Marketing Week (MW): Why has ActionAid released a report claiming that you are avoiding paying valuable tax to poorer countries in need, notably in parts of Africa?
Nick Fell (NF): You should ask ActionAid why it has decided to focus on SABMiller because we strongly believe the allegations are groundless.
MW: As a multinational that has a special and arguably co-dependent relationship with many regions of the world, shouldn’t SABMiller review the policy used by big business to avoid corporation tax onshore by exploiting loopholes, and act as an example of a business doing things differently?
NF: We don’t deploy aggressive tax planning techniques, and we already take our responsibilities to local markets and communities extremely seriously, as you will see. Our economic contribution through local supply chains is often substantial, through not only production but local sourcing of raw materials and the sale and distribution of our products.
MW: Moving on, what separates you from your other global competitors in the beer industry, namely Heineken and AB-Inbev?
NF: Our commercial and marketing strategy is built on a very different view of how people associate with beer brands. We develop strong premium portfolios for local markets.
Heineken’s strategy is essentially providing premium consumers the world over with Heineken. We see flaws in this strategy.
Beer is intensely local. The biggest global brand continues to be Heineken, but its share of global beer is only 1.5%. People take huge pride in their local beer. The markets where a beer can come from overseas and do better than a local beer are extremely limited.
AB-Inbev’s strategy is to leverage positions in the likes of the US, Brazil and other markets with mainstream beer brands such as Becks and Stella.
This approach is also flawed because beer is premiumising everywhere in the world. The price structure in beer is essentially made up of four strands – economy, mainstream, premium and super premium. Mainstream is the largest strand but it is the premium and super premium sectors that are growing everywhere. If you want short-term success then I guess you might just focus on your mainstream brands, but if you are looking for success in the long term then you have to be represented in the premium and super premium categories.
If Browns can do for Kozel what Pizza Express did for Peroni, then in 20 years we will have another huge position in the premium end of the market
MW: So tell me more about your own strategy.
NF: Our strategy rejects the notions that beer is globalising around a handful of brands and that you can gain market share by simply focusing on the mainstream sector. Instead we are developing portfolios that are successful in their local markets. We have a global piece of research called Pride in Local Origins (see box) that looks at the market with local eyes, which we use to empower local people to make the appropriate decisions.
MW: How has the research helped you?
NF: To establish brands that work locally you must understand local heritage. Take the Tyskie brand in Poland as an example. Pride in Origins helps us understand what it feels like for a Polish person to be Polish as compared with what makes, say, a Romanian feel like a Romanian (see below).
MW: How many regions and countries have you tested the Pride in Origins research in?
NF: We’ve found many different local associations to build brand architecture and activation around. Some countries associate beer with their men, so we give the beer a masculine character. For others, drinking beer shows that you are down to earth in character. Elsewhere, beer is a social experience that brings people together.
In Romania, for example, the Timisoara brand’s positioning is based on understanding how Romanians feel about being Romanian (see below).
MW: How did you hit upon your strategy that emphasises the “local” importance of beer?
NF: Our whole business model since we left South Africa as a business and expanded overseas has been to benefit from this local understanding. We didn’t have any global brands and were realistic and humble enough to understand that South African lager brand Castle wasn’t going to be one. So we leveraged the assets of the local beers that we bought. We recognise strength in assets that others can’t see the value in.
MW: In the UK you have just launched Kozel, a Czech beer. You also have Czech beer Pilsner, but your most popular beer in the UK is Italian brand Peroni. What is so special about it?
NF: Peroni is the fastest growing premium brand in the UK. The core idea of Peroni represents “Italian style” in beer. The markets where Peroni works are here, Australia, Romania to some extent and the US.
In Australia and in the UK, the idea that beer would be stylish is a differentiator because no beer has explored that territory before. To both the British people and to the Aussies, it’s a weird idea but if anyone was going to associate beer with style they reckon it would be the Italians. The way that the brand is activated in those markets is incredibly similar.
But then you have to activate and translate it differently in Romania. Romanians see themselves almost as the Italians’ next-door neighbour and the other Latin nation in Europe. We’ve discovered that making the style connection with Peroni in Romania simply isn’t enough. There, the reaction we get to applying style to beer, is: “Yeah. So what? Of course beer is stylish because I’m stylish and I drink it.”
MW: How does Peroni’s positioning stand out in the UK?
NF: The style association works well in the UK and helps the Peroni brand stand in sharp contrast to the way that the public debates the effects of irresponsible drinking in this country.
The point when Peroni started to motor in the UK was around the time when Stella Artois was going through its “wife beater” [association]. The brand was speaking of being “reassuringly expensive” in its advertising but was selling at half price in Tesco.
MW: That seems to go against your strategy of building local beer brands in local markets. Why don’t have a local beer here?
NF: If you look at the total profit pool of the UK market it is not one where you would want to buy a local brand.
What we are trying to do is use the brands in our portfolio to build advantage here. So Peroni is an obvious asset. [Czech beer] Kozel is another, although it will take time for that brand to start rocking. We’ve put Kozel exclusively in Browns bars for now. If Browns can do for Kozel what Pizza Express did for Peroni, then in 20 years we will have another huge position in the premium end of the market.
MW: Your strategy of local brands versus global brands goes against many other companies’ strategies. Take Reckitt Benckiser for example, which has sustained growth by building a list of global “power brands”.
NF: Reckitt Benckiser is an FMCG company with the sort of products that are sold purely through their functional benefits. When I was at Cadbury we knew that what really sells chocolate is emotional benefit. Women have a relationship with chocolate that is highly emotionally driven. If you try to activate chocolate in marketing without understanding the power of that emotional relationship, you are always going to fail.
At the other end of the spectrum there is Trident, Cadbury’s chewing gum brand. If you ask someone about their emotional relationship with that brand, they would say: “Excuse me? I just chew it to keep my mouth fresh.”
When was the last time you got emotional about your toilet cleaner? If you’re in functional benefits and you don’t have a powerful emotional relationship between your brand and the product then it works to go global with your brand. We don’t think the way we approach our challenge is universally correct for all products in all categories but it is right for us. We think it is suited to our territory because men have a close relationship with their beer.
Pride in Local Origins: Research that defines local marketing strategy
Insight: The fiesta is part of national identity across Latin America, and Ecuador is no exception. The research illustrated that rather than make the beer available during fiestas, the brand should get involved before, during and after the event.
The application: Limited edition packaging is now created even for a small town or region as well as giving out gifts and prizes to the community rather than an individual.
Insight: The country’s rugged territory and climate play an important role in the psychological make-up of Peruvians. They pride themselves on being straightforward, with a fighting spirit and tough character. Bullfighting is also part of the culture.
The application: The brand has reinforced the characteristics of the people and of the geography, talking about “taste with character” and reflecting the values and heritage of the region. The label has also been changed to include a depiction of the fighting bulls and the mountainous background has been given greater prominence.
Insight: Poles believe that nobody takes them seriously and as a result they have low self-esteem. SABMiller wanted to develop a strategy to result in “external validation of Polish achievements”, says Fell.
The application: Marketing activities have been created to show Poles that foreigners admire their country’s achievements. Fell says this includes communicating that Tyskie is the biggest Polish beer export in the UK. A campaign ran asking if Tyskie was human who would it be? Polish footballer [Zbigniew] Boniek was chosen – a former Juventus player who is perceived to be talented, relaxed and successful overseas.
Insight: Research shows people feeling negative about the days when they lived under a Communist regime. But they also feel a sense of nostalgia about living through that time together.
The application: Because Timisoara has been around since the early 18th century and comes from Transylvania, a place that is associated with people who work hard and have strong moral values, heritage marketing is being used to capture the sense of community and hard work to demonstrate its connection with the country.