The Zwack Company Essay

After a short introduction of the company’s past we analyze its market share and current sales and head to its trade and exports.

We review their public relations followed by the study of brand image and brand equity. In that we examine what effect the emerging of fake and cheap brands have on consumer behavior and what a firm producing premium quality drinks can do in order to create strong brands.

Then we depict the premium segment where also Unicum can be found.

The description of advertisements begins with the image, POS, afterward its costs.

Finally we evaluate Unicum’s billboard and TV advertisement campaigns.

The Roots of Tradition

The Zwack company was founded in 1840 in Budapest by Jozsef wack. It made several dozens of types of liquors and brandies. It also had the title of “Sole Purveyor to the Imperial and Royal Court of Austria and Hungary”. Still at the end of the 19th century, the company exported to many countries like Norway or the U.S.A.

After the second world war, as Budapest was bombed to rubble, the Zwack brothers had to rebuild their factory, just like after the first one. Three years after the end of the war, in 1948, the Communist Hungarian government took the factory and the family’s house. The brothers had to flee but only Janos Could emigrate successfully.

In the first years of the communist era, government continued to produce Unicum without knowing the original recipe and having any sort of agreement with the owners of the Zwack name. Later Janos Zwack sued the Hungarian government for this act and won.

Peter Zwack joined the family business in 1972. By that time he lived in the U.S.A. with his wife and daughter. With the change of political system in Hungary, he was invited to buy back the old family factory. He signed a joint venture with the Hungarian monopoly, Buliv in 1989 where Peter Zwack und Consorten AG owned fifty percent. In 1991 came privatization. In order to be full owners of Zwack company, they handed in a bid for Buliv. Being this successful, they went public in 1993. Now ownership structure is 50%+1 share for Peter Zwack and Emil Underberg, 26% for Diagio and 24%-1 share is floated on the Stock Exchange.

The Corporation Today

Zwack Inc. owns a 70% market share in low category drinks, 20% in the middle category and 11% in the high category. Overall market share is about 40% that that means they are one of the biggest company on the market.

Zwack is not selling only Unicum, but this company is the distributor of many other well-known brands, like Johnny Walker whiskey (with 33% market share), Captain Morgan rum, Dom Perignon champagne, Baileys, Evian mineral water, and surprisingly one of its own substitutes, Underberg bitter liquor.

Concerning sales, Zwack was always aware of trends, being one of the biggest advertisers in Hungary. Today, as branded drinks are needed to be advertised regularly, Zwack is focusing more on selling as well. Due to high seasonality and price sensitivity of Hungarian customers, the company chose the technique to give a free gift with every bigger bottle of liquor. They also change packaging before Christmas or other special occasions (anniversaries etc.), knowing the fact that it plays an important role in customer buying decision. As the Hungarian customers’ brand loyalty is not so strong yet, besides the offered packaging, mainly price determines the demand.

Public Relations

Zwack is very well-known about its public relations. It supports different kinds of events, like:

o Opera Ball 2002,

o Water polo team,

o Festival orchestra,

o ExperiDance,

o or J�nos Br�dy, the famous musician.

These also help people remember on Zwack and the uniqueness of these reminds them on the premium quality they get both from the drinks and these programmes or actors.

The other way to keep contact with customers is their outstandig webpage that gives all possible support to their products. Both businesses and consumers can get all needed information on this page. They can write their comments to the producer, send e-card, look at the list of distributed drinks, study family history, read the articles and recipes of a star mixer who uses Zwack materials in his drinks, buy Zwack memorabilia.

This easy way, they fulfill all requirements of good message reception:

o well-designed support materials help to raise attention, have a stopping power,

o with special offers and sweepstakes they grow interest in consumers to know better the product palette of the company,

o using strong emotions (family, love, faith) their ads and in the whole company image and giving the opportunity for creative feedback they are able to persuade many people.

Brand Image and Brand Equity

Unicum versus Hungaricum

The price competition induced by fake brands and the new brands of hypermarkets (e.g. Tesco, Spar) reshapes consumer habits. If there is a spirit of same taste and alcoholic content plus being 20-30% cheaper the price sensitive consumer will chose that one. This was the reason why Gyori’s Hungaricum was so dangerous for Zwack. Gyori Liqueur-factory has also introduced a brand like to Unicum, with a 30% lower price, and similar bitter drink content

Certainly Zwack sued Gyori for that. It had been a long procedure, after which finally the two opponents had come to agreement. Gyori has withdrawn the product from the market and accepted that will not produce and trade any product similar to Unicum.

The Effect of Fake or No Name Brands

According to Gy�rgy R�tfalvi – CEO of Zwack Unicum Inc. – fake and new supermarket brands’ price effect have resulted the higher popularity (with 10-12%) of cheaper drinks while sale of premium segment has declined.

This situation is not easy for the participants to hold their ground. The cheap copies of the famous brands are of course only externally similar and not in the recipe. For example of the drinks traded by Zwack Unicum there have been about dozen copies of Unicum since its introduction, Bailey’s ten, Johnny Walker three-four and Vilmos six – of course these “wraiths” have been offered at about half the price of the original ones. These damage the brands’ reputation and decrease turnover. The company has initiated ten suits against the imitators. They won all that have been ended – but these cases have high costs and the proceedings take years.

The fact these cheap copies can survive shows that for a large percentage of consumers matters only the price not the origin or the content.

Earlier when there was for example only 50-100 Ft difference between the “palinkas” the consumer had paid attention to the process how product was made. But now when he or she has to choose from a 2000Ft quality product or a no name palinka, he or she will not care which has been made of real fruit.

The price war of the cheapest drinks has an indirect effect on the premium segment, because a part of the customers cannot or does not want not to pay the higher price.

Let us take the example of Tesco. They provide six types of spirits from brandy to vodka dressed in striped “pyjamas” of which Tesco Whisky-creamliqueur is the most expensive. It costs 536 Ft.

Future Prospects

In the beverage industry the price boom had such a strong effect like the terror attack of 09/11. Many think that the weakened tourism as a result of the American event has contributed to the lower demand for expensive drinks. Even a 1-2% cut back in the orders from the restaurant industry can be a hard hit for the producers.

Others believe the altered consumer structure is the consequence of wine industry’s upsurgence. R�tfalvi doubts that wines with a price of many thousand Forint would be competitors of premium spirits, because both have different positions in the gastronomic culture. That is why Zwack has developed its wine selection (containing 30 types before) to a supply of 150 wines.

This market phenomenon was unexpected because professional predictions have suggested an opposite trend. They think with the rise of living standards, the consumption of spirits will decline and significant demand of cheap spirits will be shifted to the high value premium segment. (This is the opinion of L�szl� Gyory CEO of “Spirits Association” and of P�l Kornfeld CEO of Martini-Bacardi Hungary and “Association of Spirit Importers”) Yet there was only a few percent decline in spirit consumption.

An average Hungarian citizen drinks (counting at 100% alcoholic content) – contrary to the 5.2 liter ten years before, only 3.2 liters a year. The distribution among spirits, wines and beers is the same for years, 1/3-1/3-1/3 (considering the alcoholic equivalent).

After the EU connection the producers of the premium segment expect a three times higher turnover- due to the decreasing duty and hoping an ascending tourism and higher standard of life.

Creating Stronger Brands

The traders of expensive drinks are forced now to change their marketing tactics in order to fight with the “pajamas’ brands. Yet they had been spent 10-15% of income on marketing keeping advertising costs at the ceiling. Zwack Unicum enhances brand loyalty with e-trade, and also provides for their buyers a lifestyle magazine. They have also started a buying motivator program, for example so has become from the film aesthete Andr�s R�z “whisky ambassador”.

The Premium Segment

According to federal data in Hungary palinka, brandy, liqueur and vermouth make up the most popular premium segment with a share of 15-20% per sort. The market is valued 70 billion Ft.

In the middle category vodka, rum and bitter have 7-10% market share. Whisky and gin forming the small category possess 2-4% share.

The premium segment represents 12-13% of the Hungarian intoxicant market (wines and beers excluded). Within the segment the half of the turnover is owing to the bitters – drinks prepared of herbs -, 16-18% to fruit palinkas. The remaining part is split among whisky, gin, vodka and liqueur.

There are 6.5-7 million liter premium drinks traded on the market, its 70% is made in Hungary. Viewing a different listing 72% of the premium market is dominated by Zwack Unicum Inc, followed by V�rdadrink Ltd., Miskolci Likoripari Inc., az Aranykapu Inc., Kecskem�ti Likoripari Inc., Pannondrink- Millenium Inc. and B�k�si �s fia Ltd.

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Image and POS

Image takes a key part in consumer decision. The first thing Zwack is trying to establish is a good product and company image. They want to create an image to correspond preferred product features, because many future loyal consumers are first trying products like Unicum alone and standalone decision is always more objective than a suggestion. Strengthening this need is the key to win loyalty. Therefore, permanent strong visibility is necessary.

This is done through POS. Point of Sales technique is used with big satisfaction on both consumer and company sides. To increase brand loyalty by keeping awarenes and reinforcement, Zwack offers T-shirts, ashtrays, baseball caps and many more things. This is still a cutting edge of the company selling policies.

Regarding physical points of sale, Zwack focuses more on larger shops, supermarkets and gas stations where their product is percieved as a good gift idea. In supermarkets they keep prices low to be able to compete with substitutes like Jagermeister. For the other sector called HORECA (gastronomic units: Hotel, Restaurant, Cafe) they provide larger sized bottles like 1 liter for whiskey or the greatest bottle of Unicum that is 5 liter.

Importance of Sales Instruments

The minimum requirement of success is to build an adequate distribution system, but further factors of good performance on the market depend on quality categories.

In case of premium category like Unicum the key is to create an attractive image for the target group. Trial occurs because of the hope to experience the suggested feeling or lifestyle in the ad. In the ideal case when the image corresponds the preferred product properties, from the trier becomes a loyal consumer. Here the strong visibility of the brands is also essential at the point of sale (POS means having ashtrays, glasses, posters and trays at the place of decision making. We can also count with high degree of loyalty in case of premium brands. Price plays smaller role in decision making – if it does not deviate significantly of competitors.

The largest participants of the premium category communicate with high quality design that they sell value for reasonable price. The reception of the consumer is favorable as these products provide for less wealthy persons a good quality alternative.