Harvard Case - Modelo: Finding a Fighting Spirit
"Modelo: Finding a Fighting Spirit" Harvard business case study is written by Derek D. Rucker, Ann Legan. It deals with the challenges in the field of Marketing. The case study is 10 page(s) long and it was first published on : Nov 1, 2022
At Fern Fort University, we recommend Modelo implement a multi-pronged strategy to revitalize its brand and regain its fighting spirit. This strategy involves a combination of marketing, innovation, and operational changes to re-engage consumers, drive sales, and secure its position as a leading beer brand.
2. Background
The case study 'Modelo: Finding a Fighting Spirit' focuses on the challenges faced by Grupo Modelo, a Mexican brewery, in maintaining its market share and brand relevance in the face of increased competition from domestic and international players. Modelo's flagship brand, Corona Extra, had experienced a decline in sales and market share, particularly in the US market, its largest export market. The case highlights the company's efforts to address this decline through various initiatives, including product innovation, marketing campaigns, and distribution strategies.
The main protagonists of the case study are the executives at Grupo Modelo, particularly those responsible for marketing, sales, and product development. They are tasked with finding solutions to revitalize the brand and regain market share.
3. Analysis of the Case Study
To analyze the situation, we can utilize a framework that considers both internal and external factors affecting Modelo's performance. This framework incorporates SWOT analysis, PESTEL analysis, and Porter's Five Forces to provide a comprehensive understanding of the company's strengths, weaknesses, opportunities, and threats.
SWOT Analysis:
- Strengths: Strong brand recognition, established distribution network, loyal customer base, commitment to quality, and a strong focus on innovation.
- Weaknesses: Declining market share, perception of being too traditional, lack of brand differentiation in a crowded market, and limited digital marketing presence.
- Opportunities: Expanding into new markets, tapping into emerging consumer trends, leveraging digital marketing channels, and focusing on sustainability initiatives.
- Threats: Intense competition from domestic and international players, changing consumer preferences, economic fluctuations, and regulatory changes.
PESTEL Analysis:
- Political: Trade agreements, import/export regulations, and government policies on alcohol consumption.
- Economic: Economic growth, consumer spending, and currency fluctuations.
- Social: Changing consumer preferences, health consciousness, and growing interest in craft beers.
- Technological: Digital marketing advancements, social media platforms, and e-commerce opportunities.
- Environmental: Sustainability concerns, packaging regulations, and consumer awareness of environmental impact.
- Legal: Alcohol advertising regulations, product labeling requirements, and age restrictions.
Porter's Five Forces:
- Threat of New Entrants: High, due to the relatively low barriers to entry in the beer industry.
- Bargaining Power of Buyers: Moderate, as consumers have a wide range of choices and can switch brands easily.
- Bargaining Power of Suppliers: Moderate, as suppliers of raw materials and packaging have some bargaining power.
- Threat of Substitute Products: High, as consumers have various alternatives, including wine, spirits, and non-alcoholic beverages.
- Rivalry Among Existing Competitors: High, as the beer industry is highly competitive, with numerous domestic and international players vying for market share.
Consumer Behavior Analysis:
- Segmentation: The beer market can be segmented based on demographics, psychographics, and consumption patterns. Modelo should focus on understanding the needs and preferences of its target segments.
- Targeting: Modelo should target specific consumer groups, such as young adults, Hispanic consumers, and beer enthusiasts, with tailored marketing campaigns.
- Positioning: Modelo should reposition itself as a modern, innovative, and socially responsible brand that caters to the evolving tastes and values of its target audience.
4. Recommendations
To address the challenges and capitalize on the opportunities identified, Modelo should implement the following recommendations:
1. Re-energize the Brand:
- Refresh the Brand Image: Develop a new brand campaign that emphasizes the brand's heritage, quality, and authenticity while incorporating modern elements to appeal to younger consumers.
- Focus on Digital Marketing: Invest in digital marketing strategies, including social media marketing, influencer partnerships, and targeted advertising, to reach a wider audience and engage with consumers online.
- Leverage Social Media: Create compelling content that resonates with target audiences, foster online communities, and engage in real-time conversations with consumers.
- Develop a Content Marketing Strategy: Create valuable and engaging content, such as blog posts, videos, and infographics, to educate and entertain consumers and build brand loyalty.
2. Innovate and Expand Product Offerings:
- Introduce New Products: Develop new beer styles and flavors that cater to evolving consumer preferences, such as craft beers, low-calorie options, and flavored beers.
- Explore Premiumization: Introduce premium versions of existing products, such as limited-edition releases and special packaging, to appeal to discerning consumers.
- Expand into New Categories: Consider expanding into adjacent categories, such as ready-to-drink cocktails or non-alcoholic beverages, to diversify the product portfolio.
3. Optimize Distribution and Pricing:
- Strengthen Distribution Network: Expand distribution channels to reach new markets and increase product availability.
- Optimize Pricing Strategy: Develop a pricing strategy that balances profitability with consumer affordability and competitive pressures.
- Explore E-commerce: Implement an e-commerce platform to offer direct-to-consumer sales and expand reach.
4. Enhance Customer Experience:
- Improve Customer Service: Provide excellent customer service through various channels, including online, phone, and in-person interactions.
- Develop Loyalty Programs: Create loyalty programs to reward repeat customers and encourage brand engagement.
- Personalize Marketing Efforts: Utilize data analytics to personalize marketing messages and offers based on customer preferences and behavior.
5. Embrace Sustainability:
- Reduce Environmental Impact: Implement sustainable practices throughout the supply chain, such as reducing packaging waste and using renewable energy sources.
- Promote Corporate Social Responsibility: Engage in initiatives that support local communities and promote responsible alcohol consumption.
5. Basis of Recommendations
These recommendations are based on a thorough analysis of the case study, considering the following factors:
- Core Competencies and Consistency with Mission: These recommendations align with Modelo's core competencies in brewing, marketing, and distribution, while also supporting its mission to provide high-quality beer products.
- External Customers and Internal Clients: The recommendations address the needs and preferences of external customers, while also considering the interests and capabilities of internal stakeholders.
- Competitors: The recommendations take into account the competitive landscape and aim to differentiate Modelo from its competitors through product innovation, marketing strategies, and customer experience.
- Attractiveness: The recommendations are expected to enhance brand value, increase market share, and generate a positive return on investment.
6. Conclusion
By implementing these recommendations, Modelo can revitalize its brand, regain its fighting spirit, and secure its position as a leading beer brand. The company needs to embrace innovation, adapt to changing consumer preferences, and leverage digital marketing channels to connect with its target audience. By focusing on a multi-pronged strategy that combines brand revitalization, product innovation, and customer engagement, Modelo can achieve sustainable growth and success in the competitive beer market.
7. Discussion
Other alternatives not selected include:
- Merging with a larger competitor: This option could provide access to resources and market share but may compromise brand identity and autonomy.
- Focusing solely on cost-cutting measures: While this could improve profitability in the short term, it may not address the underlying issues of brand relevance and consumer engagement.
The recommendations presented in this case study solution are based on the assumption that Modelo has the resources and commitment to implement these changes effectively. Risks associated with these recommendations include:
- Execution challenges: Implementing these recommendations requires significant investment and coordination across different departments.
- Consumer response: The success of the recommendations depends on consumer acceptance of new products and marketing initiatives.
- Competitive reaction: Competitors may react to Modelo's initiatives, leading to a more intense competitive environment.
8. Next Steps
To implement these recommendations, Modelo should establish a timeline with key milestones:
- Phase 1 (Short-term): Develop a new brand campaign, launch a digital marketing strategy, and introduce new product variations. (3-6 months)
- Phase 2 (Mid-term): Expand distribution channels, implement a loyalty program, and invest in sustainable practices. (6-12 months)
- Phase 3 (Long-term): Explore new product categories, enhance customer experience through personalization, and monitor the effectiveness of implemented strategies. (12-24 months)
By following these steps, Modelo can revitalize its brand, regain its fighting spirit, and secure a strong position in the global beer market.
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Case Description
In 2015, Modelo was tasked with growing sales from 50 million cases to 100 million cases within five years. Imported from Tacuba, Mexico, the brand had a solid and loyal following of Hispanic beer drinkers. To achieve more than double sales growth, however, the brand needed a broader target. The brand aimed to grow by targeting a more general market around the idea that the product was associated with a fighting spirit. In 2016 the brand ran two campaigns, one directed at the general market and one at the Hispanic market. The results were encouraging, but the brand felt it needed to dig deeper and find a more robust insight to achieve further growth.
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