Executive Summary on the New Alcopop Bacardi Silver

A premium malt beverage with natural citrus flavors, Bacardi Silver is a high quality, premium flavored malt beverage that has a crisp, clean taste. It's refreshing and easy drinking. Bacardi Silver combines the heritage and commitment to quality of two leading companies in the beverage industry - Anheuser-Busch and Bacardi USA. For more than 140 years, Bacardi has been recognized as the #1 distilled spirit in the industry. It is only fitting that Anheuser-Busch, the world's #1 brewer, combine its heritage and quality with Bacardi USA to deliver Bacardi Silver.

Anheuser-Busch designed Bacardi Silver with a target market of drinkers age 21 to 27 who enjoy being in bar situations but don't necessarily like beer. This target market includes single, middle class females of professional and managerial occupations.

At the present time there are three large companies vying for the market share, therefore the malternative industry is a differentiated oligopoly; Miller Brewing Company, Diageo Plc., and Anheuser Busch make up the oligopoly. Each of these companies pairs up with an additional company to flavor their malt. Barriers to entry in the alcohol industry are low, however it can take years and huge capital expenditures for and a new brewer to compete realistically. Marketing and distribution costs are high. Exit barriers are low.

Anheuser Busch's (A-B) has four key objectives: to build the growth and relevance of a premium brands; to grow A-B's share of the high end margin pool; to increase the appeal and presence of A-B brands with ethnic consumers; and finally, to continue to improve and enhance A-B's retail execution (Anheuser Busch. 2004). They were a follower in the malternative industry to Diageo's Smirnoff Ice and Coor's Zima. They are trying to gain market share. Bacardi Silver has seen a market share increase from 7 to 20% from 2002 to 2003.

The malternative industry uses a three tier, intensive distribution system. The first tier is the brewery, the second the wholesaler, and the third is the retailer. This structure is mandated by an array of state and federal laws. The harshest criticism you can make of regulations that support the three-tier system is that they mandate a single structure for the beer industry and prohibit innovative approaches.

Bacardi Silver has developed an effective message with the gain attention, hold interest, arouse desire, and elicit action model (AIDA). This AIDA model has almost tripled their market share in less than 2 years, but it has also brought the malternative industry under fire. Bacardi Silver, along with rivals Smirnoff Ice and Skyy Blue, are part of a fast-growing new category of malternatives or "alcopops. Critics argue that such companies encourage underage drinking because the drinks contain sweet fruit flavors that mask the taste of alcohol. The industry has long disputed claims that its marketing campaigns target those under the legal drinking age.