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An open letter to Ari Mervis

January 28, 2013
By

Dear Mr Mervis,

You’re not being transparent… please fix it

I have an issue that I would like to raise with CUB about the marketing of one of its products.

ari_mervis_ltr

I recently received a media release from your public relations agency. It was a gushing tale of a small little brewery making great beer in a little northern New South Wales town called Byron Bay.

When I read the media release, it seemed to be strongly suggesting that the beer was being brewed and bottled solely by the Byron Bay Brewing Company. Without an intimate knowledge of the Australian beer market, anyone reading the media release or seeing the beer’s packaging would be very surprised to learn that the beer is actually being made, marketed and distributed by Carlton and United Breweries, albeit under licence.

The way that your company is marketing this beer, at the very least, lacks transparency. At its worst, it could appear that your company is actively seeking to hide your involvement from the consumer.

I think that the marketing of this beer is damaging to your company’s image and to the wider beer market.

I regularly have spirited discussions with the staff of brewing companies, including CUB, many of whom I count as my friends. I am often told, “beer is a unit cost game” and “this is a business where scale matters”. And indeed it is and it does. A company such as CUB enjoys many competitive advantages over Australia’s small breweries due to your size.

In the Australian beer market, cost is an important factor influencing the purchasing decisions of many beer drinkers. Your company is extremely well placed to produce high quality beer at a competitive price, not to mention to distribute and market your beers very effectively. This includes the many craft brands that you produce, such as those from the excellent Matilda Bay Brewery, that are well placed to capitalise on the growing ranks of consumers who are interested in exploring the world of more flavoursome craft beers.

However, in growing your business to the size to benefit from such scale, you have also left a large number of consumers behind. You would appreciate that there is a small but growing number of consumers for whom, whether consciously or not, buying from small and regional breweries is an important part of their purchasing decision. A number of small breweries have sprung up on the basis of satisfying this demand.

These breweries do not enjoy the benefits of scale, of marketing and distribution networks, of large public relations consultancies, of the financial resources needed to negotiate commercial arrangements to ensure their beers are poured in certain premises, of multi-million dollar ad campaigns and of the brand recognition that comes with these things. Often the only advantage they have is being small and having an interesting story to tell.

As strange as it might seem to the CEO of a multinational company, being small is their only competitive advantage.

As the CEO of a large company that spends millions registering and enforcing your trademarks, I am sure you will understand how important it is that your identity is clear in the market place. I am certain you will appreciate, then, that when you produce beers such as Byron Bay Pale Lager and market them in a way that doesn’t disclose your involvement, it makes it hard for consumers to identify what it is they are purchasing. While they are still purchasing a high quality product, it’s not necessarily what they think they are buying.

No doubt this is why you trademark your own bottles, labels and brands: to protect your brand from businesses trying to pass themselves off in the market place and to trade off your intellectual property. While being small and independent isn’t trademarkable, I am sure you appreciate the principle.

When you present this beer in a way that presents it as simply the product of a small, regional brewery, you risk misrepresenting what it is.

The SABMiller website proclaims the “high standards of ethical behaviour and transparency” that underpin all that your company does. It says that you communicate in an “open and honest way with all your stakeholders”.

Given the high ethical standards that SABMiller promises, I am sure you will agree that when you market your products in a way that can mislead consumers, it is a breach of the high ethical standards that you set. Such practices can only fuel the cynicism that many consumers already feel about multinational brewers and also unfairly hurt the brewers who make up a very small but vibrant part of the Australian beer market.

This is not a call not to make the beer. It is a call to be transparent and to clearly label your involvement in the brewing and marketing of your beer, both on the packaging and in your marketing communication, so that beer drinkers can make informed decisions.

If, as I am regularly told by your staff, beer drinkers really don’t care who makes their beer, then you lose nothing by making your involvement in the brewing and distribution of this beer clear. It is already industry practice with international brands brewed under licence, surely it’s appropriate to do so when you licence brands locally.

There can be no harm in ensuring that beer drinkers can make an informed choice about what they are buying, can there? It is in the interests of both the Australian beer consumer and fair competition in the Australian beer market.

You have recently loudly proclaimed a willingness to apologise and fix it when CUB has made mistakes, even at great cost to your company. I would ask you to acknowledge that there is an issue here and to fix it.

Yours in beer,

Matt Kirkegaard
Editor,
Australian Brews News
www.facebook.com/DearAriMervisPleaseFixIt

(Update: complete coverage of this issue can be found here.)

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15 Responses to An open letter to Ari Mervis

  1. Dave Thomas on February 24, 2013 at 4:12 am

    Dear Mr. Kirkegaard,
    I am perplexed by what you mean by the following in your open letter to SABMiller?
    “Often the only advantage they have is being small and having an interesting story to tell. As strange as it might seem to the CEO of a multinational company, being small is their only competitive advantage.“
    What about the self-proclaimed advantages of “richer flavors, wider choices, local neighborhood business presence, more intimate consumer contact, wild and wacky innovators, etc.?“
    Whenever it benefits craft brewers (and I am one) these superlatives are often used to advantage with our loyal and new customers. Product quality, image and ‘sic caveat emptor’ ought to be advantage enough for any brewer regardless of size. I, for one, am getting sick of the whining/whinging of my fellow “craft” brewers who have forgotten these beliefs that got us into the business to begin with, now choosing to focus on the “craftiness” of the big brewers whom ALL started off small years, decades or hundreds of years ago.
    While you are casting aspersions why is hidden contract-brewing never as inherently evil as being successful in the brewing business?
    I hope and pray that no small wrong-minded brewers of the day ever become successful and find yourselves outside of some spuriously flexible definition of “craft”. ‘Sic caveat ceruiasam’

    • Editor on February 24, 2013 at 5:14 am

      Thanks for the comment Dave —

      In reply to your points — craft brewers don’t have a monopoly on richer flavours. The rest of the things you mention are generally things that are the benefits of being small. What we see here is a multinational brewing company that wants all of the benefits of being huge, but at the same time wants to pretend to be small because they know that people are looking for that. That’s where I have a problem, especially as they have gone to extended lengths to hide the true nature of this beer and deceive customers. If customers don’t care who makes it, there is no harm in putting SABMiller (or at least CUB) on the label. If customers do care who makes it,they are actively being deceived.

      As for the rest of you comment, this isn’t about definitions of craft beer, it’s not about ‘big’ and it’s not about contract brewing. It is about transparency.

  2. Mark on February 1, 2013 at 12:01 pm

    I reckon CBIA/ARCBA should steal an idea from Hopdog Beerworks. Make a craft beer bottle top (green and gold would standout). Copyright it and aggressively market it. Only problem is then the issue becomes, who decides what craft really is. Shareholders? Owner operated breweries? Contract brews? Licensed Brews?

    Is Coopers ok for the cap but this guy isn’t?

    I know of a “Craft” brewery widely distributed that has only in the last 8 months built a brewery and it only supplies kegged product. I don’t think they should be forced to label where it’s brewed if they don’t want to.

  3. adam betts on January 29, 2013 at 11:41 pm

    perfectly said

  4. Grant Cadwallander on January 29, 2013 at 12:21 pm

    This fight is a good and just cause. You are right to pen this open letter although I feel it will fall on deaf ears, but, and it’s a large but, it should apply to all brewers. Because there are a lot of craftys out there that don’t actually brew their own. And that info should be available to all consumers.

    • Editor on January 29, 2013 at 12:25 pm

      The letter is penned, that’s all I can do. The rest is up to CUB… Whether their ears are deaf or they just have a tin ear for issues such as this, we will see.

      And yes, there is a debate to be had about contract brewing and transparency, but that is a slightly different issue to the one here. I’m happy to tackle this one first and it might inspire the industry to sort out the other itself…

      • Grant Cadwallander on January 29, 2013 at 12:37 pm

        I’m sure it’ll be discussed rigorously on sat at gabfgeelong. The first step is the hardest. It sounds like you’ve had enough of the trick marketing. It shits me to as these are usually the only so called craft beers that fill the shelves of 99% of bottle shops in Geelong.

  5. bierfesten on January 29, 2013 at 8:37 am

    I agree with on this one @jules . I love craft but big boys aren’t going to be transparent. There game is shareholder growth and volume.
    Phở craftbeer is still new beer to consumers. I prefer someone drink a squires over a VB.

    I dont agree with the limited Brewers Assoc statement recently. Blue Moon by coors was Craftbeer for me years back.

    • Editor on January 30, 2013 at 9:14 am

      Sorry, missed this one yesterday.

      I agree absolutely agree that many of their beers are craft beer for many people and I have not challenged the fact that they make them, or suggested that no-one drink them or they should be considered any less a beer than from small brewers. In some cases they are better. But many people do care who makes their beer, and CUB knows this. All we are asking is that they be open and honest with consumers.

      And if, as you say, big brewers aren’t ever going to be transparent, fair enough too — but it’s probably time for them to change the heading on their website’s ‘Transparency & Ethics’ page.

  6. Jules Smith on January 28, 2013 at 9:15 pm

    Think about this. Craft beer does not exist in Australia.

    Retailers and big breweries sell fake Craft beers because they can. They have power. But an individual brewery or brewer sells fake craft beers without breweries because they choose to do so. No one is innocent. It is not unique to Australia . But it seems to occupy a very large share of the craft beer scene here. No one behaves as badly as Australian “craft beer ” players. Even Coopers is tarnished via Premium Beverages with very aggressive beer tap contracts across all beers they sell.

    Australian Brews News and Crafty Pint’s promotion of the Hot 100 Craft Beers also demonstrates you guys don’t have clean hands too. Seriously. What a shameful marketing ploy this survey has become. You should rethink this survey.

    The Australian beer market is very sad at the moment. It is like a child passing through the terrible teens. The wine industry went through the same phase to a lesser degree.

    This situation will not change but get worse before it is resolved. Coles, Woolworths and Aldi are hardwired to just want more profit. Initially by ranging more and more whilst seeding private label pretend beers. Then , cutting all brands back to limit choice and control the consumer tastes raising margins higher. You see it in every product category in retail. It is a documented strategic format. Down down prices ploy of Coles is clearly a lie. Multiple brands have increased in price to pay for lower cost private label items or drops in core commodity lines like white bread and milk. Will beer go this ways? It has in the UK with grave social consequences.

    The beer buyers know absolutely nothing about beer. And they don’t care. It’s all about driving more profit per square meter in retail. They often don’t even drink the beers they select. The tasting panels do. But that it just a ranging process. It’s all very profit driven. Time tight.

    Getting back to Byron Pale Lager. The answer for the deceit by CUB/Sab Miller and Coles is simple. Lion no doubt has special more favourable trading terms deal with Woolworths. ( They generally do give better deals and no doubt the Japanese Kirin Executives are throwing tonnes of money at the Aussie market. It’s a lot more attractive than Japan. And why not. Term deposits in Japan are zero..so any single digit profit in poor old Australia are lookin pretty good to shareholders.) The greater their share of market in Woolworths, the more profit Woolworths gets. So Lion will no doubt be the favoured sons in Woolworths. at least for time being. And the more promotions and floor space offered to Lion. It’s a formal deal no doubt. So CUB is declining faster than Sab Miller wants. Australia is an embarrassment. Local executives will now start getting the chop. If only they had built a few breweries in Africa!

    So, to even things up, Sab Miller no doubt did special renewed trading terms deal with Coles. Hence Byron Bay, Steam Rail and more Sab Miller sales in Coles. It’s the nature of the Australian retail and brewery duopoly. They both deserve each other. This happens in all categories in retail. But it kills off consumer choice and prevents level playing fields. Woolworths no doubt is pretty pissed off right now.

    Hopefully, CUB / Sab Miller via Coles and Lion via Woolworths will crucify each other. Perhaps better and more small breweries will emerge in Australia that dont need retailers and don’t suck up to them. The old farm gate approach to drinking beer at your local brewery might just be the answer. But getting a decent brewery survey out from you and Crafty might be a good starter!

    • Pete Mitcham on January 29, 2013 at 7:33 am

      Jules,

      Your points are well made and thoughfully put but miss the point. Since the get-go this has had nothing to do with what’s in the bottle but what’s ON the bottle.

      If a brewer makes a beer at a certain location AND makes or claims that location is part of the products ‘soul’ then shouldn’t it be made there? If it’s just a story to help sales, then say that.

      Long discussions with Matt on this have made clear to me that the issue for him — and for the beer community as a whole — is transperancy, honesty and integrity.

      At the end of the day it might just come down to this; does an individual consumer want to drink a beer made by a brewer to be enjoyed by a drinker or a beer made by an accountant to please a shareholder?

      If the consumer is mislead it hurts everyone involved in brewing good beer.

      • Scott on January 29, 2013 at 12:24 pm

        How about these guys, http://craftbeer.org.au/ get some money together and make an ad for national TV, youtube, etc.

        Ad opens with brewers in a small bewery, brewing their beer. A montage shows similar breweries all over the country.

        Then night falls and the breweries go quiet. Then dodgy looking trucks arrive, with dodgy looking guys. They steal all the beer and the trucks arrive from all around the country at CUB.

        We go inside the brewery and see them emptying this beer into big vats. A production line showing water, monkeys urinating into bottles, preservatives and sugar are mixed into the beer.

        We then close with the line, “Carlton Draught — Made from Beer and a whole lot of monkey piss, bullshit and other crap!”

        :D

        • Editor on January 29, 2013 at 12:28 pm

          While I appreciate the passion, I don’t think it’s right to denigrate Carlton Draught in that way. It’s an extremely well made beer that appeals to a lot of people. It may not be our choice, and may be bland to our tastes, but that doesn’t make it a bad beer.

          If nothing else, it has CUB’s name on the label…

          • Russell Griffin on January 29, 2013 at 11:49 pm

            I’m not sure that is Scott’s point. A clever ad campaign to help position this issue with consumers is a great idea. While we’re all aware of the issue, I’m sure most consumers would not have given it a second thought. Go forth and advertise — just don’t mention the monkey piss cos they’ll sue faster than you can say “Gissa VB thanks maaate”

          • Editor on January 30, 2013 at 4:44 am

            Hi Russell — thanks for joining in. I took Russell’s point, which was well made, but thought that it was the rest was unnecessary. Despite your or my beer preferences, it’s not fair to characterise the other beers in that way. I know plenty of the brewers who are great people, passionate about what they do and they make a high quality product that targets a market that demands it, though they’re demanding it less it seems. I think the SABMiller boss summed up the situation pretty well



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