A significant marketing investment will be required for Broo Ltd to successfully launch its beer in China, according to a local industry expert.
Broo Ltd today announced that its Chinese production partner Jinxing Beer Group had started production of Broo Premium Lager.
“The final packaging design for Broo Premium Lager in China has been slightly altered from the Australian format to better suit the Chinese market and further enhance the Broo Ltd iconic kangaroo logo,” Broo informed the ASX.
“The ABV has been reduced from 4.6 per cent to 4 per cent to represent the changing trend in Chinese consumer preferences.”
Broo’s much vaunted kangaroo logo will not on its own guarantee success in China, according to The Minh Nguyen, managing director of Bevex Marketing in Shanghai.
“I think that heavy marketing investments are needed to push the product,” he told Australian Brews News.
“Australia is not a country famous for beer, contrarily to Belgium and Germany. What is the unique selling proposition? Having a kangaroo is not enough… The product attribute (taste profile) will probably be similar to that of other lagers,” he said.
Nguyen, formerly of AB InBev and organiser of the Beernanza beer festival, estimated that a beer launch on this scale would require a minimum marketing investment of 10 Chinese Yuan ($1.90) per case.
Broo’s distribution agreement with Jinxing was based on the sale of five million cases in the first year, which on Nguyen’s calculations amounts to a required marketing investment of $9.5 million.
Broo’s Initial Public Offer raised a total of $10.5 million. The company has since announced the $1 million acquisition of Mildura Brewery and the $2 million acquisition of a site in Ballarat, where it intends to build a $100 million brewery.
Pricing, distribution key
Nguyen said a typical marketing strategy would be a 70/30 split between trade marketing (customer discounts and rebates for wholesalers) and consumer advertising.
“China is a very price conscious and surprisingly fragmented market, consequently pricing is very important, contrarily to other countries where the distribution network is more concentrated with a few distributors and more direct selling,” he added.
“Distribution in China has more layers (master distributor, first tier distributor and second tier distributor), consequently road to market strategies are more crucial in China.
“Will the pricing strategy be good enough to persuade the distributors to push the product? If you are selling at a low price point and the distributors get an even smaller margin, then maybe they would prefer to sell a product at a higher price point with bigger margins.”
Crafting path into China
Several Australian craft beer brands are also trying their luck in China. Little Creatures recently announced plans to open a second brewpub in Shanghai.
In February, Austrade and three Australian breweries – Kaiju!, Australian Brewery and Nail – visited four major Chinese cities to showcase their wares to buyers.
But Nguyen said craft beer is a different proposition to that of Broo, albeit with its own challenges.
“I think that Broo and Australian craft beers do not have the same positioning,” he said.
“Craft beer is still a growing segment that will take years to grow because consumers have to get used to the new tastes.
“On the other hand, lager beer is readily available in China and some brands generate a huge volume.”