Market Share Battle: Liquor vs Beer in US - Ethics & CSR, Exams of Business Management and Analysis

Download Market Share Battle: Liquor vs Beer in US - Ethics & CSR and more Exams Business Management and Analysis in PDF only on Docsity! Semester II Examinations 2007/ 2008 Exam Code(s) 2BC1 Exam(s) Bachelor of Commerce Year II Module Code(s) MG204 Module(s) Business & Society Paper No. Summer Repeat Paper External Examiner(s) Professor Colin Eden Internal Examiner(s) Professor Hugh Scullion Ms Josephine Igoe Instructions: Answer all questions in Section A Answer any 2 questions in Section B Duration 2 hours No. of Pages 4 pages incl cover page Department(s) Management Course Co-ordinator(s) Ms Josephine Igoe Requirements: MCQ N/A Handout Yes – Case Study Statistical/ Log Tables N/A Cambridge Tables N/A Graph Paper N/A Log Graph Paper N/A Other Materials N/A Time Allowed: TWO HOURS Section A Compulsory Case Study Candidates are required to answer All questions from this section (Case Study) When Spirits Collide: Liquor Vs Beer An epic battle of wills has been brewing in the world of spirits. Diageo, the US liquor market leader with 27 percent of the market, has taken on Anheuser-Busch, US beer industry leader with 56 percent of the market, in a no-hold-barred battle of titans. At issue is the treatment of liquor versus beer, their comparative tax treatment and the different restrictions they face in sales, advertising and promotion in the United States. The Beverage Alcohol Business The Beer Industry. Since prohibition was repealed in the United States in 1933, the beer industry has worked to cultivate an image of ‘sports, fun and patriotism’. The slogan of a 1940s ad campaign was ‘America’s Beverage of Moderation’. In most states, beer can be sold in convenience stores. The television airwaves are filled with beer commercials, making beer one of the largest consumer-goods advertisers. The Liquor Industry. While beer has enjoyed an upbeat, sport-oriented image in the United States, liquor has been associated with seedy characters and smoky bars. Because of its higher alcohol content, liquor had been treated differently from beer. Liquor’s federal excise taxes are more than double those of beer and almost three times those on wine. The age limit for drinking beer is lower than the age limit for drinking liquor in some states. State laws regarding when and where liquor can be sold are usually considerably more stringent than the restrictions placed on beer. Despite their relative disadvantage, the liquor industry accepted its position for years. According to Chuck Phillips, former chief executive of Diageo North America, ‘the spirits industry had lived for years with this feeling that we don’t want to stick our heads above the parapet because the beer people would get upset’. The Battle Begins Although the liquor industry had complained of having an unfair playing field, they did little to level it until 1985, when Seagram launched a campaign entitled ‘A drink is a drink is a drink’. Based on the idea that a standard serving of beer, wine or liquor has the same alcohol content, Seagram argued that the liquor and beer industry should be treated the same in taxation, distribution and advertising. Unable to get access to the US networks to break a self-imposed ban on liquor advertising, Seagram’s took out a magazine ad with the tagline, ‘What the networks do not want you to know