Global knowledge, local delivery

Since the 1970s, many consumer goods companies have been moving brands towards global propositions, but this is rarely appropriate for brands embedded in the cultures of individual countries. Graham Mackay describes why SABMiller is the most local of global brewers

Twenty-eight years ago, Ted Levitt, editor of the Harvard Business Review, wrote one of the first articles to popularise the concept of ‘globalisation’. He asserted that a global proposition would ultimately always win over the local proposition. That the superiority of a global offer – both the product and the marketing – would eclipse the cultural variants that country managers always asked for. And he predicted that a centrist corporate movement would prevail based on a creed of one product: one brand: one voice: one ad campaign. There seem to be, in essence, two interlinked arguments behind this proposition: one based on emotional association, or aspiration; and the other on management practicalities. The first asserts that consumers will naturally aspire to, and drift over time towards, international brands simply because they are international. They are self-evidently better because people all over the world have sought them out. The second argument is that it is practically impossible – unmanageable or unaffordable – to replicate at a local level the quality, look and feel of global brands so the local brands don’t look as good or perform as well.

In the course of my career in consumer goods I have encountered many examples of individuals and companies that believe Levitt’s thesis explicitly. Successful products, companies and careers have been built on it. An example of the first driver would be in cigarettes where international brands such as Marlboro have delivered better quality – originally, anyway – and a higher cachet through sophisticated marketing when compared with local alternatives. Another obvious example is Coca-Cola. By contrast, household and personal care are categories where consumers lack much emotional connection but welcome global brands with a more sophisticated look and better functionality.

Beer is different

Alcohol is a mood-altering substance and beer in particular has a history as old as civilisation. The highly emotional characteristics of beer brands themselves and their long history and association with place, will always dictate a high degree of localism that sets beer brands apart in the fmcg universe. This is reinforced by the economics of producing and distributing what is a bulky, perishable product.

That’s not to say that the brewing industry has been immune to the forces of globalisation. At the turn of this century, the top ten brewers around the world accounted for just over one-third of beer sales volumes. Since then a mass of local and regional brewers, many of them still family owned, have been subsumed into four big players – namely ourselves, Anheuser-Busch Inbev, Heineken and Carlsberg. These four account for almost half of global beer sales volumes, and about three-quarters of the profit pool.

This period of intense consolidation has undoubtedly driven the adoption of global best practice in many areas – from brewing production, to packaging and distribution. But when it comes to brand marketing, each of the brewers has a different take on where they stand in the ‘global versus local’ debate. To fully understand our perspective and why it differs from the consensus, it’s necessary to understand where we, as a company, have come from.

From south African Beginnings

Today, SABMiller is the biggest drinks business on the London Stock Exchange, with interests in 75 countries across six continents and more than 200 brands.

You’ll recognise some of them – such as Grolsch, Peroni Nastro Azzurro, Pilsner Urquell and Miller Genuine Draft – but many more of them will be unfamiliar to you despite being powerful local brands in their respective home markets.

Since coming to London in 1999, our sales and revenues have grown by over seven-times to $26.3bn and our market capitalisation has increased eightfold. This is from a company whose served markets (as I was fond of saying in our early days in London) did not cover the Palace of Westminster, Times Square or the Eiffel Tower but did include Dracula’s Castle, the Gobi Desert, Timbuktu and the Source of the Nile.

Undoubtedly the global success of SABMiller is built upon the firm foundations and sound business principles that were laid down many years ago in South Africa.

The springboard for our expansion was the advent of democracy in South Africa, a cause actively supported by SABMiller. This freed us to invest outside the country just at the moment when wider geopolitical changes were throwing up new opportunities across Eastern Europe, Asia and Africa.

In the early days, we acquired breweries from governments wanting to privatise. These assets had often been badly neglected under public ownership, so we focused on bringing them up to scratch, applying the disciplines that we had learned in South Africa: to enhance quality, drive down costs and improve distribution. Our approach to marketing was, where possible, to build existing local brands through strengthening their associations with local heritage and cultural icons.

Brewing is essentially A local Business

Despite the rapid consolidation in the beer industry over the past ten years, the beer market has remained stubbornly diverse. And brewing has remained at its heart a very local business, steeped in culture and tradition that from its earliest beginnings has been associated with place.

Until not many years ago, most beer brands were simply the name of the town where they were brewed. In many countries that remains the case – notably in Germany, which is why the German brewing industry is still very fragmented.

As the industry evolved, brewers realised that higher-quality beer was dependent on a particular type of water, giving rise to great brewing towns such as Burton-on-Trent, Pilsen in the Czech Republic or Timisoara in Romania.

Today, however, we can manipulate water to create whatever conditions we like. Hops can be processed and transported across the world. New barley strains are supporting local suppliers in markets with no previous brewing tradition, and the company itself is experimenting with a new generation of beers which rely on a different set of raw materials and production techniques. Yet beer remains resolutely local.

The role of international Beers

Of course, as consumers become wealthier and the middle-class grows, they look for more sophisticated products, and some are seeking out international brands.

We do cater for that with four distinct international premium brands that talk to consumers’ emotional connections to place or culture, whether it is the Italians’ unquestionable ownership of style typified by Peroni Nastro Azzurro, the quality and provenance of Czech brewing found in Pilsner Urquell, the charismatic eccentricity of the Dutch reflected in Grolsch or the American urban cool of Miller Genuine Draft.

Despite the array of imported beers that you see in the UK, brands consumed outside their country of origin actually still account for only about 5% of world beer volumes, and that proportion has changed little over the past ten years. Truly international brands, such as Heineken or Corona, have global market shares in the low single digits, and you need to combine more than 60 of the top beer brands to amass half of total world volumes.

Aspiring consumers are nowadays just as likely to turn to local premium beers, many of which speak to the burgeoning sense of pride and identity that comes with social and economic progress and, particularly in sophisticated western markets, to crafts and speciality beers.

For example, in the US the expansion of craft brewers, and in the UK the resurgence of cask-conditioned ale, are aligned with the same concern for local provenance that we have seen in the food industry. But equally it is about place, identity and belonging.

Why Beer Brands Are so tied to local provenance

My explanation is that they are emotional constructs, far more than they are physical ones. While there are undoubtedly some highly important functional attributes to which one can appeal in beer – refreshment being the most common – in reality the intrinsic differences between different lagers of the same alcoholic strength and temperature are subtle. After a pint you would be hard pressed to tell two lagers apart in a blind tasting, but a consumer will, on most occasions, have a clear preference. Although they will generally aver that their chosen beer is the one that tastes best, this is simply a rationalisation of an instinctive, emotional choice.

In our view the human motives of friendship, male bonding or national pride can’t be accurately applied from one culture to the next without reinterpretation, and local sensitivity and local intimacy are critical to understanding the unarticulated, intuitive relationship that people have with the beer in front of them. For many men, beer is possibly the most important brand in their repertoire of personal products, when it comes to defining who they are.

But the male psyche, how men bond and what they aspire to, finds radically different expressions in different parts of the world. In many parts of Africa, fatherhood and the familial responsibility that surrounds it, is highly aspirational to young men. But while beer campaigns in the UK do appeal largely to men, one that emphasised fatherhood, I fear would be doomed to failure.

We believe that deep, rich and rigorous consumer insight is critical to brand building. I am sure that many of our competitors would say precisely the same. However, we take it to a level of granularity that borders on the obsessive in order to understand and assimilate those attitudes towards beer which are – from a consumer’s perspective – indefinable.

As a topical aside, even understanding, and combating the drivers of, alcohol misuse force an appreciation of the highly cultural nature of drinking. In the UK we have an undeniable problem among young people for whom drinking to intoxication is entirely acceptable – if not glamorous. Travel to Italy, however, where alcohol is typically considerably cheaper than here in the UK, and drinking to excess is taboo and considered socially unacceptable.

Here are three of SABMiller’s brands, to illustrate what we have, through detailed research, come to understand about how different groups of people relate to their national identity.

Tyskie gronie

As Poland’s largest beer brand with a market share of 18% and heritage dating back to 1475, Tyskie is rooted in what it means to be Polish. But while Poland’s history is rich with great artists, composers and philosophers, it is the 15th century and not the 21st that is thought to be the ‘golden age’ of Polish culture. Instead, its recent history is darker and more troubled, characterised by a succession of devastating wars, which means little from the past 150 years stands in its original place.

Consequently, Poles feel that they have lost a link to the heritage of their forefathers. They feel destined for greatness, but need external affirmation to feel positive about being Polish. So they will take an avid interest in the performance of Polish players in the English football leagues or hold up Robert Kubica, the Formula 1 driver, as a national hero, because of his success on a global stage. They want proof – validated by a global audience – that Poles can be great.

So Tyskie seeks to create and tell narratives that allow Poles to feel better about themselves, providing them with grounds for genuine pride. One example is when we changed the livery of the trucks exporting Tyskie to the UK to demonstrate the brand’s status as an export brand and its popularity overseas.

Pilsener in Ecuador

In Ecuador, national identity embraces all epochs of its history – combining Catholicism, pagan symbolism and a more secular ideology. When native inhabitants were forced to convert to Catholicism by the Spanish, the conversion was often not entirely pure, with the result that indigenous elements, such as a polytheistic belief in ‘spirits’, became part of the new religion. The Spanish conquerors brought populations from Bolivia, Guatemala and, ultimately, Africa as slaves, and they too brought their beliefs and traditions.

This combination of influences is most powerfully exhibited in the many thousands of fiestas that take place around the country, from the Fiesta of La Mama Negra, which aligns the power of a volcano to the mercy of the Virgin Mary, to the Corpus Christi celebrations of Pujili, which combine the Catholic celebration of Holy Communion with traditional celebrations of the harvest and offers of thanks to Inti, the Inca sun god.

Pilsener is our ‘national’ brand in Ecuador, growing lustily and with an 80% market share. Its television commercials seek to reflect the complicated and deep-rooted connection of the people to their ancestors and the land.

Castle in south Africa

With the football World Cup taking place in South Africa last year, we took the opportunity not to showcase a global brand to the watching world, but rather to unite South Africans behind our flagship local brand, Castle Lager, and build brand equity and loyalty with local consumers.

With 11 languages and a multiplicity of cultures and political affiliations, the Rainbow Nation has been trying to forge a common national identity since the demise of the apartheid state. While most people will acknowledge their South African identity at some level, this fails to compete with powerful racial, geographic and tribal loyalties still very much in evidence today. South Africa is a country still searching for a voice that encapsulates the country’s diversity, while demonstrating a strong sense of unity to the rest of the world.

Our research found that one characteristic that unites all South Africans – regardless of their background – is the enormous pride taken in their reputation for hospitality and openness. Castle Lager, sponsor of the national football team Bafana Bafana, created a commercial that encapsulated this in the build-up to the World Cup.

Having been in decline for many years, Castle has not only stabilised, but is now in double-digit growth long after the tournament has ended and makes up nearly one-fifth of our total portfolio in South Africa.

A responsive marketing eco-system

The results reinforce the importance of putting consumer insight at the heart of any brand strategy, and having a marketing eco-system that can remain sensitive to the idiosyncrasies of local culture, while simultaneously deploying the most effective and efficient marketing and sales techniques.

We have worked long and hard to develop such a system within SABMiller. One that gives local marketing teams the autonomy they need to respond locally, but which utilises the expertise, skill and learnings available across the business. It is an important part of how we can add value and leverage the scale of the group.

This combination of discipline and freedom is cultural, as much as it is structural. Our instincts are to employ the complete individual and empower them to develop bespoke solutions. This avoids the trap inherent in less-flexible systems, which lead to ideas that in theory fit all markets but in reality suit none.

In conclusion, we have embraced globalisation, but with qualifications, as we believe that the beer business is inherently local and will remain so. Our determination to build brands that resonate with local consumers is a key point of differentiation between SABMiller and its competitors. We recognise that our approach is more costly and more complex to manage. And, in many ways, we are ‘swimming against the tide’ identified all those years ago by Ted Levitt. But we are attempting to use the best of what we know globally to enhance our offering and delivery locally. In short, we believe we are the most local of the global brewers.

And while much of the global consumer goods industry is focused on identifying the ways in which everyone is the same, SABMiller is trying to work out what it is that makes everyone different.

Graham Mackay is chief executive of SABMiller

This is an edited version of the Marketing Society Annual lecture, 28 March 2011.

Tyskie is rooted in what it means to be polish, with a heritage dating from 1475

For many men, beer is possibly the most important brand in their repertoire of personal products when it comes to defining who they are