MARKET POSITIONING FOR ICEBERG VODKA

EXECUTIVESUMMARY:
In this report we seek to help the company, Iceberg find their market positioning for their foray into China, particularly entering the Beijing market.
We conducted an assessment of the Beijing vodka market potential, the main competitors, distribution channels, relative price analysis and conducted our own market research by means of a survey.
Our research revealed that Chinese consumers are generally brand conscious and have penchant for high end purchasing. We identified four main competitors: Absolut, Stolichnaya, Smirnoff and Finlandia where Absolut holds the lion portion of the market by positioning itself as “the choice” for young, urban professional.
With that, we recommend positioning Iceberg as the ‘affordable premium’ and making ‘Iceberg’ the ‘Evian’ in the vodka market by charging the “right” price, to the “ideal” consumer, at the “right” time, the “right” place.

TABLE OF CONTENTS:
1. Introduction : Background and Opportunity
1.1. Alcoholic Drinks in China - A Market Analysis 3
1.2. The Vodka Market in China 3
1.3. Iceberg - Company and Product Overview 4
2. Market Research Methodology
2.1. Overview 5
2.2. Survey 5
3. Analysis
3.1. Main Competitors in the Vodka Market in Beijing 6
3.2. Market Share Analysis 6
3.3. Distribution Channels Analysis 7
3.3.1. Supermarkets 7
3.3.2. Online Delivery 8
3.3.3. Retail Liquor Stores 8
3.3.4. Watering Holes 8
3.4. Relative Pricing Analysis 9
3.5. Analysis of Survey Results 9
3.6. SWOT Analysis of Iceberg 10
4. Market Entry Strategy Development
4.1. Target Market 11
4.2. Product Positioning 11
4.3. Marketing Mix
4.3.1. Price 12
4.3.2. Distribution Channels 12
4.3.3. Promotion 12
5. Conclusion 12
6. Appendix I : Survey Form 14
7. References 15 1. INTRODUCTION
1.1. Alcoholic Drinks in China - A Market Analysis
The Chinese alcoholic drinks market is both large, and relative to other developed markets still growing rapidly. Add to this the fact that Chinese consumers are very sophisticated, and highly brand conscious, and that the degree of sophistication is ever increasing as more brands and products are introduced.
Older people, the majority spirit drinkers in China, are drinking less traditional spirits, replacing these with beer, due to the lower alcohol levels in beer, thus reducing the health risks associated with drinking of traditional spirits. Overall per capita consumption is still comparatively low in China, which offers a large scope for market development.

China is a traditionally brown spirits-dominated market. Beer remains the dominant staple of the Chinese beer-drinking habit, and China now ranks as the largest beer market in the world.
Wines have attained consumer acceptance, not least due to Chinese politburo member Li Peng, who decreed that state banquets should be lubricated with wine instead of spirits in 1996. The western eating and drinking habits have been key influences, as have rising average incomes in China. Wine is now becoming the fashionable drink for the wealthy younger generations in China’s cities, and the “badge” drink of China’s wealthiest élite.
Sprits remain part of Chinese tradition appearing in many social activities including birthday party, weddings and other ceremonies as well as business entertainment. Traditionally spirits are the main drink denoting happiness or respect.
1.2. The Vodka Market in China
Increasingly, there has been a shift towards international white spirits in traditional Asian Market. And vodka is also growing from a small base in China.
According to The IWSR , overall vodka sales in the Asia Pacific region rose by 22.1% over the 5 years CAGR between 2002 and 2006 to reach 2.9 million of nine-litre cases. Particularly, for China, total vodka sales in China are forecast to 1.3 million nine-litre cases. This is a significant increase from the estimated 44,500 nine-litres cases sold in 2002.
Much of this development can be attributed to the growing middle class in China, which goes to exclusive bars and consumes imported white spirits and a growing number of expats and westerners visiting China. And Vodka in China is poised to grow exponentially with the rapid proliferation of the western on-trade and the on-set of a mixed drinks culture among consumers
There are enough reasons to be optimistic about the future of vodka in China. Essentially, China possesses vast indigenous white spirits categories that are not too dissimilar from Vodka: ‘Baiju’. In addition, a new generation is growing up with different aspirations and with a more contemporary outlook on the world. Scotch and Cognac are not the be-all and end-all of the drinks spectrum. Brands still matter. Vodka, with its ready mixability as well as the strong images of some of the leading brands, could be poise to become the next phenomenon and benefit from the growing wealth of a younger generation looking for ‘modern’ badges.
The super-premium vodka segment remains untapped but has potential given the growth of the modern on-trade sector and the Chinese penchant for high-end purchasing.
1.3. Iceberg - Company and Product Overview
Canadian Iceberg Vodka Corporation was incorporated in 1994. In January 1995, the company announced that it would work with the Newfoundland Liquor Corporation to produce ultra-premium vodka made by from harvested 12,000 year-old icebergs and triple distilled neutral grain spirits made from Ontario sweet corn.
Iceberg Vodka begins as pieces of ancient ice that break free of Arctic glaciers and travel south along the east coast of Newfoundland carried by the North Atlantic swell. Ontario sweet corn, one of eastern Canada’s most sought-after agricultural products, is harvested in mid-summer when sugar content peaks.
In July 1995 the first growlers were harvested by Iceberg Vodka Corporation. CNN and other television, radio and newspaper outlets picked up on the event and helped to make Iceberg Vodka an international story.
This new ultra-premium product was introduced in September 1995 at the annual Canadian Provincial Premier’s Conference in St. John’s Newfoundland.
Canadian Iceberg Vodka is now sold by many provincial liquor boards throughout Canada. It is also sold by individual distributors worldwide.
The Iceberg brand has one distinctive advantage; it's purely made out of iceberg. Iceberg’s accolades are many, including the 2010 Gold Medal at the Beverage Testing Institutes; Best Buy Bar Competition in Chicago; the 2009 Gold Medal at the Vodka Festival, Cannes, France; the Silver Medal at the 2000 International Wine & Spirit Competition in London, UK, and the Gold Medal and a “Best Buy” designation at the 1998 World Spirits Championships in Chicago. In 1998, the Beverage Tasting Institute gave Iceberg a 'superlative' score of 94 out of 100, ranking it second behind the acclaimed Grey Goose in a blind taste test of the world's best vodkas . Iceberg is gluten free and thus very low in calories.
Iceberg water is the cleanest water on earth. Tap water can contain hundreds of man-made chemicals. And this is shocking: A surprising number of big-name distillers use ordinary tap water to make their products. Not much better is the glacier water used by many distillers. This glacier melt is surface run-off that has been contaminated by decades of atmospheric pollutants such as carbon emissions and volcanic ash.
Iceberg water has been locked up and protected as solid ice for 12,000 years. Impurities in Iceberg water are so infinitesimal that they are measured in parts per quadrillion . Iceberg water is 7000 times purer than tap water. This is simply the world’s purest water.
2. MARKET RESEARCH METHODLOGY
2.1. Overview
With the primary objective of the firm being to successfully import Iceberg Vodka in the Beijing market among young and soon to be affluent consumers, marketing survey really put the emphasis on consumption behaviour. The main goal of our survey was to learn more about the alcohol drinking habit of our target and also their attitude toward the consumption of imported food product and luxury goods.
The compiled results of this survey would eventfully set the bases of the firms’ marketing strategy to enter the Beijing market.
2.2. Survey
The survey counts 13 questions divided in two sections (Appendix I). The first section contains 3 questions; the first one is to know the gender, second to know the preferred alcohol type and third, the frequency at which they drink.
The second section counts 10 questions and the respondent were asked to use a scale of 1 to 5 where 1 means they agreed with the statement and 5 means they disagreed with the statement. We basically wanted to know more about; the peer pressure, the brand loyalty, their attitude towards imports, their attitude towards luxury product, if they were calories conscious and if brand association have an effect on their purchase behaviors.
3. ANALYSIS
3.1. Main Competitors in the Market
Currently, there are four key brands in the vodka category in China. They are Absolut, Stolichnaya, Smirnoff and Finlandia. The core brands in the market are Absolut, Smirnoff and to a lesser extent, Finlandia and Stolichnaya. There is also a wide selection of smaller brands such as Van Gogh and 42 below. The Absolut family (Absolut and all Absolut variants) is the leading brand in terms of awareness and usage. There are distinct differences between the brand images of the leading vodka brands.
Absolut Brand image profile Absolut vodka is perceived as: Having attractive packaging, easy to drink and driven by the flavours and packaging. In terms of Brand personality, The Absolut vodka drinker is perceived as being: a young urban professional – either male or female; international – not European, American or Asian, could be any nationality; smart, interesting and fashionable.
The Smirnoff Brand image profile is perceived as: becoming more popular and modern, much of this is driven by the fact that Smirnoff is aggressively promoted in the market. In terms of Brand personality, The Smirnoff drinker is perceived as being a young foreign white male from Europe, working in advertising or fashion and into the latest music and trends, always the first to try something.
The Finlandia Brand image profile Finlandia has a relatively weak brand image in comparison with Absolut and Smirnoff. The brand is perceived as being similar to Absolut, but not as high-class or as modern and fashionable as Smirnoff. It is relatively strong in having an attractive packaging. The Finlandia drinker is perceived as a younger, white European male working for a foreign government in the trade department or as a foreign professor in a Chinese university, someone who does not socialize much.
The Stolichnaya Brand image profile Stolichnaya as the original vodka, traditional and unfashionable. The Stolichnaya drinker is considered to be an older Russian male, someone who drinks to get drunk, neither fashionable nor modern.
3.2. Market Share Analysis
First of all, we find the numbers of bottles sold in China’s largest alcohol selling website “Yemaijiu” and give the market share of the biggest 4 brands of vodka.
After that, as we communicate with the online sales person we decide to estimate the whole market is proportionate to the online market. As in the real life, people buy vodka online because they already know the brand and have taste of it. They just want to buy this kind of brand. So our estimation has some grounds.
Table 1: Online Sales of Vodka in “Yemaijiu”
Brand Sales Online
Absolute 37% 797
Stolichnaya 16% 355
Smirnoff 20% 428
Finlandia 12% 258
Others 15% 317

We can tell from the market share that Absolute is the best seller in the Beijing market. And the rest three bands are sold at the approximate numbers.
3.3. Distribution Channels Analysis
There are four main avenues to get hold of Vodka. They are mainly through supermarkets, online stores that offer delivery services, brick and mortar liquor stores and watering holes i.e. bars, clubs & etc.
3.3.1. Supermarket
In China, most of the most western style supermarkets contain a fairly sizeable collection of foreign alcohols. The following chain stores (in alphabetical order) all have a decent amount of space dedicated to distilled spirits. BHG seems to have the most expansive collection but is also the steepest in price. Conversely, Wal-Mart is the cheapest but offers the smallest selection.
1. April Gourmet – four main locations: Sanlitun area (2), Lido, and Shunyi
2. BHG Market Place – five main locations: Dawanglu, Solana, Shuangjing, Sanlitun, Wudaokou.
3. Carrefour - seven main locations: Sanyuanqiao, Temple of Heaven, Shuangjing, Zhongguancun, Beijing Zoo, Fengtai, and Wangjing.
4. Jenny Lou’s – seven main locations: Central Park, Jianwai Soho, Dongzhimen, Ritan Park, Chaoyang Park West Gate, Sanlitun, and Wangjing
5. Wal-Mart – four main locations: Zhichunlu, Dawanglu, Wangjing, Xuanwumen, and Dajiaoting
3.3.2. Online Delivery
With the proliferation of online shopping, there is no need to go out looking for alcohol as there are now online liquor stores that allow you to pick and choose their spirit of choice and will deliver right to your door. The following online stores offer a reasonable selection of alcohol that you can order all from your home computer.
1. www.asc-wines.com - Very professional website which includes reviews, articles, and promotions.
2. www.bjliquorestore.com - This basic website offers a decent collection of wines and alcohols.
3. www.liquorstore.cn - It is not the most beautiful website but offers a variety of wines and distilled spirits with free delivery within the 3rd Ring.
4. www.thewinerepublic.com - This site is a compliment to the company’s brick and mortar location at Jianguomen. It offers home delivery options and promotes wine events as well.
3.3.3. Retail Liquor Stores
There are quite a number of traditional freestanding liquor store and wine shops in Beijing. There are also a ton of small convenience stores that carry a small selection of liquore. Truth be told, there are more than can be listed here. They are mainly all clustered around expat living areas such as Guomao, Shuangjing, Lido, Sanlitun, Dawanglu Chaoyang Park West Gate and embassy districts. For instance, take a walk around a compound like Central Park or Global Trade Mansion in Guomao, and you will find three to four different shops.
Particularly, there is one quintessential liquor store that cannot be passed up because of its variety and unbeatable prices. The aptly named "Heaven" is tucked away on the small street behind The Village and Yaxiu Clothing market, 100 meters west of "Nearby the Tree" pizzeria. Enter this no-frills shop and you will be wowed by the wall-to-wall display of liquor, all different varieties from all over the world.
3.3.4. Watering Holes
A survey of the expatriate lifestyle guides like ‘Time out Beijing ‘or ‘Beijinger’ return no less than 50 results for the top destinations on bars and clubs clustering around the Chaoyang, Sanlitun and Gongti area.
3.4. Relative Pricing Analysis
We conducted a survey of the relative pricing of the main vodka brands across the four key distribution channels: online, supermarket, pub and hotel.
Table 2: Comparison of the Price for four Key Vodka Brands in Beijing market (700ml a bottle)
Price Online Supermarket Pub Hotel
Absolute 138 158 200 400
Stolichnaya 90 108 150 300
Smirnoff 86 100 150 300
Finlandia 106 128 180 350

As we found that, the price in the online website is the lowest. People who are sensitive to price will choose to buy vodka online. And the price in Supermarket is a little bit of higher than that online because of the rent. Some parties at home will require buying couples of vodka in the supermarket. In pub, young people sometimes buy spirits like vodka and care less about the price so the price in the pub is much higher than both online and in the supermarket. Last, the price in hotel is the highest because those who buy vodka in the hotel seldom use their own money or if the people live in hotel are very rich and don’t care about the price of vodka.
As compared among the four brands, Absolute is the most expensive one. It’s now the most famous brand in Beijing market. People always associate it with Russia culture. Smirnoff is the cheapest in supermarket and online distribution channel. Stolichnaya and Finland brand Finlandia is in the middle. All four brands don’t differ much in price. Even the most expensive one, Absolute, is not that expensive.
3.5. Analysis of Survey Results
The survey was handed to 30 respondents in the IMBA class and 65 respondents outside Peking University. The total sample is 95 respondent and we tried to replicate the ratio of gender in China so 55% of our sample are male.
Beer is by far the preferred alcoholic drink of our sample with 40% of shares. Wine comes second with 22% and out of all the spirit, vodka is the one our sample drink the most often at 13% of recall. This number tells us that the two main competitors are alcohols that can be considered as more casual and with a smaller degree of alcohol. Therefore a good way the increase the consumption of Vodka among weekly drinker could be to propose a variety of light cocktail recipes that can easily be drank on weekdays.
More than 50% of our sample drinks at least once a week or more, which is a good thing for anyone who’s in the alcohol business thus a good thing for us.
Peer pressure does not seem to influence alcohol consumption as only 30% of our samples admit feeling the need to drink when peers do.
Data is very polarized when it comes to brand loyalty, more than ¼ of our sample have a favourite brand of liquor and more than ¼ don’t have a preference at all. For the sake of our survey we can assume that 60% of alcohol consumer don’t have a favourite brand of liquor, therefore, can potentially switch.
Only 20% of our sample would not be willing to pay a premium for imported product.
More than ¾ of our sample would aim their purchase toward a low calorie product. This number is a good indicator for us as Vodka is the less caloric among all the spirits.
We are able to assume that brand does not directly influence purchase behaviours for 30% of our sample.
Less than one fifth of our sample consider themselves refractive to trying new things and it seems that word of mouth and friends recommendations does not really has an effect on their opening. We can aim at the remaining 80%.
3.6. SWOT Analysis of Iceberg
Based on the market research, market analysis and first hand survey data for alcohol beverages to the people who live in Beijing, China, we can infer the strengths, weaknesses, opportunities, and threats as below.
Strengths of Iceberg vodka could be high quality, good reputation, and recognized premium brand image on Iceberg. Weaknesses could be less awareness in Chinese market relatively comparing to western markets, the alcohol beverage market situation dominated by traditional spirit products, and strong beer preference of drinkers in China. Opportunities could be the things that Chinese vodka market has high growth potential as total vodka sales in China are forecasted to 1.3 million cases according to the IWSR as we mentioned above, that young elite groups in Beijing are getting bigger and bigger which could be the major customer base of Iceberg Vodka, that usually brand royalty of Chinese drinkers is relatively lower to the established brands, resulting in an opportunity for Iceberg Vodka to make them new customers. On the other hand, strong resistance from established competitors, Absolute brand, Smirnoff brand, Finlandia brand, and Stolichnaya brand, could be the most challenging threat to Iceberg Vodka.
4. MARKET ENTRY STRATEGY DEVELOPMENT
4.1. Target Market
According to the market research in consuming base of the vodka market of Beijing, majority of the vodka drinkers can be characterized into 4 categories. The first group is young urban professional, smart, interesting and fashionable, including male and female with diverse nationalities. The second group is young foreign white male from Europe, working in advertising or fashion and leading the latest music and trends, they always want to be the first to try something new in their lives. The third group is relatively younger, white European male, working for a foreign government in the trade department or as a foreign professor in Chinese university, they usually do not socialize that much. The forth group is older Russian male; they drink to get drunk and not fashionable or modern.
After analysing the main vodka drinkers in Beijing, we could reach a decision to have a particular targeting market that stands for young elite group in which they are pursuing premium brand and consider themselves as luxury as well as they prefer affordable price to enjoy with their salary level.
4.2. Positioning
In order to position the brand of Iceberg vodka on the market, we need to know where the competitors are first and find proper position to differentiate our brand from the competitors. We considered two significant criteria, one is how young the customer base is, and the other is the level of premium. Considering that criteria, Stolichnaya brand could be put on the area far from young and lower premium level because its major drinkers are older Russian male and they drink to get drunk not to appreciate quality or taste. Finlandia brand could be positioned on relatively younger but not that young and higher premium level because its main customer base includes foreign professors in Chinese universities. Absolute and Smirnoff brands could be placed on younger and the middle level of premium because their main customers are young professionals of Chinese and from other countries.
Therefore, we decided to position the Iceberg brand on the high level of premium and young customer base, which could not only make the Iceberg brand luxury and dynamic but also differentiate it from competitors in Beijing vodka market. 4.3. Marketing Mix
4.3.1. Price
Based on the positioning of Iceberg brand, we suggest setting the price ranging from RMB 150 to 480 across different distribution channel. The price falls into the average level among that of other brands in the market. The details are as follows:
Price in RMB On-line Supermarket Pub&Bar Hotel
ICEBERG 150 180 300 480

4.3.2. Distribution Channel
We suggest taking watering hole i.e. bars, clubs as the main distribution channel, and on-line shop, supermarket and hotels as supplementary channels. Since pubs and bars are the main place where young people in China drink liquor, they are vital channels to introduce the product to the market.
4.3.3. Promotion
We categorize the promotion activities into 3 parts with different purposes.
In order to penetrate the market and gain acknowledgement, we suggest holding promotions activities with prestigious pubs and bars in the city. For example, we can provide customers with special product combos. This category is mainly applied in the initial stage of the market entry.
In order to build premium image, we suggest holding small-size tasting event. We can invite those customers who buy over RMB 2000 at pubs and bars and provide them with some high-end series of iceberg products.
In order to build continuing connection with customers, we suggest launching membership system among customers. Via the membership, customers can receive drinking suggestions periodically and enjoy special discount and new product purchase priority.
5. CONCLUSION
Make ‘Iceberg’ the ‘Evian’ in the Vodka Market
In conclusion, our strategy is not competing head-on with the current market leader, Absolut or the premium likes of Grey Goose or Belvedere but craving a niche market position to be an ‘affordable premium’. The Absolut vodka team has done a good job raising the awareness for vodka, and we intend to leverage on that and build a competitive advantage with the iceberg brand’s core competency: Purest Vodka.
Purest vodka share resonance with the purest water, therefore, drawing parallel from the drinking water industry, the long term strategy would be to make Iceberg the Evian in the vodka market. 6. APPENDIX I : SURVEY FORM
A. Please indicate your gender.
1. Male 2. Female 3.Prefer not to answer

B. What type of alcohol do you drink most often?
1. Beer 2.Wine 3.Vodka 4. Rum 5. Gin 6. Whiskey 7. Baiju 8. Souju 9. Sake 10. Coolers

C. How often do you drink alcohol?
1. Each day 2. 3 to 6 days a week 3. twice a week 4. Once a week
5. Once each two weeks 6. Once a month 7. I don't drink alcohol

Using a scale of 1 to 5 where 1 means you agree with the statement and 5 means you disagree with the statement.

D. When people around me are drinking I feel the need to do the same.
1 2 3 4 5

E. I have a preferred brand of liquor.
1 2 3 4 5

F. I’m willing to pay more for imported food and beverage products.
1 2 3 4 5

G. I’m willing to pay more for food and beverage products if I know what are the differences over an average price product.
1 2 3 4 5

H. I will choose a product with less calories over a comparable product containing more.
1 2 3 4 5

I. I will tend to buy the product of a known and respected brand over a comparable or slightly better product of an unknown brand.
1 2 3 4 5

J. I’m willing to try and taste new food or beverage.
1 2 3 4 5

K. I sometimes like to treat myself with a luxury product.
1 2 3 4 5

L. I’m willing to pay more for a given product if I know that my peers will notice that I paid more.
1 2 3 4 5

M. I’m willing to try and taste new food or beverage only if someone I know recommended me the product.
1 2 3 4 5 7. REFERENCES
Smith, Alexander. "Global market review of vodka - forecasts to 2013: 2008 Edition: Asia." 1 Feb. 2008. Just-drinks.
Cui, Geng, and Qiming Liu. "Regional Market Segments of China : Opportunities and barriers in a big emerging market." The Journal of Consumer Marketing 17 (2000).
Zhao, Yilu. "Inroads in China For Wine Importers." New York Times 28 Dec. 2003.
Murphy, James. "Vodka Brand Aims for Urban Appeal." Media [Hong Kong] 24 Aug. 2007.
http://www.iceberg.ca/Vodka-aspx/World-s-Purest-Vodka.aspx