Tag Archives: Beer

BRIC’s and Beer

20 Oct

As Germany’s infamous Oktoberfest winds down to a close, I find it appropriate to reflect on one of my favorite subjects: beer. After water and tea, beer is the third most popular beverage in the world, and one of the oldest prepared beverages – evidence of beer brewing, accidental or not, pre-dates written history by millennia. I find it particularly interesting to think about the challenges modern brewers face in marketing and distributing beer in such a competitive market, especially in some of the world’s largest populations and economies: the BRICs.   

A recent Businessweek article profiled the push by Budweiser, Anheuser-Busch InBev’s flagship brand, into Brazil. Interestingly enough, Brazil is the birthplace of the majority of the parent company’s board, and is the world’s fourth largest beer market by volume.  The annual per capita consumption of beer in South America’s largest country was 47.6 liters, according to Japanese brewer and holding company Kirin; seeing as how per capita consumption for the top 20 most fervent beer drinking markets is at least 59.6 liters, Budweiser and its competitors must be licking their chops at the opportunity to convert more Brasileiros from drinking caipirinhas to drinking cervejas.

In Russia, unsurprisingly, beer takes second place to vodka as the most popular alcoholic drink, and many consumers view beer not as an alcoholic beverage, but rather as a soft drink. Still, Russians consume on average 58.9 liters per capita.  Presently, the market is dominated by domestic brewer Baltika(now owned by Carlsberg), while AB-InBev’s Budweiser controls just 0.5% of the market. Though thirsty Russians may prefer vodka to beer, they still consume enough to make it the world’s third largest beer market, according to Kirin.

The Indian beer market dates back to the early days of the British Empire, when porters and the appropriately named India Pale Ales were exported to the subcontinent. According to the Institute of Alcohol Studies, the number of Indians consuming alcohol has increased from 1 in 300 to 1 in 20; even though alcohol consumption has grown rapidly, as marketers increase their efforts, beer accounts for only 10% of all alcohol consumed. What is the most popular beer in India? Kingfisher – roughly 1 out of every 3 bottles of beer sold in India is this lager, brewed by Bangalore-based United Breweries Group.

China, the world’s largest country by population, is unsurprisingly one of the fastest growing markets for beer in the world. China is already the world’s largest beer market by volume, yet per capita consumption – 22.1 liters – doesn’t even warrant the country a place in Kirin’s ranking of 35 beer-drinking countries.  As Madison Avenue advertisers and their international brethren refine their offerings for the Chinese market, one can imagine that it will only be a matter of time before the Chinese catch up to Western beer drinkers. Will foreign breweries be able to successfully infiltrate the notoriously difficult to navigate economy of China?  Yes, but not organically; CR Snow, a joint venture between SABMiller and China Resources, brews Snow, which eclipsed the domestic beer Tsingtao as the market leader for the first time in 2006.

Tastes vary among cultures and country to country, but there is no denying the investments that the world’s largest breweries are making to court those in the largest developing countries. The American image abroad hasn’t exactly been spotless in recent years, but what about American brands? According to Chris Buggraeve, AB InBev’s Chief Marketing Officer, American values resonate globally, even if American politics don’t. “It [Budweiser] doesn’t stand for America. It stands for deep American values that are extremely relevant worldwide,” he says. Cheers to that.

B2C Contract Brewing – Custom Craft Beers

18 Jul

Back in March I wrote about contract brewing, both as a tool for start up breweries to minimize costs early on in their development, and also as a way for businesses to provide a more branded experience (as in the Darden Group designing unique beers for each of its restaurants). I hadn’t yet fully fleshed out the idea of a B2C model, but a recent experience at the Shenandoah Brewing Company – which recently announced they found an 11th hour buyer after the brew-on-premise/brewpub/microbrewery had been shopping around for buyers – makes me think that a B2c model that allows consumers to brew their own beer has the potential to scale successfully.

The premise of on-site B2C  brewing is fairly simple: customers choose what type of beer that they want to create, and the brewery provides the necessary instructions, ingredients and tools required as part of the brewing process. Because there is an emotional attachment to a product the customer created himself, the brewery can charge a premium for the product and services rendered.  Additionally, there has been a burgeoning interest in craft beers, which will only grow as consumers trade up from Keystone Light to beers with taste. The Shenandoah Brewing Company had the general idea right, but fell short in its execution in terms of customer experience and pricing. Perhaps the new management will find ways to create more value by addressing the weaknesses of the operations and expanding its marketing efforts.

SBC had been open for years, but I had never heard about it until this May. After the 0.1 seconds it took to decide I had to check out the place, I called to arrange an appointment for myself and fellow beer aficionados  Carl Fudge and Daniel Lombardi.Not only is the SBC in a bleak shopping center in a unattractive corner of Alexandria, VA, but the brewery is also kind of a dump. I recognize that small businesses must be scrappy with their limited resources, and the challenges of operating as both a commercial brewery and a retail-like B2C operation force SBC to make certain trade-offs regarding investments, but I did not think that SBC created a customer experience that was rich enough to draw customers in and encourage repeat visits.

SBC has 8 personal kettles that each have the capacity to brew batches of 90-110 beers (our three batches came out to 99, 107, and 111) After sampling a few SBC beers, we each selected a a type of beer to brew. I opted for a Copper Pale Ale with a crisp, hoppiness that would be refreshing in the DC summer heat, and the 101.

For the casual beer lover, participating in the behind-the-scenes brewing experience was enlightening and really cemented not only my love for craft beer, but also my interest in learning more about the brewing process (especially after reading the story of the Brooklyn Brewery, as told by co-founders Tom Potter and Steve Hindy). My Copper Pale Ale was decent, but not great; I definitely wouldn’t pay the per bottle average cost of $2.25 for it at a convenience store, but the experience of reaping what I sowed –drinking what I brewed, I should say – definitely commands a premium.

The brew-on-premise concept struck me as having real potential for a new way to consume beer. I could imagine finding a particular recipe, and tweaking it ever so slightly to the point where I have a custom beer that is truly unique to me, with a killer label design to boot. At that point, the value conferred by the brewery isn’t as much the brewing experience as it is a replenishment service. My hypothesis is that a brewery could meet the needs of a customer who is replenishing his stock of custom brews every 3 months or so at a lower cost than going after a one-time customer. SBC clearly did not share my opinion, and had not put thought into a CRM tool that tracks the tastes of its patrons.

I love the concept of brew-on-premise, and if I were a company designing the experience from scratch, there are a few things I would keep in mind:

  • Brewing is a time-consuming process, so your patrons will have to spend a significant amount of time at your facilities. This is a good thing. With that in mind, create an atmosphere that is attractive, fun, and has entertaining activities for the downtime during the brewing process – music, darts, sports, merchandise and food are all prerequisites in my book
  • Focus on customer service. Amateurs and seasoned home-brewers alike will provide significant revenue streams, so treat them well. Ensure that anyone brewing at your venue leaves well educated in regards to the brewing process, and would recommend your venue to his or her friends.
  • Transparency in pricing. Your patrons are more than willing to pay a premium for the experience of creating a  unique beverage, but they should be well aware of all costs involved in the process from the start.

All in all, I loved the experience of creating my own beer, and only wish I had better graphic design skills for my logo. I look forward to tracking the progress of the new management of SBC, as well as seeking out other brew-on-premise operations in the area.  These businesses won’t put the AB InBev’s of the world out of business, that’s for sure, but they do have the opportunity to provide a unique customer experience capitalizing on the trend of growing interest in microbreweries.