Customers and Demand

Characteristics

Current situation

Future trend

Segmentation of customers

Individual buyers and retailers

Same

Does a buyer's purchase volume represent large fraction of typical seller's sales revenue?

Moderately, when we do not speak about individual buyers

Same

Switching cost

No switching costs, because of the great variety of choice

Same

Can buyers find substitutes for industry's product?

Yes, other alcohol drinks(wine,etc), or non-alcohol beverages

Same

Price elasticity of market demand

High, there are a lot of substitutes, so when prices grow people can easily switch, but when the prices fall down, they come back and demand grow

Same

Price elasticity of demand for typical firm

High

Same

Price elasticity of various customers

High

Same

Price discrimination (actual and potential)

Actual: there is no price discrimination and there are no reason for it to appear in future

Same

Bundling and Tie-ins (actual and potential)

Customers are supposed to buy different kinds of snack, for example, chips, rusks, nuts, etc. If we talk about HoReCa, here we can see also different kinds of main dishes.

Same

Are prices negotiated on each individual transaction or set as take-it-or-leave-it" for all transactions?

If we talk about individual buyers, they have no power, so for them the price is fixed. But retailers have are rather powerful, so they can influence the price.

Same

Do buyers pose credible threat of backward integration? (for B2B)

No

Same

Does product represent significant fraction of cost in buyer's business? (for B2B)

For small business it is significant, but for big companies (especially in HoReCa) it is not significant.

Same

Characteristics

Current situation

Future trend

Availability of close substitutes

Because we speak about B2C market and product is located in every retail chain and even corner shops, its substitutes are really close and available. But there is one feature, this situation make sense only before 23.00, after this time it’s a beer time. Beer monopoly take place and it is good for the whole industry.

The end of the beer monopoly after 23.00, because of the actions of the vodka lobby.

Price-value characteristics of substitutes

The average price for 1 beer is 43 rubles and for 1 can of non alcohol beverage average is 55 rybles. For ordinar customer it is not a big difference, especially when he or she look even at alcohol consistancy, because it is a little bit higher in low alcohol beverages. We estimate the threat from low alcohol beverages as high for beer market. It is difficult to estimate price-value characteristics for vodka-beer, because of the big difference in pure alcohol content. But if we fix price for 1% of alcohol and deal with percentage of alcohol as a value for customer. Vodka will be much cheaper.

There is an upward trend to higher prices for all alcohol beverages and spirits.

Price elasticity of industry demand

There are next figures for price elasticity:

Beer -3.017

Vodka -1.774

Wine -1.045

For demand elasticity:

Beer -3.017

Vodka 1.114

Wine 1.304¹

We suppose that in coming future this figures remain relative constant.

Availability of close complements

It is really simple to buy any complement in the same place where customer can get a bottle of beer.

Same

Price-value characteristics of close complements

There are relevant prices, 1 snack cost approximately like a half of beer bottle.

Same