Case Study Bundaberg - explanation PDF

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Bundaberg Brewed Drinks (Bundaberg) has been delivering premium-crafted beverages from the town of Bundaberg in Queensland since 1960.

bundaberg.com

Key learnings 1

Don’t rush, take your time with Asia: It is easy to rush into Asia to take advantage of the extensive growth opportunities. Bundaberg learnt that you need to explore and understand the market, while staying true to your values.

2

Find the right partner – do your research and choose carefully: Bundaberg uses a ‘testing and sorting process’ to determine if a potential partner can develop the brand in the long-term, rather than just sell products short-term.

3

Build a successful partnership: Bundaberg responds to the different business cultures in Asia by setting clear expectations and objectives, while developing a strong relationship through guidance and support.

bite off more 4 Don’t than you can chew: It is important to have a clear and achievable entry strategy when considering Asia. Bundaberg segments markets and cities into zones, and only introduces a limited amount of products to avoid overwhelming consumers.

5

Build your own Asia Recipe: Tailoring your product for a long-term market presence is critical in Asia. Bundaberg is developing an ‘Asian Brew’ of its Ginger Beer and researching future unique products for Asian tastes.

Case study 3

The family-owned business has transformed itself from a small regional distributor to an iconic Australian brand, best known for its famous ‘Bundaberg Ginger Beer’. Bundaberg’s global business has tripled since 2006 making it the current largest Australian-owned soft drinks company and the fourth biggest in Australia overall behind foreign-owned Coca Cola, Schweppes and PepsiCo. After continued success in the Australian market, Bundaberg turned its sights in the early 1990s to growing new markets in Asia. Bundaberg initially established itself in Singapore, which today is its largest Asian market, by focusing on Singapore’s significant Australian expatriate community. Bundaberg then launched successfully in Hong Kong, Malaysia and Brunei. China was next on the list, with a 30 per cent annual growth rate in the Chinese food and beverage industry making the potential for success irresistible. ‘China presented a real opportunity for Bundaberg with a rapidly emerging middle-class, large disposable incomes and an increasing appetite for imported food and beverage products,’ says Bundaberg CEO John McLean. ‘However, what we learnt the hard way is that you really need to take your time.’

Don’t rush: take your time with Asia Bundaberg entered the Chinese market in the early 2000s, taking on a local partner with limited research or preparation. The relationship quickly proved very one-sided, with Bundaberg unhappy with its partner’s lack of transparency on sales, distribution and customer details. Different values, business ethics and a lack of control also raised concerns. Bundaberg had no input into product promotion and sales, or ability to manage quality or contribute to strategic direction; therefore they eventually terminated the partnership. At the same time, Bundaberg became increasingly aware of similar worries with its other partnerships in Asia. Its initial ad hoc approach to partnerships involved simply selling cartons of Ginger Beer to distributors throughout Asia to get the product into the region. No additional support was provided to partners such as help with branding or relationshipbuilding. It was a basic purchase-order relationship with no product exclusivity. Challenges soon arose, with concerns about its partners’ transparency as well as the impact of not having targeted market-entry strategies to take advantage of future growth opportunities. Bundaberg decided it needed to slow down and be more strategic. ‘Go slow – it is harder to fix the mistake from rushing rather than making the right decision in the first place,’ John advises.

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Find the right partner: do your research and choose carefully Bundaberg has since become extremely rigorous in its due diligence with partner selection in Asian markets. Values such as honesty, strong business ethics and commitment to quality are crucial. It is a challenge for the executive team to find the appropriate partner that supports these values from among the numerous partnership requests that Bundaberg receives each week. ‘I want a partner who I would gladly invite to come and stay at my house as a guest,’ says John. But many Asian partners are reluctant to be transparent about local market figures and its major business relationships. Another obstacle is the limited market knowledge of many potential partners. Most partnership requests are from entrepreneurs who lack established market relationships, let alone any experience in importing and distributing high-quality food and beverages in the region. To identify serious, long-term potential partners, Bundaberg has developed a cautious testing and sorting process. ‘Are they simply a carton mover or [are they] a brand builder?’ is now the focus, explains John. This involves establishing if the potential partner is committed to developing the Bundaberg brand in the

region, rather than simply pursuing shortterm sales. In order to ascertain longterm commitment, potential partners are asked if they are willing to invest in marketing. Bundaberg is very clear about the preliminary payment process (cash on order) and that there is no room for negotiation on the initial payments. The partner also needs to demonstrate strong relationships and connections with local food authorities and customs, and successful experience in importing and distributing beverages. Many potential partners do not meet these criteria. For those who do, John, or one of the executive team, travels to meet with them in their country and also brings them to Queensland to see the brewery and meet the Bundaberg team. Information is shared on sales figures, distribution plans, existing relationships in the region and the ability of the partner to receive, store and move products. After a potential partner is brought on board, they are sent a limited amount of cartons through which Bundaberg can trial and evaluate their potential to sell the product and develop the partnership further.

Case study 5

Building a successful partnership: set clear expectations and provide guidance and support

Ginger: the ancient Asian spice

Australian businesses operating in Asia often need to address the fact that many partners in the region have a different culture of business – a frequent cause of failed business ventures. Bundaberg responded to this by placing enormous emphasis on managing expectations and setting clear standards from day one. This involves being straightforward about where Bundaberg is willing to compromise, and what is a non-negotiable. This includes providing a strict framework and written guidelines on how the distributor is to manage marketing, product quality, logistics and reporting. Importantly, Bundaberg works hard to do this in a sensitive and culturally appropriate fashion. The executive team spends a lot of time on the ground with its local counterparts building relationships, as well as maintaining communication from Australia through regular Skype meetings and business trips. ‘It is important to develop their understanding that this is a collaborative effort and the partner’s support can assist to build the market further,’ emphasises John. The partner must understand that they are more than a ‘carton mover’ and are a valuable asset to the business, he explains. Bundaberg also provides extensive marketing knowledge and support to help the partner build the brand in their region.

Ginger is one of the world’s most ancient spices. Originating from South Asia, it has been used for millennia by Asian and Middle Eastern cultures for its healing properties as well as in traditional cuisine dishes and teas. The Chinese in particular have been using ginger for over 2,000 years as a detoxifying agent and an anti-flammatory.

Ensuring that the partner has an intimate understanding of the product can also help address any challenges that arise in local markets. Problems that would not normally occur in Australia can develop in the Asian context due to misunderstandings associated with cultural and language differences. An example of a common challenge in Asia is the misconception that Ginger Beer is alcoholic. In China, Bundaberg products have sometimes been stocked in the alcoholic section of supermarkets, potentially incurring higher import taxes. This highlights the importance of ensuring your business partner understands your product inside out.

Australia’s ginger is predominantly grown and produced in Southeast Queensland, with the value of processed ginger products estimated at over $80 million. The plant variety ‘Queensland ginger’ is known globally for its unique flavour compared with the other main variety: Canton ginger. This makes it highly sought after for processed goods. Bundaberg CEO John Mclean highlights that the combination of the longstanding popularity of gingerbased products in Asia and the distinct flavour of Queensland ginger has resulted in Asian consumers being naturally attracted to its Ginger Beer. This is a key element driving Bundaberg’s marketing and expansion into the region.

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Don’t bite off more than you can chew: have a clear and achievable entry and growth strategy appropriate for the local market

Once the right partner is identified and a good relationship established, Bundaberg is careful not to overreach in its market-entry strategy. Expectations for growth can frequently make new entrants to Asian markets such as China overly ambitious, often attempting to instantly launch the entire product range across the country. No single model or strategy will work for markets like China because of the vast differences in size, distance and consumer preferences among the cities and provinces. Bundaberg’s future China market strategy recognises this and will break China into manageable market subsectors. Even cities such as Beijing, with its population of approximately 20 million, will be divided into its own geographical zones. Current and future strategies involve Bundaberg applying all its energy to one zone until growth and business is promising, and then expand outwards to the next zone. ‘Focus very tightly then work your way out,’ explains John. The differing consumer preferences among countries in Asia also influence the appropriate market entry to build a long-term brand. An example of this is Bundaberg’s largest Asian markets of Singapore and Hong Kong, where there is strong demand for high-quality and imported food and beverage products. Bundaberg has therefore focused on retail opportunities in major supermarkets. However, expansion into other markets requires a different strategy. South Korea, for example, has a passionate culture of eating out with

more than 650,000 restaurants and bars. To capitalise on this, Bundaberg’s planned entry strategy into Korea will focus on selling products in leading entertainment venues. For Australian businesses developing their entry strategy into Asian markets, it is also important to understand the opportunities for growth by identifying potential competitors and distribution channels. Bundaberg’s entry strategy into China includes distinguishing which supermarkets are best to distribute its high-quality product to a niche market of discerning Chinese customers willing to pay for a premium beverage. It is also crucial to be realistic about what is achievable in the various markets for sales and distribution. Setting targets based on Australian and other country figures is often impractical. It is vital to understand and analyse the local market size, sales and pricing, and to benchmark your business against competitors. This needs to be done continuously due to the constantly evolving nature of growing Asian markets. Bundaberg quickly realised this in Hong Kong, where they believed there was room for significant improvement in retail sales and positioning. After benchmarking its product against evaluating competitor pricings and supermarket shelf positions, they realised they were performing very strongly for the Hong Kong market and that the local partner was an advantageous collaborator.

Case study 7

Build your own Asia Recipe: tailoring your product for a long-term market presence Tailoring products for the unique preferences of Asian consumers is also vital in building an effective presence in the region. Asia is as diverse as it is vast, and local customers’ tastes are constantly evolving. Australian companies need to tailor their products along with their growth strategy specifically for the Asian country or area in which they want to expand. Addressing this challenge, Bundaberg is conducting extensive research to develop new bespoke products targeted at Asian tastes. These ‘Asian Brews’ may include more intense ginger-flavoured drinks to appeal to the regional popularity of ginger.

Equally important when tailoring products – and often overlooked when exporting throughout Asia – are the various different laws and regulations that exist across countries and even within cities. To ensure successful expansion into Asia, Bundaberg has invested heavily in a high-calibre research and development team which has extensively analysed food laws in 11 Asian countries. Translations of these laws can be limited and the native-language version overrules English interpretations, making the process long and tedious. The research has led to an almost finalised development of an interim ‘Asian Brew’ of its Ginger Beer. This recipe will meet all compliance regulations with preservatives on importing beverages in the various Asian countries, and will form the basis of future tailored products aimed at the differing tastes in Asia.

Conclusion Bundaberg’s experiences demonstrate that entering Asia and building a strong presence comes with many challenges. The key to expanding into the region is to understand the potential difficulties and adapt to the different modes of doing business. Having learnt from its mistakes in its initial attempt to enter China, Bundaberg is now focused on finding the right Chinese partner who meets its stringent selection criteria. Indeed, its increased knowledge of the complexities of the Chinese market has led Bundaberg to recognise that they might have several partners who will operate in the various regions across China, rather than simply one partnership. This emphasis on growth extends beyond China. Bundaberg has recently secured partnerships in Indonesia and is in the process of finding partners in South Korea. Bundaberg is also increasing its product offerings in its existing markets of Singapore, Hong Kong, Brunei and Malaysia. Its Asian engagement will be an ongoing learning process, but with its commitment to going slow, understanding its markets, building strong partnerships, and tailoring its product to the region, Bundaberg aims to build on its success.

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