P
ProHub
English 简体中文 繁體中文
Medium Strategy Profitability Brand Positioning Market Decline

Scotch Manufacturer

#Alcoholic Beverages #Spirits #Scotch Whisky
ProHub Comment

This is a strategic positioning case focused on a declining market segment. The core challenge is determining whether to defend/grow market share in a shrinking scotch market or to optimize profitability through cost reduction or brand harvesting. The case structure guides candidates through systematic analysis of market dynamics, competitive positioning, and profitability drivers before considering strategic alternatives.

Estimated Time 15 minutes
Difficulty Medium
Source Harvard
50 / 100
We have been contacted by a large distilled spirits manufacturing and marketing company to develop a new strategy for one of their brands.

Clarifying Information

  1. The first scotch was introduced in North America in the early 1940s, and grew steadily and rapidly in popularity until the 1960s. The industry has subsequently declined in volume every year to 1996 at a rate of about 3% per year. From 1996-1998, the volume declined at only 1% per year for these two years.
  2. Scotch consumption has been declining because fewer people have been drinking scotch. Fewer people have been drinking scotch for two reasons. First is a general decline in the popularity of scotch. Other distilled spirits, such as vodka and wine have increased in volume and become more popular. Second is a decline in the age group that traditionally drinks scotch (the 35-50 age group). As the baby boomers age, this segment of the population is growing, so even if popularity doesn’t change, the scotch market should improve going forward due to the growth in this segment. In addition, scotch is becoming more popular, especially the unique single malt scotches.
  3. There are three segments in the market, low-end (such as private label CVS whisky), premium (typically seen on the back bar in a bar), and super-premium (including Chivas Regal and single malt scotches).
  4. 40% of the volume in low-end, 50% in premium, and 10% in super premium.
  5. Yes, all segments are economically profitable.
  6. 20% in low-end, 60% in premium, 20% in super-premium.
  7. Tied as the #2 brand with 25% market share of volume (#1 has 35%, #2 has 25%, we have 25%, #4 has 10%, others have 5%)
  8. Priced slightly above the industry average (10%)
  9. #1 has gained share from us, the #4 and other brands, but mostly from us
  10. #2 has held share
  11. We all have same cost of goods, differences are in selling costs and advertising costs
  12. #1 has highest selling costs and advertising costs, #2 has second, #3 has third, and so on
  13. #1 and we have a price premium, #2 is priced at the industry average, #3 and all others are slightly below the industry average, but no one is dramatically different than the industry average
  14. #1 has a lower per unit profitability but has the most share of profit given its highest market share