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TWO DOGS BITES INTO THE WORLD MARKET: FOCUS ON JAPAN CREATION OF "TWO DOGS" On a cool winter day in Adelaide, South Australia, a city with a...

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TWO DOGS BITES INTO THE WORLD MARKET: FOCUS ON JAPAN CREATION OF “TWO DOGS™” On a cool winter day in Adelaide, South Australia, a city with a population of 1.1 million, Duncan MacGillivray found himself in a conversation with his neighbour who had too many lemons for which he was trying to find a use. MacGillivray, who owned a pub in the city, decided to brew the lemons into an alcoholic drink to serve as a refreshing alternative to draught beer. Thus was born the world’s first commercial brewed alcoholic lemon drink. The brew, which became known as TWO DOGS™ after a joke, became a highly popular drink and was soon made available on tap (draught) in pubs all around Adelaide, as shown in Figure 1. Figure 1: Creator, Duncan MacGillivray, with glass of original draught Two Dogs The popularity of the drink quickly spread by word of mouth. In response to the dramatic increase in sales, the company commenced bottling the drinks in 1994 to increase its product availability in the distribution channel. To meet the demand, TWO DOGS™ was produced under contract by a local brewery in Adelaide. This enabled the company to focus its resources on marketing and brand building activities, instead of investing in a costly commercial brewing and bottling facility. TWO DOGS™ quickly gained market acceptance, firstly because consumers loved the new taste sensation of ‘brewed alcoholic lemonade’, but also because it filled a real market niche for a ready-made beverage similar to beer but with an easy flavour profile. TWO DOGS™ exceeded initial expectations when it reached domestic sales of over 400,000 cases in the first twelve months, and extended its presence to the whole of Australia within one year of launch. The success of TWO DOGS™ attracted competitors, who sought to emulate TWO DOGS™ and capitalise on the newly created and rapidly growing consumer niche. The first competitor This case was prepared by Professor Amal Karunaratna of the University of Adelaide, Australia for class discussion rather than to illustrate either effective or ineffective management of a situation described (2003). 1
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came in late 1994 from Australia’s largest brewer (Fosters); the product ‘Sub Zero’ was a sweetened alcoholic soda targeted at young adults. By 1995, there were dozens of different sweet alcoholic drinks, all brightly coloured, exotically flavoured with catchy names including “Z”, “KGB”, “Cactus”, “Ruski”, “DNA”, shown below in Figure 2. Figure 2: Early Competitors in Australia INTERNATIONAL EXPANSION In the face of fierce domestic competition, the company Two Dogs International (“TDI”) commenced an international expansion program in 1995. Its first market entry was into the United Kingdom. In the Northern hemisphere summer of 1995, riding on the back of the close historical and cultural connections between Australia and the UK (including common language and similar legal and regulatory systems), the first eight shipping containers of TWO DOGS™ arrived in the UK. TDI initially adopted a direct export strategy, selecting and appointing a relatively small but well established English cider maker as its exclusive distribution partner. The appearance of TWO DOGS™ incited massive consumer interest, such that it was impossible to meet the surging demand given the six week shipping time from Australia. Therefore TDI quickly moved to a licensing strategy, allowing TWO DOGS™ to be produced in the UK. Within six months of its official launch in May 1995, TWO DOGS™ outperformed the initial annual sales target of 300,000 cases, and went on to achieve one million cases in 1996. Following its UK market success, and utilising its production base within the European Union, TWO DOGS™ commenced export from the UK into continental Europe including Denmark, Finland, France, Germany, Italy, the Netherlands, Norway, Sweden and Switzerland. Around the same time, in June 1996, TWO DOGS™ commenced its US market entry. Learning from the UK experience and also due to high import duty on alcoholic beverages, TDI adopted a licensing strategy incorporating local production from the start. By 2001, with 2
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Running head: TWO DOGS 1 Two Dogs
Institution Two Dogs
1. Should TWO DOG maintain its premium price and thus risk losing volume growth
to cheaper products?
TWO DOGS Company should maintain its...

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