Before you send your beer outside your home country and build your brand and business internationally there are a few critical decisions you need to plan. We will share those key decisions and discuss in more depth with 3 Australian craft breweries – Kaiju Beer, Prancing Pony and Hawkers Beer exporting around the world at the upcoming Australian Craft Brewers Conference in Adelaide on Thursday 27 July 2017 from 2pm – 2.45pm in the Kegstar Room.
Come and join us for Export – Triumphs and Tribulations and gather some usual insights and learning shared by Callum Reeves – Chief Boss @KaijuBeer; Corrina Steeb – CEO and Co-Founder @Prancing Pony; Mazen Hajjar – CEO and Co-Founder @Hawkers Beer and Ben Giles – Senior Trade Advisor at Austrade as you seek to export your beer, brand and business internationally.
- Where to go? Before you venture off-shore and start shipping or brewing your beer in overseas lands you need to decide Where to go? Which market(s) are best suited to your product(s) in which order of priority? There are a myriad of factors and indicators you can use to help you come to this conclusion. Unfortunately, in export and in small business too often we see “reactionary undirected spray and pray” approaches to export as opposed to “deliberate, considered, choice based strategic decision making” when it comes to the first fundamental question to answer: Where to go? Working with many food and beverage clients and delivering capability courses on behalf of the Australian Government to food businesses across Australia we have narrowed the key factors to consider to 5 underneath which you can come up with some lead indicators to make a measured and objective decision on where to go? 1st, 2nd, 3rd… etc in terms of international business development:
- Socio-demographics – it is easy to get blinded by the newspaper headlines – like 3 billion middle class drinkers in Asia by 2030 (Rohde, 2012) but you need to dig past the headlines to see that middle class is defined as annual per capita expenditure between US$3,650 and US$36,500. Our work with premium quality food clients suggests you look past the simple population to define your target in terms of age, income and urbanisation and other socio-demographic indicators including penetration of high disposable income luxury chain retailers and/or disposable income for food and entertainment.
- Market Attractiveness – the obvious one – what do the numbers say? How much volume, value, cumulative annual growth and more importantly $/L are drinkers willing to spend on beer and other parallel world beverages (alcoholic or non-alcoholic). Some markets may appear huge on the surface in terms of consumption and volume e.g. China but you need to dig again below the surface to see that the average price of a domestically brewed draught beer of 500mL in China is 6.00 ¥ or A$1.15 per pint vs the average Imported Beer 33cl bottle 15.00 ¥ or A$2.88 per 330mL bottle or 250% more for 33% less beer and that is mainstream beer before we even get into craft beer pricing differentials compared to domestic and/or other imported craft beer brands.
- Open to Trade – Which markets are open? Importing and exporting a lot of beer around the world? You can dig for data in this space as well to use you head as well as your heart when you consider where you can relatively easily ship your beer in terms of foreign markets. Common data sources available to mine in this space include ABS statistics for outbound Australian exports (follow the leader) or UN Comtrade for import / export data. You need to be across your HS Codes and where possible use multiple data sources to triangulate the information. Knowledge of Free Trade Agreements and where the tariffs are and where they are falling fast is also an important indicator of opportunity.
- Market Deterrents – You need to be aware of behind the border trade barriers or markets that have product registrations or stringent labeling guidelines like local language labeling and/or religious certification before port of entry. Some Asian markets have their own local equivalent of a Food & Drug Administration and require product registration before entry including: Thailand, the Philippines and Indonesia to name but a few.
- Dispersion – highly concentrated markets either in terms of supply side power of suppliers or retail side in terms of power of buyers are more difficult to penetrate for obvious reasons. Where you see a concentration of market share in a few strong local players or a concentration of market share on the retail side of the value chain you will need to factor in a higher % share of the value chain to the retailers. Markets with retail duopolies or oligopolies that extract high retail margins not only include Australia but New Zealand, Singapore and Hong Kong as well.
- How to enter? Once you have narrowed your choice of market(s) to enter to your top 1 or 2 or 3 in terms of order of priority and opportunity you are now able to head to the market and test your hypotheses and validate your assumptions on the right mode of market entry to successfully set up your brand and business in that host country. Depending on how deep your pockets are or the pockets of your investors and shareholders there are three key modes of market entry:
- Export the most common and lowest risk first entry mode of many small businesses you need to also take note of the different modes within export and the pros and cons of each entry mode from selling locally to an Australian Based Consolidator or using a local agent to using an in-market agency or selling to a local importer and distributor or direct to an end retail customer. Fundamental to your success in export will be partnering up with the perfect partner to help you implement you go to market launch plan and activate your brand in the host country. Some tips and guidance on how to objectively measure and evaluate a perfect partner for distribution are outlined in our Creatoblog – Looking for Love . You would not marry someone sight unseen over the internet without meeting them, first would you? So, why would you ship your precious beer sight unseen to an inbound inquiry when you have not checked out the warehouse, distribution, sales and marketing capability of a potential importer in a foreign country?
- Contractual modes of market entry include two very common to the brewing industry – licensing and contract manufacturing. Brewing under licence is common for “large multinational brewers” and we might see more of this in craft in the future if craft beer drinkers start to base purchase decisions on factors like freshness and brewed locally for sustainability reasons. While uncommon to date in craft beer there are some businesses already experimenting with this entry mode the most notable close to home example being Yeastie Boys brewed under licence in UK by Brew Dog and in Australia by Nomad.
- Investment is the preferred mode of market entry of the well-resourced large multinational enterprises in search of fast growth. Investment modes of entry include Joint Ventures, Strategic Alliances, Greenfield Investment and Merger & Acquisition. Some recently publicised equity raisings in craft beer have indicated this mode of entry is under serious consideration for notable northern hemisphere craft brewers looking to more aggressively expand their businesses into the US, Australian and Asian Markets (Kamps, 2016 and The Drinks Association, 2017).
- When to enter? Finally you need to allocate sufficient $/people/time to resource a go to market launch and activate and generate trial and repeat purchase for your beer in the new host country. You need to be strong at home before you head overseas as your Homebase will fund the early years of investment in your off-shore markets. There are many ways to get your beer in the hands of drinkers and it is vital you resource your business with sufficient funds and people to support your brand during the vital Go to Market launch phase as the saying goes you only get one chance to make a first impression and there are many great craft beers out there! Some innovative collaborative ways to activate and share the cost of activating your brand in foreign lands are evident in both craft beer and independent wine and worthy of a closer look:
- Brewers Association – Export Development Program (EDP) – set up by the Brewers Association in 2004 the EDP objectives include educating international trade and media about US craft beer diversity and informing BA EDP members about international opportunities based around a host of support activity from participation in trade shows, competitions, seminars, inbound buyer missions, export market research and promotion through international media.
- New Zealand Beer Collective – friends abroad the NZ Beer Collective is the collective pooling of resources of 5 Kiwi Craft Brewers to enter the UK market and make a bigger dent together than they can make individually pooling their resources to assist with trade activation and distribution. The members include 8 wired, Renaissance Brewery, Three Boys Brewery, Tuatara, and Yeastie Boys and the Collective was established in was formed in 2016 to act as exclusive importer, national distributor, brand management and sales of the New Zealand Beer Collective in the UK market.
- The Craft Beer Clan of Scotland – a collection of 35 Scottish Craft Breweries collectively marketed by J W Filshill Ltd, a wholesale business based in Glasgow and run by very experienced international liquor executives they market collectively their craft beers into fast growth craft beer markets like North East and South-East Asia.
- Margaret River Wines – 14 winemakers, ranging from some of the region’s smallest to biggest, are stocking their product in four stores branded “Margaret River Wines” in China. And there are plans afoot to open another six by year’s end, and up to 300 within three years (Pancia, 2017). Teaming up they can directly distribute and educate the Chinese wine drinkers on the premium value and position of “Margaret River Wines”.
Exporting can be a great way to diversify your business, reduce risk and increase scale and economies of production in your brewery at home, not to mention the brand equity and business value you can create abroad if you do it well. Come along to the Australian Craft Brewers Conference in Adelaide on Thursday 27th July 2017, and join us in the Kegstar Room for Export – Triumphs and Tribulations with shared experiences from three Australian craft brewers who are already exporting and be informed of the Government support and assistance available to you from Austrade.
Bibliography and References:
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