Factors influencing a companys market share: an Estonian beer market case study

Andres Kuusik
University of Tartu, Estonia

Jorma Larimo
University of Tartu, Estonia
University of Vaasa, Finland

Urmas Varblane
University of Tartu, Estonia

Abstract

There have been big changes on beer markets of CEE countries. Big multinational companies have moved in and
strongly influenced the market shares. The aim of the paper is to find explanations, what factors were behind of
the developments in market shares of Estonian breweries. We will do it from the local breweries point of view.
For that purpose we have investigated literature and empirically conducted in-depth interviews with CEO-s of
leading breweries and analysed statistical data to get affirmation to theoretical statements. Our study revealed
that major changes in market shares are explainable mainly by resources companies have, and by discontinuous
innovations and radical changes in brand architecture.

Andres Kuusik (PhD)
Senior Lecturer of Marketing
University of Tartu
Faculty of Economics and
Business Administration
Narva Rd. 4 A214
51009 Tartu University
Estonia
Phone: +372 737 6321
e-mail: andres.kuusik@ut.ee
Jorma Antero Larimo (PhD)
Professor of International Marketing
University of Vaasa, Department of
marketing.
Professor of International Marketing
University of Tartu; Faculty of
Economics and Business Admin.
Narva Rd. 4 A226
51009 Tartu University
Estonia
e-mail: jla@uva.fi
Urmas Varblane (PhD)
Professor of International Business
University of Tartu
Faculty of Economics and
Business Administration
Narva Rd. 4 A226
51009 Tartu University
Estonia
Phone: +372 737 6361
e-mail: urmas.varblae@ut.ee
 INTRODUCTION

During the past 20 years there have been a lot of changes on beer markets of CEE countries. In this
paper we will focus on the strategies of main players on the Estonian beer market. Although the Estonian beer
market is the smallest beer market in CEE and CIS, the growth of beer production and consumption was second
biggest within CEE and CIS from 1992 until 2007/2008 (based on the FAOstat 2010, see Swinnen & Van Herck,
2011). In 2009 the Estonian beer consumption per capita was 85.4 liters, which is clearly above the EU-27
average 75.3 liters (Brewers 2010). Estonia was among the first Eastern European markets which were
entered by foreign breweries through acquisitions. There have been also very interesting developments on the
Estonian beer market. At the beginning of 1990s there were four equal breweries on the Estonian market. Today,
one of these companies is out of the market, one is a niche player, and other two are struggling for the market
leader position, whereby one of the last mentioned has meanwhile enjoyed a market share about 56% when at the
same time the other company had only 14% of market.
The aim of the paper is to find explanations, what factors were behind of the developments of Estonian
breweries market shares. Instead of focusing on the strategies of multinationals which entered to the Estonian
beer market in 1990s, we will analyse the strategies and developments of the local breweries, which had to
survive and adapt with new situation to be successful. For long, market share has been widely recognized as a
goal in marketing plans and as a measure of competitive nonfinancial performance (Buzzell and Wiersema,
1981; Newbert, 2008). There exist also a wide literature about the positive relationship between market share
and profitability (Boulding and Staelin, 1990). Therefore, in this paper we use the term market share
synonymously with success and performance.
The structure of this paper is as follows: First we will provide an overview of the literature about the
possible factors which theoretically can influence the market share of a company. Next sections are devoted to
the description of the activities and strategies of the main players of the Estonian beer market during the past 20
years. In the final part of the paper we will provide an analysis and discussion about the possible reasons and
factors which have influenced the dynamics of market shares of Estonian breweries during that time.
The general beer industry related data used in the article are obtained from different alcohol market
research reviews made by Estonian Institute of Economic Research as well other market research companies,
international business journals and brewery organizations. The company level data of two leading local
breweries is based on the interviews of the managing directors and marketing director (Kastein, 2012; Noop,
2012; Vernik 2012) and on material published in the annual reports and web-pages of these companies.
Information concerning two other key Estonian breweries is based on the web-page info of those companies.

LITERATURE OVERVIEW

Several authors have mentioned different aspects, which have an influence on success or market shares
of companies (see Table 1). First of all Levitt (1960) pointed out the importance of the defining the business the
company is really in. To be successful, companies cannot define their businesses too narrowly or too product
based. Levitt brought out also the importance of vigorous leader who has to have a vision of grandeur.
The quality of the human capital is mentioned also by authors of resource based view (RBV) of the
company (Barney, 1991). RBV emphasizes firm-specific resources and the existence of isolating mechanisms as
the fundamental determinants of firm performance (Teece et al., 1997) Theses resources are tangible and
intangible assets as already mentioned human capital resources (training, experience, judgements, intelligence,
relationships and insight of managers and workers), but also physical capital resources (technology, plant,
equipment, location, access to raw materials), and organisational capital resources (structure, planning,
coordinating and controlling systems and relations among groups within and between organisations) (Barney,
1991). Wernerfelt (1984) has mentioned in addition also brand names, trade contracts and loyal customers.
Some authors have found that the market share of a company is also dependent on tactical marketing
mix decisions. For example Best (2005) has proposed a market share index, where market share is directly
dependent on promotion, product quality, price and service quality. Fogg (1974) have pointed out five key
aspects which are important for gaining market share: prices below competitive levels; product modifications or
significant innovations; more rapid delivery than competition; larger, better-trained, higher-quality sales force;
and advertising and sales promotion. Buzzell and Wiersema (1981) have found that relative product quality,
changes in quality and a new product activity appeared to be important dimensions of market share change. Also
sales force spending was strongly associated with market share change. Media spending, in contrast, appeared to
be much less strongly related to market share change. Leone and Schultz (1980) have found too, that the
elasticity of advertising on company (brand) sales is low. For frequently purchased branded goods, excluding

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cigarettes and gasoline, reported elasticities ranged from .003 to .23. According to that, Graham (2009) has
raised the question Whats the point of Marketing anyway?. The findings of his study revealed that
exceptional, permanent, structural change in market share is achieved not through everyday manipulation of the
promotional mix, but by a major change to brand architecture or some discontinuous innovation.
One special topic in the literature focuses on the advantages of first movers and followers. First movers
have several advantages which can lead to bigger market share, for example: pre-emption of scarce assets giving
privileged or exclusive use; preferential access to distribution channels; strong image and reputation advantages
deriving from pioneering success; building brand loyalty and switching costs for customers; technology
leadership; dictating the terms of competition by setting industry standards; etc (Hall and Densten 2002; Cottrell
and Sick 2002). Wernerfelt (1984) has pointed out that first mover advantages are valuable only if they are
protected and translated into an entry barrier. Also Brown and Lattin (1994) and Huff and Robinson (1994) have
accented the importance of the lead time, when pioneer should create sustainable competitive advantage against
followers. For followers the potential keys to success can be the ability to learn more about a technology before
irreversibly committing scarce resources; the advantage of observing market reaction to product design and
features, avoiding sunk investment in obsolete technology (Cottrell and Sick 2002). Hall and Densten (2002)
have brought out late adoption only makes sense if the market is growing rapidly and significant scale economies
are available for a late entrant.
Additionally, Buzzell and Wiersema (1981) have found that exit of competitors is clearly factor that
deserves attention in modelling market share change, although its effect was quite variable in their study. They
concluded that the impact of a competitor exiting depends strongly on who exits. Pleshko and Heiens (2012)
have found that marketing strategy decisions as being aggressive or passive, defender or prospector, are relevant
to a firms market share, especially when these decisions are in consistence with firms market position.

TABLE 1.
Summary of factors which influence the market share of the company based on literature overview
Existing resources Strategic decisions Tactical activities Environmental
conditions
Physical: access to Defining the business Product features Entry and exit of
raw materials, tech- (Levitt, 1960) (Buzzell and competitors (Buzzell
nology, equipment, Wiersema, 1981; and Wiersema, 1981)
etc. (Barney, 1991; Fogg, 1974)
Wernerfelt, 1984)
Organisational: Timing: being first mover Distribution, sales Market growth (Hall
systems and relations or follower. (Hall and force (Buzzell and and Densten, 2002)
within and between Densten 2002; Cottrell Wiersema, 1981;
organisations. and Sick 2002; Fogg, 1974)
(Barney, 1991; Wernerfelt, 1984; Brown
Wernerfelt, 1984) and Lattin 1994; Huff and
Robinson 1994)
Human: training, Marketing strategy: Service/Delivery
experience, etc. of aggressive vs passive; (Best, 2005; Fogg,
managers and prospector vs defender. 1974)
workers. (Barney, (Pleshko and Heiens,
1991; Wernerfelt, 2012)
1984)
Marketing: brands, Change in brand structure Promotions (Best,
contracts, loyal (Graham, 2009) 2005; Fogg, 1974)
customers.
(Wernerfelt, 1984)
Discontinuous innovation Pricing (Best,
(Graham, 2009; Fogg, 2005; Fogg, 1974)
1974)
Source: compiled by author

We divided all factors introduced above into 4 groups in Table 1. The list of factors in Table 1 is clearly
not complete but based on the literature overview we can conclude that market share dynamics of the company
depends mainly on: (1) existence of resources: physical, organisational, human and marketing resources; (2)
strategic decisions like defining the market, changing brand structure, launching radical innovations, choosing
the competitive strategy and timing the entrance; (3) tactical decisions, like product, pricing, promotion or

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distribution policies; and also (4) environmental conditions like entry and exit of competitors and market
growth, which was important by Hall and Densten (2002) especially for late comers.

KEY EVENTS IN DEVELOPMENT OF MAIN PLAYERS IN ESTONIAN BEER MARKET

PRELUDE
After the Second World War, when Estonia was incorporated into Soviet Union, all beer factories were
nationalised and market based system was replaced by centrally planned system. It caused quick reduction of
quality of produced beer as the competition between producers was eliminated. The production of Western
European type of lager or stout beer in Baltic States or Russia was very limited. The dominating official local
products like Ziguli beer, Moskva, and Kuldne oder (Golden barley) were produced by several producers
following centrally fixed preparation recommendations. But still every producer had also its own assortment.
There were four bigger beer producers: Saku, Tartu, Prnu and Viru. Due to the weaknesses in production
technology the beer lasted good only some two weeks, which limited heavily also the distribution range of
breweries. They served mainly only nearby regions around the breweries and hence Saku served Tallinn the
capital with its surroundings, Tartu served southern, Prnu western and Viru north-eastern region of Estonia. In
addition to the big breweries there were also around 25 microbreweries in operation.

STORY OF SAKU BREWERY

The Saku brewery was established in 1820. During the Soviet period in 1976 Saku was given the title as
experimental brewery, which provided special preferences from Soviet Planning Agency (GOSPLAN) toward
investments. It helped Saku to invest and therefore it was the most attractive target for foreign investors among
breweries. Saku succeeded to be included into the list of so called pilot privatization list of firms and hence was
among the first Estonian companies that were privatized at all after regaining independence of Estonia in 1991
(Terk, 2000). The company had all the time focused only on beer production and the company had been the
biggest brewery in Estonia for a long time. A majority (60%) of the shares from the Saku company was acquired
by BBH (Baltic Beverage Holding), a company that was established only somewhat earlier jointly by two Nordic
breweries - namely Pripps from Sweden and Hartwall from Finland to establish and manage brewery operations
in various CEE and CIS countries. The rest of the shares of Saku brewery were owned by several local investors.
BBH started straight away significant reconstruction and development operations in the brewery. The
production of the brewery was in 1992 ca. 20 million litres and the company had 210 employees. In 1998 the
production was already 38 million liters and in 1999 it reached 47.5 million litres. The company started in 1996
exports to Finland and Sweden. In 1999 exports was some three million litres (some 6 percent of the total
production). The company was also the official representative of the leading Finnish beer brand in the 1990s -
Lapin Kulta - in Estonia. Since January 27th 1998 the shares of Saku Brewery were traded in the list on the
Tallinn Stock Exchange. After several changes in ownership, on 20th of September 2008 the shares of Saku
Brewery were delisted from Tallinn Stock Exchange - Saku belonged totally to the Denmark based Carlsberg.
From privatization till now Saku has had 5 different CEO-s.
The success of Saku started with the launch of Saku Originaal in 1993 (see Figure 1). It has been until
now the leading brand (alcohol content 4.6 percent) of Saku. The second strong brand is Saku Rock which was
launched right after Saku Originaal and was targeted to younger consumers. As Saku Originaal and Saku Rock
are quite masculine brands, Saku started very early to produce special milder testing labels for more feminine
segments: in 1999 launched Saku on Ice and in 2006 Saku Dlight. In super premium segment Saku launched
Sack bei Reval for the 180th anniversary of Saku in 2000 and Saku Kuld (Saku Cold) in 2005. Other labels have
not had so much influence. From the more recent launches can be mentioned the introduction of Saku Gourmet
collection in 2010 and the set of European bears in 2011 which included three brands of different types of bears:
Dublin (stout), Manchester (ale), Praha (dark beer). In 2012 this European collection was complemented by
Stuttgart (wheat beer). In 2011 and 2012 Saku has also launched several milder (Saku Ehe), lighter (Saku 2,8%
and Radler) and non-alcoholic beers (Rock Zero). Right now Saku is offering on Estonian market also several
imported beers: Carlsberg, Tuborg, Kronenbourg 1664, Baltika 3 Classic, Baltika 7 Export, Baltika 0, Holsten,
Staropramen Premium, Staropramen Dark, and Koff Export. Beside beer Saku is offering also other product
categories: for example in 1995 the launched Vichy Classic mineral water, in 2001 they started to produce cider,
in 2002 long drink etc. In 2007 when they launched nearwater category, Saku changed its corporate slogan and
positioned itself as drinks producer instead of beer producer.
In spring 1998 Saku brewery launched a new type of a 0.5 litres bottle. The new packaging was needed
because the previous type of bottle, inherited from the Soviet period and in use ever since, had quality problems
accompanied by the poor image. New bottle and new more attractive boxes for these bottles had a clear

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influence on Sakus market share in 1998. In 2005 Saku started to offer beer in PET bottles (1,5l) which also
influenced the market share positively.
Saku brewery has during the years had several campaigns targeted clearly either to men or to women. In
most cases the advertising has been very masculine but the campaigns of e.g. Saku Ice and Saku Delight have
been clearly targeted to women. Saku was first who started to sponsor a basketball team (T Rock), Saku
invested to Saku Big Hall in 2001. Saku was the first main sponsor of the Estonian General Singing and Dance
Festival. Since 2003 Saku has organized also lotteries and other promotional games. During the last years the
importance of lotteries has tremendously decreased because of roughened legislation restrictions.
The market share of the Saku brewery increased during years 1993-1995 from 45% to 57% due to the
launching Saku Originaal and Saku Rock. Since year 1998 till 2011 the market share has dropped to around 40%
- 42%. Short time exceptions in decrease have been in 1998, when Saku launched new bottle and box, in 2001,
when Saku launched 3 new products and during year 2004-2006, when Saku started to use 1,5l PET bottles and
launched super premium beer Saku Kuld.

STORY OF TARTU BREWERY

Tartu brewery was established in 1826, when J. R. Schramm started to manufacture lager type of beer in
Tartu, which worked since 1893 as Tivoli brewery. In 1912 Tivoli was acquired by A.LeCoq and in 1913 the
Tivoli brewery was renamed as A.LeCoq. After nationalization of the breweries in 1941 the name of the
company was changed to Tartu brewery. The company was thoroughly reconstructed in the 1950s and early
1960s and in 1960 the company was appointed as the leading enterprise of beer and beverages. In 1968 the
company started as the first Estonian company to bottle mineral water.
Tartu brewery was not as successful in the privatization process as Saku. After some failed negotiations
an Estonian holding company Magnum Group acquired Tartu brewery in 1995. The idea was to develop the
company and to sell on. The production of Tartu brewery was only 13.5 million liters in 1995. Already in
October 1996 Magnum Group sold 15 percent of the shares to a Finnish Olvi corporation, which was at that time
a relatively small, but growing family owned brewery in the Finnish markets. In 1997 Olvi increased its
ownership and promised to invest in total 270 million Estonian crowns to the development of the company
during the following years. Big investment projects to renew the production processes and quality of the beer
produced were started immediately. The facilities were ready in 1999 and already in the same year the
production volume reached ca. 30 million liters - thus twice as much as the production volume of Tartu brewery
in 1995. In 1999 a holding company A.LeCoq was established to control Olvis operations in Estonia and also
the newly acquired units in Latvia and Lithuania. Also the name of the company was decided to be changed from
Tartu brewery to A.LeCoq. In Spring 2000 Olvi came as the sole owner of the brewery via a holding company
A.LeCoq. The brewery has had the same CEO since the privatization.
In 1999 Tartu brewery decided also to diversify alcohol production outside beer industry and started as
the first Estonian company to manufacture cider. The Finnish parent company Olvi had started cider production
some years earlier and the good experiences from this diversification in Finland gave basis to make the
respective diversification outside beer production also in Estonia.
In early 2000s the production volume of beer almost doubled. However, at the same time A.LeCoq
decided also to continue the expansion outside beer production. In 2001 the company started to manufacture as
the first company in Estonia sport drinks and at the same time expanded production of soft drinks and cider. In
2002 the company became the leading drink producer of Estonia with a volume of 55,928 million liters. An
additional significant strategic move existed one year later when the acquired the Estonian beverage company
AS sel Foods, which manufactured juices, mineral waters and vitamin-enriched soft drinks. In 2004 the
company is the first drink manufacturer to exceed the production margin of 100 million liters in Estonia.
In 2005 the company started as the first one in Estonia to produce near water. The latest structural
change happened in late February 2012 when A.LeCoq decided to buy 49 % of the Karksi brewery. The brewery
belongs to the microbreweries. The acquisition was not motivated by the beer production of the Karksi
Company, but the existing conditions and means for producing the apple wine that is used to make ciders and
long drinks. Because of the growth of both domestic sales and exports of ciders and long drinks A Le Coq
needed quickly extended capacity and Karksi provided these opportunities.
The main brand of Tartu brewery was during the whole 1990s the brand Alexander. It was launched as a
response to Saku Originaal (see Figure 1). Interesting is that without any special promotion Alexander is sill one
of the leading labels on the Estonian beer market today (Vernik 2012). As referred earlier, in 1999 the Tartu
brewery adopted again the old brand name A.LeCoq. In the 2000s the main brand of the company has been the
A.LeCoq Premium (alcohol content 4.7 percent). This brand represented still in 2011 ca. 35 % of total beer sales
of the company followed by Alexander. Several times A.LeCoq has supported its leading brand with short term
special editions: in 2001, 2010 and also in 2012 different kind of A.LeCoq Premium Extras have been launched.

5
Third strong brand is A.LeCoq Special, which is super premium beer and was launched in 2007 for the 200th
anniversary of A.LeCoq. The company also tried to compete with Saku Rock and launched in 2002 a beer named
Black, but this was not successful. Therefore it was replaced with label Disel in 2004. Disel is still on the
market but compared with Saku Rock the brand has not been as successful. Because the A.LeCoq Premium has
not so masculine imago A.LeCoq had no need to offer special products for more feminine segments. Only 2008
A.LeCoq started to offer more lighter products for women beer cocktails (Beershake Rose in 2008, Beershake
Tequila & Citrus in 2009 and two new tastes of Beershake Granberry, Lime and Grapefruit in 2010) and special
beers (Premium Extra and Premium Extra Lemon in 2012). From the more recent launches of new types of beer
by A.LeCoq can be mentioned the launching of A.LeCoq Maiz (2010), in which 20% of malt is replaced with
corn malt, A.LeCoq Pils (2011) which is Czech type beer and A.LeCoq Organic in 2012, which is the first
organic beer in Estonia. Right now A.LeCoq is offering on Estonian market also several imported beers:
Heineken, Buckler, Sandels, Olvi Export, Lidskoje Premium, and Edelweiss.
Company has influenced beer market several times with packaging in 2000 A.LeCoq launched 4packs
and in 2005 covered cans with foil. Both of those innovations were very successful. More recently A.LeCoq has
introduced pint (0.568L) size packages: in 2009 pint size can and in 2012 Alexander Suur (Alexander Big) in
pint size bottle.
The campaigns by A.LeCoq have usually not been targeted especially to men or women although some
exceptions can also be found like the advertising related to Disel beer which has been targeted to men. Following
Saku, A.LeCoq started also to support a basketball team (TT A.LeCoq) and invested to A.LeCoq Arena. Since
2001 A.LeCoq has been the main sponsor of the Estonian General Singing and Dance Festival. In 2002 A.LeCoq
was the introducer of the lotteries and other promotional games.
The market share of the A.LeCoq brewery dropped during years 1993-1998 from 22% to 13%. Since
year 1998 till 2011 the market share has almost continuously increased, reaching now 40% - 42% equally with
Saku.

STORY OF VIRU AND PRNU BREWERIES

The third biggest local brewery Viru brewery was also nationalized soon after the independence of
Estonia was regained. This brewery was established in 1975 by the collective farm in order to diversify their
business. It was common practice in Soviet Union to facilitate production of consumer goods by collective farms
next to their main activities. The company produced originally only one beer brand Ziguli beer but started to
produce also other brands during the 1980s. In 1991 the name of the brewery was changed to AS Viru lu.
Already in 1992 a Danish brewery AS Harboe Brgyggeri acquired a majority share in Viru lu located in
Rakvere some 60 kilometres east from Tallinn. Following the strategy by BBH also Harboe increased ownership
in the brewery to 75 percent some years later. In contrast to BBHs Saku strategy, Harboe decided to expand
Virus product sortiment and Viru started to produce also soft drinks in 1995.
As in the case of Saku, the foreign owner modernized the production processes, but it took more time
with the modernization as the starting position differed from Saku. Hence Viru could not take the benefit of new
situation, being owned by foreign investor as much as it would had been possible. First when the company
started to produce under license from the Danish parent company a beer called Bear Beer with very strong
alcohol contents (7.5%) Viru started to gain more market share (see Figure 1). Although the alcohol contents was
high, the price of the beer was low, which together with started economic slowdown gave to Viru a market share
of over 10% and second position in the Estonian markets in late 1990s.
In 1998 Viru brewery launched Toolse Originaal, which was very close imitation of Saku Originaal. It
was not successful because the market share started to drop already in next year. In 2001 Viru tried to launch
new brand Frederik Premium. Although the launching campaign was very huge and costly it failed. In 2003 Viru
brewery introduced the big 1.5 litre PET bottles to the Estonian market. The influence was so strong that Saku
brewery also reacted and made an investment into PET packaging production line. In 2006 the HF Puls
trademark was acquired by the Viru brewery. In 2011, when Harboes brewery closed down its brewery in
Roskilde, Denmark and transferred the production to Estonia, Viru brewery started to produce via license
gourmet beer under trademark Gourmet Bryggeriet.
The market share of Viru brewery is today on the same level as it was in 1993. There have been several
fluctuations in market share of Viru brewery during that time, including also three bigger increases: during
1997-1998, when Bear Beer was launched; during 2003-2004, when PET bottles were launched and finally
during 2008 when Viru took over the production of Prnu brewery.
Prnu brewery the fourth somewhat more important local brewery in the early 1990s stayed
without foreign owner. The company could keep its market position in some 8-9 % up to 1997, but after that the
company started to loose clearly its market share (see Figure 1).
Prnu brewery launched Perona in 2001 and Puls in 2006. Both had influence on the market share of the
company. The Based on the success of the beer brand the name of the company was also changed to Puls

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brewery in 2006. Because of the decreasing sales figures Viru brewery acquired the HF Puls trademark in 2008
and production of the beer was transferred already in the same year from Prnu to the Viru brewery. Since 2008
Prnu brewery does not exist anymore on the Estonian beer market.

DISCUSSION

The dynamics of market shares of main Estonian breweries and their main activities concerning products and
packaging are summarised on the Figure 1. The figure reveals that one of the main reasons of the market share
changes is the radical innovation or radical changes in brand structure as Graham (2009) concluded based of his
findings. Biggest changes in market shares have been when Saku came out with Saku Originaal and Saku Rock
(market share increased 12% during two years); when Viru launched Bear Beer (market share increased 13%
during two years); and A.LeCoq launched A.LeCoq Premium (market share increased 18% during two years).
All these launches were related with offering totally new quality on Estonian beer market (radical innovation)
and also with the major change in brand architecture.

Figure 1. The market shares of main breweries and the timing of their product strategy activities in Estonia
between 1993 and 2011. (Sepp, 2007; Annual reports of Olvi group; Kastein, 2012; Noop, 2012, Vernik, 2012;
www.saku.ee; www.alecoq.ee; www.wiru.ee, www.beerguide.ee )

Behind mentioned innovations and brand changes the resources have certainly played an important role.
In all cases these launches would had not been possible if there had not been enough physical capital and know-
how of strategic partners (parent companies) involved. Prnu brewery did not find any rich and experienced
partner and therefore had no possibility to fight against Saku and A.LeCoq. Surprisingly it was able to resist
quite long time four years from 1993 till 1997. This was possible partly due to marketing resource listed by
Vernerfelt (1984) good trade contracts this brewery had with resellers in western side of Estonia. This resource
unfortunately disappeared with the development of centrally managed store chains. Here we arrive to one main
principle of RBV pointed out by both Vernerfelt (1984) and Barney (1991), that resources are useful only if it is
possible to turn them to the long term competitive advantage. As we see in the case of Saku brewery: technology
and equipment, and in the case of Viru, that even licences do not ensure long term competitive advantage.
There can be two more resources behind the success of A.LeCoq human capital and organisational
capital. As mentioned before, there has been only one CEO with his team in A.LeCoq through all the time since
the privatisation of the company. We are sure that CEO of A.LeCoq is one of the kind Levitt brought out in 1960
vigorous leader who has a vision of grandeur, and A.LeCoq owes its success in great part to this person. The
other aspect, which can have an influence on A.LeCoqs success, is the position of the company in the group.
A.LeCoq has much more influence in Olvi group than Saku had previously in BBH and especially has nowadays
in Carlsberg group and therefore A.LeCoq has been free to create and execute its own strategy, whereas Saku
was more influenced by strategies of different parent companies through the time.
From the Figure 1 we can see that also little changes in product features or packages may have a
moderate influence on companies market shares as it was stated by Fogg (1974) and by Buzzell and Wiersema
(1981). Launches of Perona in 2001 and Puls in 2006 have influenced the market share of Prnu brewery 1% -
4%. Also launch of A.LeCoq Special in 2007 raised the market share of A.LeCoq about 4%. We can see how
important package in beer industry is. Launch of new bottle and box in 1998 by Saku, introducing PET bottles

7
by Viru in 2003 and also by Saku in 2005, inventing fourpack in 2000 and folio on can in 2005 by A.LeCoq all
these events have had smaller or bigger influence on the market shares of mentioned companies.
But the new product launches have not been always successful. Viru brewery tried to copy Saku
Originaal and brought Toolse Originaal to the market in 1998. Either the brand was not differentiated enough
(too close to Saku Originaal) or was there an influence of successfully launched A.LeCoq Premium next year,
but Toolse Originaal did not succeed. We propose that more probably the reason was in too close following or
imitating Saku, and therefore Toolse Originaal did not provide enough new value for customers (see Figure 3 in
Appendix I). As the A.LeCoq proved next year, the market was actually ready for new products. The second
time Viru brewery failed when they launched Frederik Premium. This time Viru tried harder: the slogan was
more differentiated and the campaign was the biggest Estonian beer market has ever seen. But in general, the
product positioning, the design of the label and also the name (Premium) were too close to A.LeCoq Premium
(see Figure 4 in Appendix I), which had been only two years on the market and was still fresh and attractive for
customers. Also A.LeCoq has failed with Black (in 2002) and Disel (in 2004), which both were launched to
attack Saku Rock (see Figure 5 in Appendix I). In this case we propose that the main reason was the marketing
resource, mentioned by Vernerfelt (1984) a loyal customer base which was turned into long term competitive
advantage and saved the market share of Saku Rock. This brand has still in 2012 very strong and distinctive
image and therefore also very loyal customer base.
Figure 1 reveals also that timing has played a role in market share dynamics. Saku as the first mover
could enjoy very high market shares (over 50%) during several years until A.LeCoq attacked. During the lead
time, which was pointed out by Brown and Lattin (1994) and Huff and Robinson (1994), Saku tried to build
barriers for the defence of its position by launching Saku Rock for younger and Saku Ice for more feminine
segments, and also introducing the new attractive bottle. Partly these activities were successful (for example
Saku Rock has still very high customer loyalty also today) but definitely Saku started to lose market share after
the attack of A.LeCoq. One explanation behind the success of the follower (A.LeCoq) can be the market
growth, which was mentioned by Hall and Densten (2002). The other explanation can be that A.LeCoq was not a
follower at all, but was another first mover. A.LeCoq defined its business differently than Saku. If Saku always
wanted to be a leader in beer market, A.LeCoq has always stated that they are leader of drinks market. So,
A.LeCoq was the first mover on the drinks market and actually Saku has followed it repositioned itself in 2007
as drinks producer. By developing of different product categories and acquiring of other drink producers (sel
Food in 2003 and Karksi in 2012) A.LeCoq has gained economies of scale and also of scope.
Exit of competitors has also influenced market shares. As Buzzell and Wiersema (1981) have
concluded, the influence depends on who exits. When Prnu brewery exited in 2008 it did not influenced the
market shares of leaders Saku and A.LeCoq. But Viru brewery in same time doubled its market share from 4%
to 8%. It was certainly related also with the acquisition of Puls trademark.
There have not existed big changes in market shares due to the promotional activities of breweries in
Estonia. This is in accordance with results of Buzzell and Wiersema (1981), Leone and Shultz (1980) and
Graham (2009). We propose that promotional activities play an important role in competitive strategy, but
frequent, usually quite similar activities from different companies nullify each other, new ideas will be copied or
answered very quickly, whereby single actions will not get such power than inimitable radical innovations.

2.5

1.5
Domestic
Imported
1

0.5

0
1996 2002 2003 2004 2005 2006 2007 2008 2009

Figure 2. Prices of domestic and imported beer in cans during 1996-2009 (EUR/L) (Source: Eesti
alkoholitootjate 2010)

Also prices have not played significant role in market share changes. During 2000s the prices have been
relative stable and have increased mainly because of taxes. Thus instead of price wars companies have decided
to use branding and launching of new products as the main marketing strategy Only once has price influenced
market shares when Viru came out with PET bottles, which meant cheaper strong beer in bigger bottles. But as

8
it was the introduction of the totally new package, we classified this event under the product development and
innovation.
An additional interesting aspect is related with the competition with imported beers. The figure 2
reveals that the difference between prices of domestic and imported beers has vanished, which means that the
competition between domestic and imported brands will increase. It is also has mirrored in the change of
preferences of consumers towards domestic beer in Estonia. According to the regular consumption surveys the
share of consumers who always or in majority of cases buy domestic beer has fallen from 79 % in 1996 to 51 %
in 2010 ((Elanike, 2011:38). As it was already mentioned earlier, the local breweries have started to offer several
imported beers in Estonian beer market. That means that they have been prepared for that change. Their strategic
response is instead of competing with imported brands to represent them on the local market.

CONCLUSION
Our analysis did not allow proving causalities between different factors and market share dynamics. But
we can conclude that existing literature offers lot of possible explanations for changes in companies market
shares. We found that market shares of Estonian breweries were influenced mainly by resources they have, and
by radical innovations and radical changes in brand architecture. Some more moderate changes in market shares
can be explained through smaller changes in product features or in packaging, timing, defining the market, and
exit of competitors. Pricing and promotional aspects were on so obviously related with changes of market shares.
We see also several avenues for further research. First, to go on with the more detailed systematisation
of the factors, which have an influence on the companies market shares. It could be interesting also to find out
the direct or indirect relations and interrelations between these factors and market share dynamics. Secondly, it is
possible to go on with the observation of future developments on this market. Additionally, one interesting way
to continue is to conduct and compare similar analyses in other countries.

ACKNOWLEDGEMENT
This research was supported by European Social Funds Doctoral Studies and Internationalisation Programme
DoRa, which is carried out by Foundation Archimedes

9
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 APPENDIX 1

Figure 3. Saku Originaal and Toolse Originaal in comparison

Figure 4. A.LeCoq Premium and Frederik Premium in comparison

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Figure 5. Saku Rock, A.LeCoq Black and A.LeCoq Disel in comparison

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