CASE 16-1 Brewdog: Establishing A Beachhead In Japan ✓ Solved

CASE 16-1 BREWDOG: ESTABLISHING A BEACHHEAD IN JAPAN, BUT WH

CASE 16-1 BREWDOG: ESTABLISHING A BEACHHEAD IN JAPAN, BUT WHERE DO WE GO FROM THERE FOR FURTHER EXPANSION? BrewDog is a rapidly expanding British beer brewery based in Ellon, Aberdeenshire in Scotland, with a 2014 annual sales of £29.6 million (or about US$42 million). The company produces bottled and canned craft beers in a variety of styles such as ale, stout, India pale ale (IPA), and lager. The bottled beers are distributed to British supermarkets and exported worldwide. Founders of BrewDog, proud Scots James Watt and Martin Dickie, were school friends and beer aficionados, fans of very hoppy IPAs of the kind that could not be found in Britain. They had begun to brew their own in 2007. Their flagship beer, Punk IPA, is their best-selling flavor. Neil Taylor, the BrewDog Head of International Bars, recently visited Tokyo and spoke about the company’s journey at a British Chamber of Commerce held at a posh bar in a trendy Roppongi area of Tokyo. “Our mission is to make people as passionate about great beer as we are,” said Taylor, who clearly embodies this passion himself. “We never want to stop innovating.” The company’s business philosophy for shared growth with its customers is also appealing, as it can claim to be Europe’s most successful example of crowd funding with three rounds of Equity for Punks, where they sold shares in the company to its customers, most recently bringing in GBP4.25 million and over 15,000 shareholders. The company also created the BrewDog Investment Fund in 2014 to provide funds for start-up breweries in a bid to support the growth of craft beer worldwide. Japan-based Whisk-e Limited has been working with BrewDog since its entry into the Japanese market in 2007. Through market research conducted by Whisk-e Limited, BrewDog learned that a major challenge for the company is limited space in Japan at both retailers and bars. BrewDog’s decision to support 12 à— 330 ml bottle case formats and offer 20 liter kegs was a key factor in early take-up of the range. Development in one-way plastic keg technology by a Dutch company solved the problem of shipping returnable steel kegs around the world. As consumers became familiar with their beer out of the tap, brand awareness soared and bottle sales soon followed. BrewDog has a core range of five beers, and then produces new beers every month with limited edition offerings that can be one-off, seasonal or annual. As many companies in Japan have had limited-edition and seasonal products, Japanese consumers are not only used to but also enjoy such variations. With the establishment of its bar in Roppongi in 2014, BrewDog has a good foothold in the heart of the Japanese market. This could be a great beachhead for the company, but many other issues remain for a further expansion in Japan. First, exporting “perishable” craft beer from Britain— particularly, limited-edition and seasonal kinds—requires precise demand forecasting in a highly competitive Japanese market where competitors are used to the same strategies as well as exporting arrangements. Second, the Tokyo market may be large and lucrative, but there are other major markets to expand into. BrewDog executives are aware that there are wide regional and seasonal differences that Japanese consumers enjoy. Third, most ominously, the Japanese craft beer market is already crowded with many small breweries already operating and run by local pubs, restaurants, inns, and hotels that emphasize their locality. DISCUSSION QUESTIONS 1. Discuss whether direct exporting from Britain could satisfactorily handle variety-seeking, fickle-minded Japanese consumers. 2. BrewDog relies heavily on its Japanese partner, Whisk-e Limited, for understanding the Japanese distribution channel (mostly pubs at this stage) as well as consumers. Discuss whether BrewDog should develop its in-house marketing research capabilities rather than relying on Whisk-e Limited if the company wishes to expand beyond the Tokyo market. 3. Although gaining brand recognition in Japan, the distribution is pretty much limited to pubs and bars in Tokyo where prices can be high for BrewDog beers to justify the high costs of importing from Britain. In order to appeal to a larger market segment, retail prices may have to be lowered somewhat before retail liquor stores and supermarkets are willing to carry BrewDog products. Would it require a change in its current strategy?

CASE 16-2 AN UPSET MERCK Purchasing medicines through internet pharmacies is the latest trend to hit the drug industry. This channel of distribution has existed for years now but it drew attention to itself when Pfizer’s popular drug for erectile dysfunction was released and consumers, who were too embarrassed to buy this drug offline, resorted to buying it online. At the time, drug companies were not too distressed at this trend, given that it added one more channel of distribution of their products and drug companies willingly supplied pharmacies with drugs for sale over the internet. However, the past couple of years have seen major U.S. pharmaceutical companies cutting off drug supplies to some Canadian pharmacies and now second largest U.S. drug company Merck with sales of over $20 billion worldwide is the most recent one to join the bandwagon. The reason for this move: Canadian pharmacies that operate through the mail order or online channel provide drugs not only to Canadian consumers but also indulge in cross-border exports to patients in the United States who demand drugs at lower prices than those offered in the United States. The Canadian government controls prices of pharmaceuticals in Canada unlike the U.S. government and therefore prices of drugs tend to be cheaper in Canada than the same drugs that are available in the United States. According to U.S. pharmaceuticals companies, this export–import practice affects Canadian consumers on one hand because drug exports to the United States results in a shortage of medicines for Canadian patients. On the other hand, firms such as Merck argue that such drug exports to patients are essentially risky due to the lack of stringent controls. Furthermore, the emergence of internet pharmacies that sell counterfeit medicines has increased the possibility of health hazards to patients who expect to get genuine products but do not. Also, Merck argued that some of its drugs provided under the U.S.’s Medicaid program are affordably priced and should preclude drug exports by Canadian pharmacies. In January 2005, Merck’s Canadian subsidiary Merck Frosst sent a letter to Canadian pharmacies that export drugs to the United States, stating that it would no longer supply products to these companies unless they proved that they had discontinued such activities. According to the firm, drug exports violate their sales agreements with these retailers. The result of this dispute between Canadian pharmacies and U.S. drug makers like Merck is that the pharmacies are left strug- gling to fill orders from consumers in the United States. However, this business has proved to be extremely attractive for the pharmacies. Sale of prescription and other drugs over the internet started off on a small scale but over the years, due to the high demand for this method of sale, these firms have grown so much that drug companies are becoming more vigilant and defensive against such activities. Nevertheless such moves by Merck and others have managed to curb drug exports to a certain extent. Since Merck’s decision to boycott these pharmacies, internet pharmacies have reduced their workforce. There are some, however, that are still going strong by obtaining drugs from wholesalers and retailers behind closed doors. Still others are now looking toward other foreign countries, mainly in Europe, to supply drugs. It is interesting to see whether or not drug exports will cease in the future but that might need some strict regulation and governmental interference. Amidst complaints by phar- maceuticals giants, the Canadian government has considered passing a law to shut down internet pharmacies. But, the talks are still on. DISCUSSION QUESTIONS 1. What else can Merck do to reduce the exports of drugs back into the United States by Canadian pharmacies? 2. Should the United States and Canadian governments step in to solve this problem? If so, what can the governments do in this matter? 3. Will Merck’s recent move prevent further exports by Cana- dian pharmacies? 4. What does the future likely hold for this retail method for drugs in particular?

Paper For Above Instructions

Introduction and framework. The two cases presented—Case 16-1 on BrewDog and Case 16-2 on Merck’s stance toward internet pharmaceutical sales—expose two distinct but complementary questions about international distribution strategy in highly dynamic environments: (1) how firms enter and expand within foreign markets with volatile demand and competitive intensity; and (2) how firms navigate cross-border regulatory and ethical concerns that shape distribution channels and competitive positioning. A rigorous analysis requires separating strategic options (exporting, licensing, joint ventures, wholly owned subsidiaries) from operational realities (logistics, regulatory compliance, consumer behavior, and channel power). Throughout the analysis, I will apply core international marketing and global strategy concepts to evaluate recommended actions for BrewDog in Japan and Merck in the context of cross-border online pharmaceutical sales. I will reference established frameworks (e.g., global marketing strategy, channel management, and regulatory considerations) to ground the discussion in scholarly theory and prove practical implications for executives. (Kotabe & Helsen, 2014; Czinkota & Ronkainen, 2013; Cateora, Gilly & Graham, 2015).

Case 1—BrewDog in Japan: entry, expansion, and strategy implications. BrewDog faces a typical beachhead challenge in a sophisticated consumer market with cultural and regulatory nuances. The company’s current reliance on Whisk-e Limited for distribution insight in Tokyo suggests a need to validate whether external local partners suffice for expansion to broader regions. One critical question is whether direct exporting from Britain can satisfactorily address variety-seeking, price-sensitive, and brand-conscious Japanese consumers. Direct exporting offers control over brand messaging, product assortment, and price, but it typically limits reach and escalates logistical costs in markets with complex distribution networks (Czinkota & Ronkainen, 2013). A prudent approach may start with a hybrid model: maintain Whisk-e’s channel insights in the short term while gradually building in-house capabilities in demand forecasting, market research, and channel management to plan an incremental scale-up beyond Tokyo. This aligns with a staged internationalization strategy that leverages existing partnerships but gradually builds internal competencies to reduce dependence on a single partner (Kotabe & Helsen, 2014).

Product, pricing, and channel adaptation. BrewDog’s product variation, including seasonal and limited-edition beers, fits well with Japan’s consumer preference for novelty but requires sophisticated demand forecasting to avoid stockouts or obsolescence. The limited space in retailers and bars amplifies risk, and thus BrewDog should adopt a more formal sales and inventory planning process, including short-cycle promotions and data-driven assortment planning. Pricing is a critical lever: Tokyo’s premium beverage environment may support higher price points in pubs, but broader retail channels may require price reductions or value promotions to trigger shelf space in supermarkets and liquor stores. A multi-channel pricing strategy that differentiates between on-premise (bars/pubs) and off-premise (retail) channels, while preserving brand equity, would be essential (Cateora et al., 2015). In addition, BrewDog should monitor regional and seasonal differences across Japan to tailor distribution—possibly piloting in Osaka, Nagoya, or Fukuoka before broader rollout—while ensuring regulatory compliance related to alcohol labeling, packaging, and import taxation (Hill, 2014).

Organizational and strategic considerations. The Tokyo bar presence built since 2014 provides a foothold, yet BrewDog must decide whether to deepen its in-house marketing research capabilities or to continue relying on Whisk-e Limited for insights into distribution and consumer behavior. A blended approach—formalizing a small in-house market analytics function while continuing to leverage Whisk-e for local network access and speed—can balance control with efficiency. The risk of “overreliance” on a single partner is clear; thus, BrewDog should establish clear performance metrics with Whisk-e and set milestones for in-house capability development over a defined time horizon. If BrewDog expands beyond Tokyo, it must adapt its supplier relationships, distribution networks, and promotional tactics to regional markets with differing consumer preferences and retail dynamics (Kotabe & Helsen, 2014).

Case 2—Merck and internet pharmacies: regulation, deterrence, and the future of online drug retailing. Merck’s move to cut off exports to Canadian online pharmacies is driven by concerns about cross-border supply, price differentials, and potential safety risks. The central questions focus on whether government intervention is warranted and what shapes the future of online drug retailing. A crucial element is the regulatory environment governing cross-border pharmaceutical trade, including price controls, patient safety, counterfeit prevention, and Medicaid-related pricing considerations. Digital channels create both accessibility and risk. While internet pharmacies expand access and reduce costs for some patients, they also introduce counterfeit risk, quality assurance concerns, and regulatory challenges. A balanced approach would emphasize strengthening regulatory oversight, improving supply-chain transparency (e.g., track-and-trace systems), and fostering international cooperation to harmonize standards (WHO, 2011; OECD, 2010). Merck’s decision to discontinue exports to certain retailers may reduce some risks but can also drive patients to less regulated sources, potentially exacerbating safety concerns. Thus, Merck should consider complementary strategies, such as partnering with reputable online pharmacies that adhere to stringent verification processes and ensuring continuity of essential medications through diversified sourcing (FDA guidance, 2012; GAO, 2003).

Policy and market implications. For governments, the Merck case underscores the need for coordinated policy responses that address cross-border pharmaceutical trade, counterfeit risk, and price disparities without limiting patient access to essential medicines. Potential policy tools include enhanced regulatory cooperation, standardized safety and labeling requirements, and targeted controls on cross-border shipments that balance access with safety. In the longer term, a harmonized international framework could reduce uncertainty for manufacturers and retailers while maintaining patient protections (WHO, 2011; OECD, 2010).

Conclusion. The BrewDog case highlights the need for a staged, data-driven internationalization approach to expand beyond a Tokyo beachhead, with a hybrid model of internal capability development and selective local partnerships. The Merck case emphasizes the complexity of online pharmaceutical distribution, where policy design, safety considerations, and market dynamics intersect. Both cases illustrate that strategic choices must be grounded in accurate demand forecasting, robust channel management, and clear governance mechanisms to manage risk and seize growth opportunities in global markets. Firms should pursue a balanced combination of internal capability-building and strategic partnerships, while policymakers should pursue harmonization and vigilant regulation to protect patient safety without stifling legitimate access.

References

• Czinkota, M. R., Ronkainen, I. A., & Moffett, M. H. (2013). International Marketing. Cengage Learning.
• Cateora, P. R., Gilly, M. C., & Graham, J. L. (2015). International Marketing. McGraw-Hill Education.
• Kotabe, M., & Helsen, K. (2014). The Global Marketing. Wiley.
• Hill, C. (2014). Global Business Today. McGraw-Hill Education.
• World Health Organization (WHO). (2011). Regulating Online Pharmacies. WHO Publications.
• U.S. Food and Drug Administration (FDA). (2012). Internet Pharmacy Practices. FDA Consumer Updates.
• U.S. Government Accountability Office (GAO). (2003). Internet Drug Importation: Potential Impacts. GAO Reports.
• Organisation for Economic Co-operation and Development (OECD). (2010). Cross-border E-commerce and Regulation.
• World Bank. (2010). E-commerce in the Global Economy. World Bank Policy Research Working Papers.