1. U g l e v e j 7 , 4 . t . h K ø b e n h a v n N V 2 4 0 0 D e n m a r k
Niels Brock - Main Thesis – Beverage Bag
Dispensers
Andreas Brolund 2x4u
What procedures and challenges must be overcome to successfully launch beverage bag
dispensers into the Zambian market?
Based on Zambian Breweries PLC internship
CARLOS SALAS LIND
CONFIDENTIAL
Summer
16/05/2012
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Executive Summary
Zambia has been growing economically at a steady rate, making it a very
attractive place for foreign investment. With an average growth rate of 5.1
percent and economic incentives created to further boost investor confidence,
Zambia is a market with many opportunities.
Through an understanding into the market dynamics of the beverage industry
gained during my work placement at Zambian Breweries Plc., a subsidiary of
SABMiller, I have gained insight into potential target groups of people that are
not exploited by any businesses in Zambia. By creating the company Brolund
Solutions, I will be able provide an innovative Beverage Solution by using
beverage bag dispensers.
Beverage bag dispensers are a mobile keg that is able to keep liquid cold or
warm for up to 4 hours and dispense the beverage into reusable cups. They are
also used for branding due to their elevated body and flag for easy sighting. They
are a proven success in European markets, most notably with public gatherings
such as football games at a stadium. The bag increases profits by selling more
drinks while improving customer satisfaction.
Due to the supply of beverages being limited to local producers that can supply
kegs, a market analysis was done to select the best soft drinks and beers.
Zambian Breweries Plc., is the market leader for local beer and producers for
Cola-Cola in Zambia making their products the right choice. This is due to Coca-
Cola dominating the market share for soft drinks and Mosi and Castle lager
dominating the beer category.
In order to secure the rights to be the official beverage seller at football games,
the benefits of the products must be highlited to the Ministry of Sport and
Football association of Zambia. The environmentally friendly cups and increased
safety due to few people crowing at bars will be presented to them alongside
with the increased customer satisfaction.
The main regions of Zambia that Zambia Breweries use will be geographically
targeted. These are Lusaka and the Copperbelt primarily due to local production
of drinks and football infrastructure. Nothern, Southern and Central will also be
targeted due to their large populations.
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Introduction
Zambia is a developing country experiencing high levels of economic growth and
is on the path to becoming an emerging market. As the country continues to
grow, public gathering events such as music festivals, sporting events are on the
rise. Especially now that Zambia, are the current African Football champions and
are set to host the African Cup of Nations tournament in the newly designed, high
capacity football stadiums.
Happy Customers, Growing Profits!
With beverage bag dispensers, you now have the power to make public
gatherings your new storefront with mobile vending products from the Beverage
Bag Dispenser and Cup-Service. The full line of environmentally friendly Cup-
Service products lets you and your staffs take hot or cold refreshments i.e. beer,
coffee, and soda directly to the customer. Mobile vending products like the
Beverage Bag Dispenser are the tools you need to generate sales and profit that
you would otherwise miss due to congested lines at bars or various events.
Methodology
Chapter 1 will be investigating part A of the problem formulation. In order to
answer what challenges launching the beverage bag dispenser could face in
Zambia, I will carry out an external marketing audit through a pestle analysis. I
will also use porter’s five forces to analyse the Zambian market, as I will set up a
company. I will also look at the legal aspects of using the Beverage Bag dispenser
in Zambia.
Chapter 2 will investigate part B of the problem formulation. In order to answer
how the Beverage bag dispensers are doing in other markets, I will carry out an
analysis of the marketing mix in selected European/American markets (product,
place, promotion, and price).
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Flow Chart
1
• Is Zambia suitable for Beverage Bag Dispensers?
• PESTEL
• Entry Modes
• Legal Issues
2
• How attractive are Beverage Bad Dispensers in other
markets?
• Marketing Mix Europe/America
3
• SWOT Analysis
• Porters Five Forces
• Competitors in the Zambian market
• Market Segmentation
• Postioning & Marketing Mix
4
• Strategy to implement
• Ansoff Matrix
• Budget
5
• Recommendations
• Conclusion
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CHAPTER 1
PESTEL ANALYSIS - ZAMBIA
Political
Zambia is a constitutional democracy with a peaceful, stable multi party
environment, which is anchored on the rule of law with distinct separation of
powers between the executive, legislature and judiciary3
. The press and the
judiciary system are run independently alongside a strong civil society. These
political characteristics provide a stable environment for investors to conduct
business with the security and confidence they need. As Zambia has consistently
continued on a path of political freedom and remained peaceful, it has become a
relatively predictable environment for investors to do business in. This has made
it easy for agencies like the Zambia Development Agency to promote broad
based investments, trade and exports4
.
Previous governments have been very supportive of business as they undertook
a number of reforms that were aimed at improving the investment and business
environment in Zambia. One of the most prominent of these reforms was the
Private Sector Development Programme (PSDP) and strategic Action Initiative
for Economic Development (SAIED), commonly referred to as the Triangle of
Hope (ToH). The extent of how successful this reform has been is still been
measured up to today but the progress is clear in progressive state of the
economic environment.
Economic Environment
The economic climate in Zambia has been improving tremendously and
continues to move in this direction. From 1999 to 2008, Zambia’s economy has
3
(Zambia Development Agency, 2009)
4
(Zambia Development Agency, 2009)
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experienced positive growth and very stable macroeconomic surroundings. Real
gross domestic product (GDP) has averaged 5.1% per annum between 2001-
2007. 5 Other important macroeconomic detectors such interest rates and
inflation has also gained much ground in the recent years, as their downward
trend has increased. For over 30 years, inflation levels have never been this low.
Inflation declined to single digits from 18.7% in 2001 to 8.9% in 20076. In 2008,
inflation moved upwards, but this was mostly due to the financial crisis as it has
stabilized since. The rates for borrowing more have also declined from an
average of 54.6% in 2001 to 26.9% in 2008. Exchange rates have been improving
while also been relatively stable. This stability is really good as it allows a
business to predict the future more accurately. Such stability is connected
directly linked to the implementation of various monetary policies and fiscal
measure at the rights times, improving investor’s confidence in Zambia.
Zambia is and continues to be a free market economy and pave the way for other
economies. Furthermore Zambia has become more recognized as one of the most
liberalized economies, not only in the sub region (Southern Africa) but also in
Africa as a whole. Investors in Zambia are allowed to repatriate 100% of their
net profits due to Zambia having no foreign exchange controls while also being
offered fiscal incentives. This makes Zambia a very attractive investment
opportunity.
Infrastructure in Zambia will also be crucial to Beverage bag dispensers been
successful in Zambia as public gatherings will be prime locations for launching
out product. Zambia’s infrastructure is very underdeveloped but is moving in the
right direction. The government is committed to improving the infrastructure in
remote areas of the country in order to increase the potential investment
opportunities that can be tapped out with business creation. The infrastructure
for sport in Zambia is making great headway. Zambian culture is closely
associated with sport, particularly football, the government has taken great steps
to develop this sector. They have partnered with the Chinese government to
5 (Zambia Development Agency, 2009)
6
(Zambia Development Agency, 2009)
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restore several current stadiums and build 3 new high capacity stadiums. This
comes at a time when Zambia has also just won the Africa Cup of Nations, making
them the African Champions of Football. This has created a great atmosphere in
Zambia due to the fashion in which they won the competition making football
stadiums a prime target for beverage bag dispensers to be used during football
games and other events held at these stadiums. From an institutional analysis
view, this is a perfect time to add my product to the sporting sector as football is
on the high rise in Zambia.
Regional Economic Comparison
Referring to Chart A7 in the Appendix, when you compare Zambia to other
countries in the region, you get a better image of how well Zambia is doing in
various economic indices. For example, Zambia claims to have a good GDP
growth rate of 6.2% when neighboring Angola has a rate of 21.1%. Although this
shows Zambia to be far less superior to Angola and a few other countries, Zambia
scores relatively well on the ease of doing business scale in the region. Zambia
was ranked at 101 out of 181 countries, only to be beaten by Botswana and
Namibia. This is encouraging for me as a prospective investor as other countries
with higher GDP growth like Congo and Angola are not easier to operate making
Zambia a more stable and attractive market with relatively good GDP growth. To
Back this fact up, Zambia scores 1st on the Foreign Direct Investment inflow with
USD 984 million in 2007 followed by Namibia with USD 797 million showing that
investors are picking Zambia8.
Cost of doing Business in Zambia
Referring to Chart B9 on company registration when starting a business in
Zambia, you can see the procedures and fees associated with this. All companies
must be registered at the Patents and Companies registration Agency (PACRA). I
would need to register a private company with a minimum nominal capital
7 World Economic Forum, World Bank, IMF, UNCTAD, Ministry of Finance & National Planning –
World Bank Survey conducted in 2008.
8 UNCTAD 2008
9 (Zambia Development Agency, 2011)
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amount of, 5 million Zambian Kwacha, which is approximately DKK 5300.
Alongside that amount it will cost approximately DKK 300 to purchase forms and
register them. A certificate of incorporation and certificate of share capital must
be obtained then a company seal will be issued. The process takes approximately
28 days making it slightly complicated but nothing too serious as other countries
like China take long periods too but still attract many investors due to the
opportunities the market offers.
Social Environment
Zambia has a population of 12 million people. Roughly 70% of the population is
fairly educated as literacy levels are at 70%. This supplies a labour force that can
be trained relatively easy. However, Zambians generally lack the
entrepreneurship spirit vital for people to develop their own businesses. This is
due to previous policies that encouraged people to train for formal employment.
HIV/AIDS is also recognized as problem affecting development in Zambia.
Statistics show that this virus mainly affects people aged 15 to 49 years. This
aged group is the main working segment of the economy affecting productivity.
This could also affect the target group for sales of our beverages at public
gatherings. On a positive note, the infection rate has reduced due to intensified
efforts from the government and other partners addressing HIV/AIDS.
Generally, Zambians are popularly known for their hospitality that is exhibited to
foreigners who visit the country either as tourists or as investors.
Technological Environment
Zambia although developing, has not reached a satisfactory technological level.
ICT technology and skills development programs are expensive, making them
inaccessible to most Zambians. Rural areas are affected on a higher scale as they
lack ICT tools and services. Looking towards the future, Zambia has installed
optic fiber networks across the country in an effort to develop accessibility and
the cost of information through the Internet. The Zambia Development Agency
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also strives to strenuously promote technological investments in other sectors
such as health, Manufacturing and Agriculture.
Environment
Any investor in Zambia must be aware of the Environment Protection and
Pollution Control Act that provides guidelines that investors must be aware of.
This is important and there have been a growing number of projects that have
been rejected by the Environment council due to the impact these projects posed
on the environment. This could be a huge opportunity for beverage bag
dispensers as they offer to reduce pollution through litter reduction. Our
beverages will be served in recyclable cups rather than selling plastic bottles.
These is very relevant as I have recently had meetings with the minister of local
government and houses, Dr Nkanduluo, who advised Zambian Breweries to work
away from using plastic to package there beverages, due to a law to ban plastics
packaging soon to take effect. Zambia Breweries has had to take this into
consideration and reflect this in their new corporate strategies. If plastic
packages were to be banned, alternative forms of more environmentally friendly
packages would need to be used. The perfect example of this would be beverage
bag dispensers as there are environmentally friendly. Meetings with the Ministry
of Local government could even provide support for the set up of my company
that would offer these solutions. Furthermore, Corporate entities like Zambian
Breweries may want to enhance their corporate image by using or branding our
beverage bags as there will be used in public events.
Legal Environment
In order to start a business in Zambia, one must be aware of the following laws
and acts:
• Income Tax Act
• VAT Act
• Customs and Exercise Act
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• Immigration and Deportation Act
• Citizen Economic Empowerment Act
• Competition Act and other legislation
The Zambia Development Agency works towards the harmonization of all these
laws in order to promote and facilitate trade and investment as best as possible
without hindrances.
Summary – Reasons to Invest in Zambia10
• An abundance of natural resources and manpower
• Political stability since attaining independence in 1964
• Abolition of controls on: prices, interest rates, foreign exchange rates, free
repatriation of debt repayments
• Guarantees and security to investors with legislated rights to full and
market value compensation
• Duty Free Access to regional, wider African and the USA markets under
SADC, COMESA/FTA and AGOA (African Growth and Opportunity Act)
respectively
• Banking, Financial, Legal and Insurance services of international standard
as week as a Stock Exchange
• Double taxation Agreements with a number of European, North American,
African and Asian countries
• Good place to work and live – sub-tropical climate and vegetation with
plenty of water. Friendly people, mostly English speaking, high literacy
rate and educational establishments to University level. Strong religious
values. Open-air lifestyle with nature reserves, game parks, rivers, lakes
and waterfalls.
• Thriving Private Sector – Government has successfully privatised most of
the previously state owned enterprises, thus encouraging an
entrepreneurial culture.
10 (Zambia Development Agency, 2010) Page 9
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Financial Incentives to Small Businesses (micro or small enterprises)
• For an enterprise in an urban area the income shall be exempt from tax
for the first three (3) years.
• For an enterprise in a rural area the income shall be exempt from tax for
the first five (5) years.11
Vending Laws
Zambia does not have solid vending laws as a large part of the population in
urban cities make a living of selling products as street venders. An alcohol license
must be obtained alongside a certificate of heath from the health and safety
board.
11 (Zambia Development Agency, 2009)Page 10
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Chapter 2
Beverage Bag Dispensers in other markets
Referring to the testimonials of different businesses using beverage bag
dispenser on the thirsty solution website (one of the main suppliers of the
product), I will give a description of the current uses for the product in existing
markets around the world.
The O2 Arena, London, UK – They have worked with thirsty solutions to deliver
beverages to their customers throughout the venue. Having the ability to serve
hot and cold beverages, at the correct temperature, right to the customers’
location, has been invaluable to their business and has increased their sales
considerably. (Tom Haywood)12
The London Eye – The London Eye attracts up to 18 thousand visitors per day
and is regularly sold out. The result of this is queues of people waiting to see
London from this unique vantage point. In partnership with Coca-Cola and
thirsty solutions, they have been able to deliver drinks to their customers when
they need it most. These customers who would otherwise not be able to leave the
queue, can now receive beverages at the correct temperature. These projects
lead to sales revenues increasing by over 800%. (Heidi Humby)13
Arsenal Football Club – Since introducing the beverage bag dispensers at the
Emirates Stadium, their beverage sales figures have rocketed. By using this
product at mobile vending points, they have been able to reduce the number and
length of queues for beverages. This has increased the satisfaction of paying
spectators as they can enjoy more the football match while increasing turnover.
They take so much pressure away from traditional outlets at peak periods such
12 (Thirsty Solutions, 2009)
13 (Thirsty Solutions, 2009)
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as half time. (Kieran Tingle) Other stadiums claiming the same experience are
that of Sheffield United F.C and Gloucester Rugby club.14
Cardiff International Arena – Using the beverage bag dispenser lead to their
profits rocketing. Once customers begun to recognize the backpacks and the
concept of mobile selling, the concept really took off. It helped minimize queues
and create interest from those that don’t venture into bars, targeting other
market segments in this way. (Paula Walsh)15
What if Innovation & Phenomenon Promotion Agency – Both of these
companies boost a much more efficient process to how they gather market
research for new drinks. They can move on streets in many locations and get
peoples attention and gather feedback after people of sampled the drink. The
easy to do branding of the bags proved to be extremely handy at getting peoples
attention on the street.16
European Market Analysis
Beverage bag dispensers have been proving to be a revolutionary product in
other markets around the world. The strategic advantage of using these bags is
the fact that with this product. You take the beverage to consumer rather than
the consumer going out of their way to locate a place to purchase a drink. When a
consumer looks for a drink that is time being wasted. Not every consumer will go
the complete length for a drink if it is not easy. This product also caters for
consumer who would not normally go into bars or other shops for drinks as we
go directly to them. Users such as the Emirates stadium and the London Eye
really highlight the progressive effects of the product. It targets consumers who
are unable or would preferably not want to move to obtain a drink and by
delivering to this set of consumers, you sell product to other consumers while
increasing the delivered level of satisfaction to each consumer. At the Emirates
14 (Thirsty Solutions, 2009)
15 (Thirsty Solutions, 2009)
16 (Thirsty Solutions, 2009)
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Chapter 3
The Zambian Beverage Market
By analyzing the Zambian beverage market for soft drinks, I will be able to
determine what drinks and beverage companies to target in various regions of
Zambia. This is relevant for various reasons such as branding on beverage bags
and determining what drinks to sell to the various target groups in the selected
regions of Zambia. The various beverage companies target different age groups
so this will help me determine my target audience.
Soft drinks
There are several players in the soft drinks market and more notably, Pepsi
under Varun Beverages LTD has recently entered the Zambian soft drink market.
The effect Pepsi has had on the market share and the presence of them in Zambia
will be crucial for my strategy, as they are at the start of the product life cycle in
ZAMBIA subsequently requiring much higher investment to launch the product
and increase their sales over Coca-Cola.
The following information is confidential and for my research only.
