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Matters of Import

The benefits of importing an established product and adapting it to the American market.
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Does it make sense to spend time developing a product that already exists?

Maybe you're going about it backward.

You finally have the idea, the one brilliant insight that'll allow you to steal yourself a small sliver of the pie and live happily ever after.

So you promptly walk up to the monolithic market, take out your penknife, and begin cutting out a slice.

You test your concept. Then you refine it. Adopt a marketing plan. You work 14-hour days, nights, weekends -- all to turn your vision into reality. And once you have a product that is yours and yours alone, you attack.

What you've done was follow the basic business advice you've long taken as gospel: "Find a niche, then fill it.'

But wait a second. Where does the gospel say you've got to do the filling with a product of your own?

Why should you work so hard to develop a better mousetrap if somebody else, thousands of miles away, has already gone and done it?

In other words, why build when you can import?

Yes, we know. Everything that exists can be improved. And yes, we also know that borrowing somebody else's idea is not going to get you high marks for creativity.

But it sure seems more efficient to take an existing idea and adapt it for that market you've discovered than to go through the work of building the product from scratch.

That is exactly what All Brand Importers Inc., a Hartford-based marketing and importing organization, has done. All Brand is in the beer business, and if ever there was a monolithic market, the beer business is it. Anheuser-Busch (with Budweiser, Michelob, and Busch) and Philip Morris (Miller High Life and Lite) between them own about two-thirds of the $13-billion U.S. industry.

Now for all the carping by people who use words like "essence" and "aroma" when talking about beer, there is nothing wrong with Bud, Miller, and the like. They are perfectly fine beers, and given their well-documented marketing muscle, you would be nuts to try to compete with them head-to-head.

So the secret in fighting pachyderms is, as always, to outflank them. That is what "microbrewers' -- makers of brands such as Anchor Steam, New Amsterdam, and Samuel Adams -- have done by turning out small quantities of distinctive and carefully targeted beers.

All Brand chose the other course. It imports. The company currently handles 11 foreign beers, including 3 of this country's 10 best sellers: Foster's Lager, Moosehead Canadian Lager, and Dos Equis (see chart, "The Top 10 Imports," page 3).

The strategy, which has been in place since the company started in 1971, boils down to this: carefully search out an excellent beer (the company has not added a single new product since 1985) and bring it to the United States. Then, by handling everything from advertising and promotions to packaging and distribution, promote the hell out of it (see "All Brands' Rules,' page 3).

"We do everything that a brewer does except make the beer," says All Brand chairman and chief executive officer John J. Kucich.

Well, not really. The company does all the nonbrewing work the conventional brewer does, but it doesn't foot much of the bill.

There is a lot to recommend this strategy, especially as practiced by All Brand. It directs the selling strategy from its headquarters, but the brewer picks up the direct costs -- advertising, packaging, point of purchase -- in exchange for gaining entry into the American marketplace and dealing with someone (All Brand) who understands the market better than it does.

The advantages of this approach to an importer are obvious. You don't need a production facility. The product comes to you ready for distribution. You don't have to deal with hundreds of employees -- your supplier has to worry about the folks on the line, you don't. And you can move quickly. If you think Lithuania is going to become the next great craze -- like everything Australian was a few years back -- you don't have to start trying to figure out exactly what they most like to drink in Vilnius, you just have to import a Lithuanian beer.

But it is one thing to bring in the Baltic's best beer, and it is quite another to sell it. For that to happen, you must, of course, persuade American consumers. But you also have to convince your suppliers that your marketing plan makes sense, especially if you know you're going to change the way they do things to appeal to American tastes. In a funny way, they, too, are your customers.

"Brewers tend to see themselves as artisans -- and in fact, they are -- and they think their beer is God's gift," says Kucich. "It can be very difficult for them to accept that something that has been working in their country may not work over here.'

For example, Foster's was originally imported in squat bottles with short necks -- the kind of container that might contain cough syrup. While they loved it in Melbourne, Australia, it didn't do much for the people in Melbourne, Fla., or anywhere else in the United States, for that matter.

Since there is little money to spend on advertising -- shipping costs alone force imported beers to carry a premium price -- packaging is critical to getting consumers to notice you on the shelf. All Brand suggested that one way Foster's could get some attention would be to export the 25-ounce cans that were popular back home. Not only did that get consumers to take a second look -- it's pretty hard not to notice a brew whose package is twice as big as everyone else's -- it also saved money. Since cans are lighter than glass, shipping costs were about 30% less, and Foster's was able to use the savings on advertising.

With Moosehead, too, there were cosmetic changes. The short, brown bottle grew taller, more slender, and green, and the label became eye-catching. Gone was the metallic red background with a white triangular insert that featured what appeared to be a tiny molting moose. In its place was a tan, green, and red label that made the moose five times larger, stressed that the beer was imported from Canada, and spelled out the Moosehead name in larger white letters outlined in gold.

But there were also more substantial changes. "One of the things we noticed, in looking at the market a couple of years ago, was that there was only one imported light beer, Amstel," says Kucich. "That looked like a substantial opportunity. Imported beers were growing at 12% a year, far faster than domestic brews, and light beers were growing faster than imports -- about 20% annually. We thought importing a light beer would make sense. In 1985 we called up Derek Oland [president and CEO of Moosehead Breweries Ltd., in Saint John, New Brunswick] and tried to convince him to introduce Moosehead Light.'

It took a lot of convincing.

First, introducing a new brand in the States is expensive -- $15 million to $20 million in the first year alone, even with very little TV advertising. And that would be money coming straight out of Oland's pocket, not Kucich's.

Second was the high cost of gearing up. A new brand would mean expanding capacity, capacity that would lie idle if Kucich turned out to be wrong. And finally, there was the very real question of risk versus reward. The United States already accounted for 40% of Moosehead's sales, and how much more volume would a light beer add? Besides, how dependent on the United States did Oland want his company to be?

Still, Oland was finally persuaded. "This is a partnership, and their objectives are the same as ours," says Oland. "We brew the product, but we have to rely on them when it comes to marketing decisions." Moosehead Light was introduced last October, and while neither Oland or Kucich is willing to disclose figures, both use exactly the same words in discussing the light beer's progress: it is doing very, very well.

And that kind of relationship is just what it takes to make importing work at its best. The person doing the importing has to convince his source that he understands the market, can work with the advertising agency, and knows which distributors are really going to give the product the push it needs.

"This is something All Brand is very good at," says Anita Rosepka, senior editor of Beverage Media, which bills itself as the oldest and most widely read magazine in the liquor industry. "They know how to pick premium brands and tie them to the country of origin. By signing Paul Hogan, [star of the Crocodile Dundee films and the "say g'day" pitchman for the Australian Tourist Commission] they were perfectly positioned to take advantage of the Australian craze.'

Of course, the importer also has to select the right product to begin with. Unless the brewer is offering a good beer, one that would be easy to introduce and promote to the American market, All Brand won't handle it.

All Brand is owned by two British concerns, Grand Metropolitan PLC, which holds 51% of the stock, and Whitbread & Co. But even though they have more than a score of beers between them -- including Watney's and Stella Artois, the leading Belgian beer -- All Brand handles only two: Whitbread Ale and Mackeson Stout. "The other brands just don't measure up to our import criteria," says one All Brand executive, who not surprisingly pleaded for anonymity.

That its owners allow All Brand to snub them tells you an awful lot about what they think of its marketing strategy. It also suggests there might just be something to importing someone else's mousetrap instead of struggling to see if you can build your own.


ALL BRANDS' RULES

What to look for when you look to import

All Brand has reduced its business strategy to a series of marketing rules. In the following list, if you substitute whatever you're thinking of importing for the word "beer," you'll have a pretty good set of guidelines for importing anything.

* The country of origin must be known for brewing beer. The thought here is simple. Consumers already have a mind-set about certain countries. France is known for wine, women, and cheese; Iceland for long summer nights and for hosting chess matches. If consumers already have an image of the country of origin, you are going to have a hard time convincing them otherwise. Instead of fighting their prejudices, just take advantage of them.

* The beer must be a leader in its country of origin. This is market research at its most basic. If the people who know beer -- the home market -- like the brew you are thinking of importing, you have a decent shot of scoring with it in the United States.

* The beer must be produced by an export-minded brewer. It's all well and good that you have spotted what you are sure will be the next great imported beer craze. (Mexico's Corona is currently the beer to drink.) But the sad fact is that if the brewer isn't truly interested in exporting, you're going to have a problem. After all, the brewer is the person paying for your marketing effort.

* The beer should be able eventually to gain 1% of the total market. On the surface, this borders on the silly. The total imported beer market is just 6% of all beer sales. "But our competition is not just imported beers, it is all beers," says All Brand marketing vice-president J. Timothy Nolan.

We never met a marketer who thought small.


THE TOP 10 IMPORTS

Ranking % of import market

1 Heineken 22.4

2 Corona 18.7

3 Molson 10.8

4 Beck's 8.1

5 Moosehead 4.8

6 Labatt's 4.7

7 Amstel Light 2.7

8 Dos Equis 2.7

9 Tecate 2.7

10 Foster's 2.5

Source: Beverage Media n

Last updated: Oct 1, 1988

PAUL B. BROWN | Columnist

Best-selling author (and Inc. magazine columnist) Paul B. Brown's latest book, Own Your Future, has just been published. Brown's blog appears every Tuesday, Thursday, and Sunday.

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.



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