White Space and Beer

About 6 months ago I blogged on White Space at Anheuser-Busch (see Surprising Juxtaposition here.)  This last American-owned large brewer has had its stock go nowhere for the last few years (see chart here) as it has battled fierce competition in a consolidating and changing marketplace.  Anheuser-Busch found it had slipped into a price war for volume.  But more recently the compaqny has turned toward White Space to improve performance.

Anheuser-Busch has just taken another stepped up its White Space efforts by deciding to enter the beer market in India (see article here.)  An important White Space project for several reasons:

1. Moving offshore gives Anheuser-Busch more diversity of competition.  The company will learn from new competitors about everything from product options to distribution and pricing alternatives.
2. India, in particular is a great markt to learn.  Competition is FIERCE.  Prices are universally low, the currency is low (giving no break to mistakes), distribution is highly fragmented and much of the demand comes from poor people who have severe limits on what they can spend.  Ninety percent of shampoo sales are made in single service sachetes which sell for less than $.01 each at thousands of small retailers.  In consumer goods it’s been said "if you can sell at a profit in India you can make a profit anywhere."  Now that’s a great place to learn.
3. India is the fastest growign middle class in the world.  While the American middle class is growing at 2-3%/year, rising economic prosperity in India is creating a growth rate exceeding 10%/year.  And this is augmented by the fact that over half the population is under 30 years old, creating an expanding market for Anheuser-Busch products.
4. In India beer = Kingfisher.  Many of us who travel to India avoid all drinks with ice or from a fountain because of sanitary concerns and poor water quality.  So the universal call for fluid refreshment, in a country that is constantly hot, is "give me a Kingfisher."  Thus, India provides a great market in need of competition against a dominant product.

I’m sure the path to succes won’t be easy.  In addition to the daunting distribution and competitive challenges mentioned earlier, Anheuser-Busch must learn to deal with terrible infrastructure (intermittent electric power, bad water treatment, terrible roadways, poor refrigeration), complex government bureaucracy overseeing business, hierarchical government entities that too often have corruption, strong Communist and Socialist government participants and districts, distrust of American interlopers, a vast array of advertising channels to a highly heterogenous media environment, 30+ languages in a single country, a propensity for unending negotiation as a culture and a completely dysfunctional legal system.

But the important thing is that none of this stopped Anheuser-Busch.  And that’s what White Space is all about.  Phoenix Principle companies identify a market opportunity and then jump in to learn.  Not just for what can happen in that new market, but what it can teach the company overall.  Possibly even how to develop a new and better returning Success Formula.

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