NATHAN LION Limited

1. NATHAN LION Limited By Tosca Bonardi, Tom Sweeney, Valerie Potts, and Lila Schwarzbach

2. NATHAN LION LTD THE BEGINNING • The Formation 1988 • Lion Corporation and L.D. Nathan and Co. merge • Hire and outside guy in 1999 • Kevin Roberts • International experience • Australian and New Zealand markets • Hinder further growth potential • several evaluations on different breweries in China • LN entered China’s market two years later in April 1995 with a 60% joint venture Wuxi. • The first investment was made in Yangtze River Delta, China’s fastest growing beer market.

3. NATHAN LIONTHE BEGINNING • Increasing ownership • 1996: increase to 80% with plans to build a new $378 million brewery. • Licensing agreement • After the construction of their new brewery • German brewer Brauerei Beck and Co. to brew the premium beer, Beck’s. • Kirin Brewery Company • In 1998, KBC acquired a 45% share of LN • ownership structure changed significantly • By the end of 1998 LN’s growth potential was still very promising.

4. CHINESE BEER INDUSTRY • Beer is a beverage • Variety of flavors, colors and types. • Different tastes, price range, and quality. • Technology • Slow paced changes • Routine and automated process • Popularity- Attractive to international brewers • China’s population • Immense growth potential • In 1998, 600 brewers produced 17.8 tonnes of beer

5. GROWTH • Capacity of breweries in China in 1998 • 80 hold over 50 million liters • Of those 80, 18 breweries could hold over 100 million liters. • The 10 largest companies only held less than 20% of the market. • Market Growth • Through the 80’s: growing at a rate of 20% a year. • Between 1992 and 1997: rate of 12.5%. • 1998and 2001: Projected to continue dropping to 6%. • Comparisons by liter per capita • New Zealand - 87 liters • Australian - 95 liters • Asian market as a whole - 30-40 liters

6. MARKET SEGMENTS AND DEMAND • China’s beer industry has four segments • Imported premium • Premium • Mainstream • Low-end • Demand fluctuates • Levels of unemployment • Disposable income • Government rulings • Beer consumption • Analyzed by regions – many little markets • Urban and rural areas

7. RAW MATERIALS, CAPITAL REQUIREMENTS AND ENTRY/EXIT EASE • Hops • Companies buy raw materials • Easier for companies • Capital Requirements: Small Companies • Not high for small businesses • Building breweries is costly • Developing brand identity • Capital Requirements: Big Companies • Brewing plants in every region • Economies of scale • Extensive marketing • Exit • Hard for small businesses – no market

8. CHINESE ECONOMY • Entering Chinese Market • Downward trend • Advanced market • World’s largest consumer market • China’s market looked very promising • Size of market • Growth potential • Low barriers to entry • No established “big guy” • China’s consumer market • Exponentially growing consumer market

9. OTHER COUNTRIES • Presence in New Zealand and Australia • Lacked growth potential • Dominated by supply and demand • Differences between economies • Growth potential • Population • Economic growth • Growth rate • Promising market

10. NEGATIVES ASPECTS OF ENTERING CHINA • Low GDP per capita • Australia and New Zealand’s higher GDP per capita • Infrastructure in China • Well developed on coast • Weak inland transportation • No public transportation system • Few private auto owners • Infrastructure in Australia and New Zealand • Well developed nationally

11. BEER MARKET • Chinese Economy in downward spiral • Competition in beer market intensifying • Premium beer market • Consumers buying habits • Willing to try new brands (low brand loyalty) • Daily “Mom and Pop” visits • Culture • Beer is a social beverage, like tea or soda • Accompanies a meal • Enjoyed warm

12. BEER MARKET • Consumption Habits • Lower in China than others • LN must pay close attention to distribution • Marketing • Customers under 30 are more responsive to advertising

13. YANGTZE RIVER DELTA • Five Regions • Shanghai • Suzhou • Wuxi • Nanjing • Changzhou

14. COMPETITORS

15. HUMAN RESOURCES AND CORPORATE CULTURE • No problems finding qualified employees • Previous retail experience • Under 30 • 2 years experience with MNC • Individual performance targets • Bonuses negotiated. • Status, reputation, reliability, and loyalty influence position, promotion, relationships. • Personal goals, • Retention of staff • Employee training systems T

16. CHINA’S CULTURE • High-context culture emphasizes social relationships between individuals • Trustworthiness is a key trait in business dealings. • Employee loyalty, building corporate expertise is vital. • Chinese dislike individual pressure. • Occasionally LNC head office managers apply more pressure than most Chinese workers are accustomed to in order to meet financial targets. T

17. MARKETING STRATEGY • Lion Nathan regularly: • Measures the health of their brand • Examines the effectiveness of their advertising • Uses past experiences for positioning and promotion • Positioning in each market: • River Delta and Shanghai – locality = comfort, affiliation. • High-quality premium beers are marketed differently • price, bottle design, position, label, and placement. • Ex: Beck’s and Steinlager • Affordable and acceptable pricing • Event sponsorships. T

18. MARKETING FOR THE FUTURE • 15% market share in River Delta region, 8% in Shanghai, 25% in Suzhou, 40% in Wuxi, 16% in Nanjing. • Distribution is an issue • Focus on expanding in River Delta region and Shanghai. • Sales are directly related to their distribution coverage • Build for the future. • Already have superior brand recognition • Create more effective distribution channels T