements the annual international project, in which representatives visit secondary schools and inform students how to avoid drinking alcoholic beverages in society and how to resist peers who compulsively offer to drink. All products manufactured by the Absolute brand must be of high quality and not contain the components that lead to heart attack, stroke, or other diseases (Mialon and McCambridge, 2018). Also, ingredients that increase the risk of these problems are not allowed. In several European countries, the company supports conferences on the dangers of drunk driving and forums dedicated to single mothers or fathers, whose spouse is a victim of alcohol abuse.
The social responsibility goal of the Gray Goose brand is to reinforce its values as a global business through its global principles. All Grey Goose employees must obey the laws of the country under whose jurisdiction they are located. International marketing and promotion must be built around the demonstration of responsible drinking. Advertisements must contain truthful information about alcohol abuse and be addressed to the individuals of the age after which the use of alcoholic beverages is legal. Any marketing materials must not contain any information or encouragement to drink drunk driving (Maani Hessari and Petticrew, 2018). Internal communication of the company constantly reminds of the physical benefits of moderate alcohol consumption. The brand does not cooperate with pharmaceutical companies that manufacture pain relievers or other drugs, the use of which together with alcohol leads to negative consequences (Maani Hessari and Petticrew, 2018). This brand’s international marketing communications do not support those groups that harm society.
Besides, the company wants its commercial partners, retailers, or restaurants around the world to adhere to the same principles as Gray Goose does. Their most popular corporate social responsibility project is a “Champions Drink Responsibly” campaign (Baumberg Geiger and Cuzzocrea, 2017). The essence of the project is to invite a reputable athlete to tell in advertising materials and at PR events about some socially important things that are related to alcohol. For example, at one of their campaigns, Michael Schumacher, who then became the seventh Formula 1 champion, told the whole world in commercials and posters about the danger of drunk drinking. At first, this social project was carried out only in Brussels, but then, the marketing campaign covered over fifty countries. In this way, a major French alcohol brand attracts popular athletes to promote socially significant ideas.
The Ciroc brand develops social responsibility projects in the following areas: alcohol in society, environment, social development, and sustainable supplies. The company promotes the correct use of alcohol, as well as natural resources in the production of alcoholic beverages (Büchler and Decker, 2018). The company’s projects are designed to empower those who produce ingredients for alcoholic products. Diageo, the company that owns the Ciroc brand, seeks to support the development of farmers and other small and medium-sized businesses in regions where ingredients are produced (Büchler and Decker, 2018). The company seeks to support its employees around the world, and also encourages them to take a responsible attitude to their work. It is also committed to supporting its contractors and distributors and expanding local business opportunities. An ethical approach is applied to every area of the company.
Consideration of Trends and Consumer Preferences
When alcohol brands enter the international market, it is important to take into account the specifics and culture of consumption since the alcoholic beverages market is incredibly large. Global sales of beer, wine, and liqueurs, according to the Goldman Sachs report, are approaching the $ 1 trillion mark annually. Beer is popular all over the world, especially in the USA, and according to Euromonitor research, its sales represent more than 75% of the sales of all alcoholic beverages (Euromonitor International, 2018). Goldman Sachs accounts for about 85% of beer sales in the United States, where this line of business is characterized by high volume and low profitability. The real growth is in emerging markets since young people in China and India start drinking beer (Euromonitor International, 2018). Also, brewers are seeing growth in Africa and the Middle East. This has prompted American manufacturers to increase sales of their key products overseas, as well as acquire international brands.
Analysts believe that beer consumers in the established markets are switching to wine or high-quality strong alcoholic beverages. Consumption of this product in the world is growing, so mergers and acquisitions are restructuring the market. Today, the global alcoholic beverage industry is ready to pay for super-premium brands (Jernigan, and Ross, 2020). The creators of new ones are trying to promote them in the super-premium segment, focusing on the American market. For example, the most popular Estonian Turi and Ston, Dutch Vox, Irish Boru, and Canadian Pearl are positioned in a promising super-premium segment.
Recent world trends are to drink less, but higher quality expensive beverages. In 2017, the global alcohol industry showed the best results over the past five years in terms of volume. Globally, sales of all types of alcohol in 2017 increased by 1.5% compared to 2016 (Euromonitor International, 2018). The whiskey and tequila categories show particularly good growth rates around the world. The export of this type of product grew by 0.9% in 2017 to a volume of 802 million bottles (Euromonitor International, 2018). Blended Scotch whiskey has made a special contribution to the growth of sales of alcohol brands in the world.
A similar trend of capital expansion in whiskey production is observed in the United States. According to the Distilled Spirits Council, sales of American whiskey for 2017 grew by 8.1% to the level of US $ 3.4 billion (Distilled Spirits Council, 2018). Now, however, this growth is threatened by the increased import tariffs imposed by the EU and China on a number of American goods, including Bourbon (Distilled Spirits Council, 2018). Growth is also shown in the production of Indian whiskey, which has recovered from the processes of demonetization in the country and serious prohibition measures against alcohol imposed by the government.
The global demand for Japanese whiskey has sharply increased, which is especially evident in the example of specialized auctions. The alcohol industry began to recover in China, after a drop in its sales due to the struggle of the country’s communist leadership against bribery among local officials. Rum, both white and colored, increased by 0.7% globally over the year to 144.8 million cases (Distilled Spirits Council, 2018). Tequila and mezcal showed the highest growth in 2017 by 4.9% to a value of 33.6 million boxes (Distilled Spirits Council, 2018). The international gin industry is showing enviable stability in the world. The growth in gin sales worldwide in 2017 was 5%. The liquor category saw an increase of 0.8%, which was mainly driven by the continuing fashion for cocktail culture (Distilled Spirits Council, 2018). This industry is also experiencing a large number of acquisitions and mergers, which once again proves the interest of international investors.
Organization of Promotion and Sales Process
International marketing in the alcohol industry is an integrated system for organizing international economic activity. It is aimed primarily at solving the company’s problems in organizing the production and promotion of alcoholic products that best satisfy the needs of active and potential buyers abroad (Paul and Mas, 2020). It includes the analysis, planning, implementation, coordination, and control of all market-oriented processes towards the consumers of a company that produces alcohol in two or more countries.
International marketing begins when an alcoholic beverage company decides to go beyond its jurisdiction. The marketing process is influenced by the environment of the country of origin and the country of destination, as well as the terms of international exchange. In the course of this marketing process, the company itself or with the help of intermediaries develops, produces, promotes, and supplies alcoholic products to the buyer or end consumer (Aghara et al., 2018). It also determines the pricing policy, ensuring that the needs of legal entities and individuals are met in accordance with the long-term interests of the entire world community.
The decision to organize a business in another country is preceded by the analysis of the current situation and prospects for the company’s development, which is expressed in three important aspects: time, scale, and market (Aghara et al., 2018). The aspect of time concerns not only the desire to get ahead of competitors or become their follower but also the real possibilities of the company. The presence of favorable conditions for the development in new economic territories is an important factor. Depending on the available resources, the scale is determined: whether an aggressive strategy of mass capture or a gradual expansion of the market presence (Paul and Mas, 2020). The most attractive market segments for the enterprise are determined in accordance with costs, risks, and expansion prospects. In this way, the enterprise lays the foundation for defining the desired strategy and developing specific marketing activities to achieve its business goals.
Due to the increased complexity of solutions in international marketing compared to the national level, a systematic and detailed planning approach is important. The process of organizing sales in the international market covers analysis and forecast of the situation, strategic planning, event planning, implementation of solutions, and control of international marketing activities (Sun et al., 2016). These actions are focused not only on sales but also on interaction with all participants who depend on the organization.
International Marketing Strategy Selection
The choice of expansion method is influenced by the size of the investment, the degree of managerial control over the process, and the market service. In the alcohol industry, there are three main groups of strategies that allow the enterprise to master new areas: export activities, intermediation, and hierarchical business construction (Samiee and Chirapanda, 2019). The first strategy means manufacturing a product in the main market and supplying it for sale in other countries. Exports often play the role of an intelligence tool for a business, allowing it to understand the viability of a product in a new market and the interest of the consumer. The advantage of export is insignificant costs and risks, while the disadvantage is the low level of control over the activities of intermediaries.
Intermediation means establishing interaction with a trading partner company in the external market, sharing responsibility and control. This strategy implies licensing, the transfer of the right to use technologies, patents, and other attributes to a foreign company (Samiee and Chirapanda, 2019). The advantage of licensing is a low level of costs for organization and control and the ability to set strict conditions for doing business. Difficulties in exercising control and loss of uniqueness is a disadvantage.
A hierarchical business organization is the creation of a new company in a foreign market as a branch or an independent enterprise. Minimal risks while maintaining maximum control is a big advantage, while high financial and time costs is a negative aspect (Samiee and Chirapanda, 2019). The acquisition means gaining control of a foreign company through the purchase of a controlling stake or a merger. In this case, the company will achieve a decrease in competition and get a certain market share. However, it will be dependent on the professionalism of specialists and the need for comprehensive knowledge in the field of legal restrictions.
The type of management risk acts as a possible criterion for the classification of strategies. It includes the risk of losing control over basic functions, as well as a conflict of interests and strategies between the parent and transnational companies (Sun et al., 2016). Regardless of the strategy chosen, a company’s entry into the international market is preceded by detailed research, the development of effective marketing concepts, and the search for reliable partners. These steps can play a vital role in the success of an alcohol brand in a new international environment.
International marketing in the alcohol industry is characterized by the following features. Marketing decisions for each country are made taking into account the international marketing strategy of the company as a whole. Marketing activities are systematically planned and a result-oriented development of the foreign market takes place. When entering the international market, companies must take into account the laws of a particular country that are aimed at minimizing negative social consequences. Marketing strategies for alcoholic beverage producers are complicated by legislation, but trade-offs help advertisers to successfully promote business. Marketers should not only increase the demand for alcoholic beverages, but educate their consumers on their correct consumption. It is also necessary to take into account the culture and trends of each individual country and the preferences of its citizens.
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