1.

Did the 2005 launch of 100 Pipers 8 Year Blended Malt cannibalize sales of Pernod Ricards other premium offering, Ballantines Finest? If Pernod were practicing market cannibalization, it would be eating into its own market share. In this case, the launch of 100 Pipers 8 Year Blended Malt was gaining market share not just from Ballantines Finest but from its competitor brand Johnnie Walker Red Labels as well. Although it might seem as though the launch of 100 Pipers cannibalized the sales of Pernods other premium offering, Ballantines Finest when the market share of Ballantines Finest dropped by 6% whereas 100 Pipers market increased by 10% in the year it was launched, the market share of Johnnie Walker Red Label was also affected, decreasing by 4% from 2005. Instead of cannibalization, I felt that the launch of 100 Pipers 8 Year Blended Malt served as a compliment to Ballantines Finest. When Pernod acquired the Ballantine brand in 2004, Pernod also acquired the 6% market share Ballantines Finest had in that segment. However, after the acquisition, sales were not increasing although market share appeared to have increased by 2% from 2004. In reality, sales had dropped by 6.7% during this period. With the launch of 100 Pipers 8 Year Blended Malt in 2005, sales doubled and by 2007, sales has tripled since the launch. It might be misleading initially to see that the launch of 100 Pipers 8 Year Blended Malt saw an increase in 10% of its market share, and a drop of 6% in market share for Ballantines finest. However, just looking at market share alone is insufficient to make a conclusion. If the launch did indeed cannibalize the sales of Ballantines finest, then the overall sales would not have increased since its launch because sales from 100 Pipers 8 Year Blended Malt would be eating into the current sales of Ballantines finest, which was not in this case. Furthermore, when Pernod lost 3% of market share to Diageos Johnnie Walker Red Label between 2006 and 2007, we can see that it was only 100 Pipers 8 Year Blended Malt that was affected, whereas the Ballantines finest remained stable. If it was true that 100 Pipers 8 Year Blended Malt was cannibalizing Ballantines finest, it would mean when Johnnie Walker Red Label was gaining market share, the market share for both of Pernods premium offering would be affected. 2. Why did Pernod Ricard begin to lose super-premium segment market share to Diageo in early 2007? Firstly, Pernod Ricard lost its super-premium segment market share because the brand image and taste perception of its products were not up to the consumers standard. As mentioned in the case, consumers in the super-premium segment highly value social status and want to project an image of wealth and success. However, Pernods Chivas Regal 12 was unable to achieve that aim since its brand image was more towards a cheaper and less premium segment. To the consumers, although both Johnnie Walker Black Label and Chivas Regal 12 was competing in the super-premium segment of the whiskey market, Johnnie Walker Black Label was considered to be of a higher quality (29pt) and image (22pt) when it came to consumers perception of brand image and taste perception, as compared to Chivas Regal 12 which had a taste quality (10pt) and image (15pt) more similar to Johnnie Walker Red Label (taste: 6pt, image: 11pt), which belonged to the premium segment. Thus, for the price that consumers were paying for whiskey in the super-premium segment, they would definitely have chosen Johnnie Walker Black as opposed to Chivas Regal 12 since Chivas Regal 12 was unable to provide the status and image that consumers in the superpremium market segment desired and looked for. Although consumers might not care so much about the taste of the whiskey since brand image is the driving factor in Thailand, a 7point difference in their perception of the brand image meant that consumers in the super-premium segment would definitely choose Johnnie Walker Black Label. In addition to consumers perception of the brand and taste, Diageo started to use a more competitive pricing strategy in 2006. Diageo changed its pricing strategy by keeping the price of its Black Label stagnant but increasing the volume of the bottle to 1L instead of 0.75L, making it more value-for-money at 1.05/ml as compared to 1.33/ml for Pernods Chivas Regal 12. Naturally, consumers would shift their purchases from Chivas to Johnnie Walker Black Label since they were getting a better deal in addition to a better brand image which reflected well on them. 3. What are the possible reasons that the premium and super-premium segment became larger but the standard segment became smaller in 2007? Impending taxation on imported Scotch will affect the standard segments growth prospects. Charging a B400/L will mean that profit will decrease for the standard segment, making it unrealistic to be focusing on the standard segment. Instead, Pernod shifted its focus to increasing market share for the premium and super-premium segment since the time after the economic crisis, the Thai market for imported Scotch whisky grew at a 10% compound rate, with consumers trading up from the standard segment due to prosperity consumers were better off and had higher spending power after the country recovered from the economic crisis.

Leaching on the fact that 100 Pipers Standard was dominating in the standard segment, the introduction of 100 Pipers 8 Year Blended Malt served to convert some of the consumers who were currently purchasing from the standard segment to start making purchases in the premium segment since it was the period after the economic crisis and the income of Thai consumers was growing. By starting from current consumers of 100 Pipers Standard and introducing them to 100 Pipers 8 Year Blended Malt and then subsequently to Ballantines finest, it helped Pernod to increase sales and compete with Diageos Johnnie Walker Red in the process. When Pernod acquired the Ballantines brand in 2004, the brand was still not as well known as Johnnie Walker Red Label amongst Thai consumers. In order to compete with Johnnie Walker Red Label, Pernod had to slowly expose Thai consumers to the Ballantine brand and time was needed to build the brand image of Ballantines finest since brand image is extremely important to the Thai consumers, and the only way to do that was by converting consumers currently in the standard segment to the premium segment through the launch of 100 Pipers, which they knew through 100 Pipers Standard.