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The new paradigm.

According to Bill Olson, president of the Guinness Import Co., high-quality premium brand equities are the key in an evolving market.

MBA: How has the Guinness Import Co. portfolio been performing?

OLSON: Our portfolio is, in depletion terms, up nine. Guinness is up about 16%. Pub Draught is three points of that, and the base business is up 13. Bass is up 15 percent. Pilsener is up over 50 percent, because it's coming from such a low base, and we introduced the draught and the large bottle.

Dos Equis is up six, while Moosehead is flat, and Kaliber is down. Harp is up about a point.

MBA: You must be pretty happy with those numbers.

OLSON: It's very exciting for us, because of the growth of those premium equities we have, primarily Guinness and Bass.

MBA: How do you see the import market turning?

OLSON: We see a whole new segmentation developing within the industry. It's that premium segment that we compete in very effectively, the place where the high-quality micros live.

Consumers are looking for more satisfying, fulfilling products, driven by image, quality and heritage. We certainly have the brands that fit that profile. I think it's a focus that we've had for the last five or six years--concentrating on premium products, developing our equities from draft.

It's not just a matter of riding the wave, of being in the right place at the right time. Clearly, we've been there. We've been focusing on this premium segment of the import category, and now we're able to capitalize on that as consumers become more aware of these high-quality premium brands.

So it's very encouraging for us. We're optimistic. Anytime you can get that kind of performance, you've got to be optimistic.

MBA: You mention that you've been promoting your brands as world classics. Do you think that sets you apart from others in the import category?

OLSON: Yes. In my view, the classifications "import" or "domestic" don't mean much anymore. It's an obsolete paradigm, frankly.

We're focusing on the what I see as the new premium segment, with our high-quality, world-class equities.

The micros have had a cause--effect relationship in that segment. They've been one of the causes, but they've also benefited from being in the right place at the right time, as the consumer has begun gravitating to that segment and their palates are becoming more sophisticated.

By focusing on our world-class premium equities, and driven by our core competency in draft, we've been able to realize significant growth, without denigrating the image of our products through a lot of price promotion.

MBA: You mentioned that you believe the import--domestic paradigm is obsolete. Could you elaborate on that?

OLSON: I don't think that the distinction is relevant anymore.

MBA: Would that allow you to ultimately produce products in the U.S.?

OLSON: We would not see that in the near future. We believe that the uniqueness of our equities and the core values and associations are very much part of the country of origin.

When I say that the old paradigm might not be relevant anymore, that's not to say we would brew Guinness in the U.S.

But you need more than country of origin. You can't just say 'We've got this brand from Ireland or Holland.' It's still very important. It's the cost of entry. But you need to evolve the brands beyond that.

MBA: In your view the days are past when importers could just bring packages from different countries and sell on novelty value?

OLSON: Yes. I think that played in the early to mid-'80s. But consumers are much more sophisticated now, and the country of origin doesn't mean as much. You need to have an interesting country of origin to get to the party, but what you do at the party is based on the personality, the relevancy, the core value of the brand.

To extend the metaphor, country of origin is important as far as getting into the party, but it doesn't mean you'll get to dance with the pretty girl.

We want to get into the party. We don't want to talk to everyone, there are other imports that do that. We want to have a significant conversation with a significant few. And maybe dance with the pretty girl.

I have dreams about this stuff. But seriously, I think there is a lot of truth to that metaphor, in terms of building our business.

MBA: As you have noted you are in the same segment with many of the micros. As the micros become larger and more competent, are competitive pressures going to make it tougher on the imports?

OLSON: We look at the micros as a positive. Again, we've been focused on this premium segment for a long time, and building our competencies and our equities around that.

In a sense, we feel that we've helped shape this market. Now, as it grows, if we continue to develop those equities, and make them relevant and meaningful to the consumer, we believe we can not only ride this wave, but direct it. So, I look at the growth of the micros as very good news strategically.

And, I think that the consumers are very smart. I think they know the difference between a premium brand brewed in Ireland, with a lot of heritage, and a recently-introduced domestic brand.

It's very difficult to try and create heritage and tradition when you're trying to develop a new product. Using Guinness as an example, those core values have developed over 250 years. No matter how good the product is, no matter how good the marketing is, you can't develop that in one or two years. The consumer has an understanding of that, and we've done a lot of research that we think verifies that. So we see the growth of the micros as good news, and we just have to make sure that we stay very focused.

In terms of entries by the large domestic breweries, the advantage we have is that we don't have low definition. To use a photography metaphor, we have high-grain, high definition as far as our focus. We are focused on the high-quality, premium segment. The big domestics, with all their skill and talent, have to be focused on a lot of areas. We believe that our focus is high-definition, and if we pay attention we'll be successful.

Strategically, the entry of more specialty products is bringing more consumers into that segment. As they refine their palates, they will want to gravitate to high quality premium equities that are meaningful and relevant, and the segment will expand. As long as we continue to adapt, and make sure our competencies, like our draft competency, matches up against that, I'm optimistic about our future.

MBA: You said that you believe that the high-quality premium segment will continue to expand. How big do you see it getting?

OLSON: In the next five or six years, I think this premium segment can get up to three-and-a-half to four percent of the industry. That's including the micros, which are around .7 right now. It's a whole new hierarchy.

MBA: By new hierarchy, you mean the creation of a new segment that would include premium imports and premium domestic specialty beers?

OLSON: Yes, I think it's an entirely new hierarchy. It's not something we created. It's not something we created. It's like Einstein's theory of relativity. It existed out there, and by listening, we found it.

It's a new hierarchy, a new paradigm. The market has matured, and it's more segmented now.

The import category has been around a long time, and as categories mature, they define themselves, they segment.

So there is a premium end, with certain high-quality imports, and some micros that are in there. That's the competitive set, that's where we live. We can also source business outside of that, but that's where our emphasis is.

MBA: How many of the micros do you think fit into the high-end segment that you are describing?

OLSON: There are some high-quality micros, and then we see other micros that will not necessarily fit into that premium segment. For some of them, quality and consistency are not there yet. So it's not all of them.

MBA: You mentioned that you would continue to invest in the equity of your brands. What will your main avenues of investment be?

OLSON: Our main avenues would be print, outdoor and we're looking at the possibility of doing some television.

MBA: At what point would you do T.V.?

OLSON: We would use television when we felt we had sufficient critical mass. That's when it would become cost effective to communicate with the consumer that way.

Also, we believe that there are certain brands that are very telegenic. There are certain brands that are not. So it has a lot to do with the core values of the equity and its personality. We think Guinness is a very telegenic brand. Bass may not be.

MBA: What do you see as the distinction between the two?

OLSON: Guinness is an incredible visual experience. You see a Guinness pour, and there is something almost mystical about it. There is a relationship that you develop with that pint, and I think that would be very powerful on television. It's unique.

There's a delicate balance, though. These are still 'discovery' brands. So when we market them, we have to do it in a way that is not aggressively overt. There is a danger of becoming too mainstream, and losing your premium image.

That's not to say we're not aggressive, that we don't want to move our brands forward, but there's a certain point where you can't convert new drinkers, and you could do damage. Television is a very powerful medium, but you have to make sure you do it in a very targeted way.

If we are perceived as mass-marketers, then we lose some of the core consumers we have. We lose that uniqueness. So you have to make sure that when you advertise these equities that it's focused, it's premium, it's aspirational and there's something about it that's covert.

That may sound like a contradiction. We're not Budweiser or Miller, and we never will be. But, if we started to get overly aggressive with Guinness and you saw it every time you turned on the television, it might lose some of its premium nature. Now if you saw it on cable, and it was very targeted and directed, that's different.

We have to treat our equities very carefully. Even though you want to grow them, if you push them too hard, and it could snap back. There's a delicate balance. I would not want to build the perception that we are trying to mass market Guinness or Bass.

MBA: Do you think that you also have to be careful when it comes down to the level of individual accounts. Do you resist permeating entire areas with Bass taps?

OLSON: We have to have high-quality distribution. We're very targeted as far as the account base. It does not serve us well to go into an account and have Guinness or Bass not be successful.

But I do believe that there is tremendous opportunity for greater distribution.

MBA: What areas of the country would you target in the coming years?

OLSON: I think there are opportunities even in our developed markets. We have a high BDI, but there are still opportunities in New York, in Boston, in Philadelphia, in New Jersey. And there are certainly tremendous opportunities as you move to the south, southwest, the central U.S. and the West Coast. We've seen enormous growth in those regions, and I still see tremendous opportunity.

There is Charlotte, NC, Pittsburgh, PA, and Columbus, OH. These are markets that will become more accustomed to drinking premium brands. Accounts in those markets have a greater interest now in premium brands. We believe that we can begin to meet their needs.

MBA: The new premium segment that you describe, is that still mainly concentrated on the coasts and certain urban centers?

OLSON: Yes, because that's where the import category has been strong, and where the consumers have developed an interest in premium brands. Where the import category has existed the longest, that's where you have the greatest segmentation. The longer the category exists, the more refinement that takes place.

MBA: Does educating the consumer come into it?

OLSON: We do that through trade publications, communications to the retailer, and we try to do that through our advertising. When you see, say Pilsner Urquell on draft, and you may not be in the know, but you see that very premium porcelain tap handle and there is a curiosity factor. We find most people in the bars and restaurants where our products are sold are very much in the know about premium products. They want to try this pilsener.

I believe the nature of where you place your products. When the consumer comes in, and knows about the brand, and can speak intelligently about the brand, that's how you move your brand forward. Especially if you're a micromarketer, like we are.

That's something that we have to do as well as anyone if we're going to prosper, understanding the micromarketing. That's what you're talking about when you ask about targeting accounts, targeting resources, marching your competencies and your brands.

MBA: Guinness seems to have been very successful at building their draft business. Would you characterize your draft business as stronger than the norm for an importer?

OLSON: Yes. Statistically we're much stronger than both the import category and the overall industry by a significant amount.

MBA: Would you put a percentage on it?

OLSON: I would just like to say that we're significantly stronger in draft, and we believe that is our core competency. We have confidence that you build premium brands that way. Not that you neglect the package, but if there is one thing that we try to do well, and believe we do well, that's the draft business.

MBA: To what would you attribute your success in the draft business?

OLSON: We understand that our brands have strong "pub" imagery. So when you think of our equities, you think of the pub experience.

We've mainstreamed beyond that, but what matches that overall pub experience is draft. We recognize that, so we said, 'We need to build a competency in this area.' It allows us to reinforce our core values with these pub associations, which are very positive for us.

MBA: You are saying that the "pub imagery" is innate in those brands?

OLSON: It's the quality, the overall ambience, the imagery of it. Those are core values, with some strong associations to pubs. Often when we ask consumers about our brands, the way they relate to them is through draft.

MBA: So do you think that on-premise business can still be an avenue for growth?

OLSON: Absolutely. There are tremendous opportunities.

MBA: And you are still generating significant trial on-premise?

OLSON: Yes, which generates economies of scope, which we exploit to build our package business off-premise.

Because of our relatively high price premiums, we have to give the consumer a favorable occasion to build loyalties on-premise. That way we can facilitate them buying the product off-premise, again at a fairly high price premium.

That's an old adage in this business, but often cliches apply in life, and I believe that one applies to our business.

MBA: You mention that your competency is draft. Do make a strong effort to ensure that the brand is being poured properly in your accounts?

OLSON: We have excellent wholesalers. Our wholesalers recognize that to grow our brand long-term they have to have a strong draft capability. We rely on the wholesaler to make sure that the lines are clean and the right kind of support materials are there.

We also spend a lot of time training our own people. We like to think that every person in our company is very competent in the draft business. So we just don't have a few draft specialists, everyone in this company understands the draft business.

MBA: How have consumers received Pub Draught Guinness?

OLSON: Very well. We look at that package as a way to satisfy our loyal Guinness draft consumer. The icon for the Guinness brand is the draft experience, and this is a way to reward our main-line draft drinkers with the Guinness experience at home.

We also believe that it's going to be an excellent recruitment device to bring new consumers into the franchise, by making this experience accessible off-premise.

So it's reinforcement, and as an extension, or trial generator.

MBA: Guinness has been criticized by wholesalers for using wine & spirits houses to distribute its product. How do you respond to that criticism?

OLSON: You have to make sure you adapt to a changing market. If you don't change, if you don't adapt, you won't be successful, and we're competing with the giants. They define the world so far as the distribution system. Given that, how do we leverage what we have, and be successful?

I understand the criticism, but I believe that we've done the right thing for our business long-term, and we've treated people fairly in the process.

MBA: So you do not see these actions as undermining the three-tier system?

OLSON: No, it doesn't undermine the three-tier system, because it is the three-tier system. We have a wholesaler, who has salespeople, and merchandisers, they deliver to all the accounts. In contrast, I see what a couple of the larger brewers are doing, and that's not the three-tier system.

What we're doing is something that we believe is better for us. It gives us some critical mass, and allows us to match up against the marketplace.

This is not a strategy we're going to implement nationwide. There are certain markets, a majority of markets, where we're going to continue with beer wholesalers, who we have great partnerships with.

MBA: Are you saying that since Guinness has strong relationships with wine and spirits houses, through its distilled spirits business, it would be foolish to ignore the synergy that exists there?

OLSON: Yes. It would be foolish not to take advantage of that and leverage that successfully to move our business forward.

But, as I said, it's not something that we'll do in every market. We have a commitment to evaluate the best distribution partner that can move our business forward long-term, and is compatible with premium brands.

We're not Miller, we're not Coors, we're not Anheuser-Busch. We have to leverage what we have to continue to access all channels of distribution. We need a distribution system that works for us.

The interesting thing is that we've always had relationships with wine & spirits wholesalers. A lot of importers have. We have the ability to access them successfully, because we're Guinness.

We have strong commitments to the beer wholesaler network, and we have strong commitments to the wine & spirit network. We have flexibility.

Again, this doesn't mean that we'll go to wine & spirit wholesalers across the country. That would not be strategic. In California, it was the right decision for our business long-term. We had to adapt, and we have to make sure that our brands were being focused on. We were meeting the needs of a changing business environment. The chains are very powerful, and we have to adapt to that.

I use the analogy of the "boiling frog." If you put a frog in a pot of water, and you turn up the heat, the frog doesn't recognize the temperature change. He doesn't recognize that the environment is changing. His capillaries burst, and he dies.

We're a small company, and I want make sure we leverage what we have so we don't become the boiling frog. We have to continue to adapt, or we won't be successful here, in the most competitive beer market in the world.

MBA: In your view, what brand in your portfolio has the most potential for the further growth?

OLSON: Guinness. The black beer. It is the most unique drinking experience in the world. A financial magazine ranked it as the 17th most valuable brand in the world. It's a brand that's worth over two billion dollars if you project its future cash flow.

Although there is competition, we believe we can dominate the black beer segment. As this whole premium amber ale segment continues to grow, Guinness is uniquely positioned to take advantage of that. It will continue to recruit new drinkers and reinforce its loyal consumer base.

MBA: Why do you think stout has never caught on in the U.S. market?

OLSON: This is a blonde beer culture, and there is trepidation about black beer. There are misconceptions that it's very heavy, rich and laden with calories.

MBA: How do you counter those misconceptions?

OLSON: You counter that by communicating to the consumer that it's a very high quality, robust, unique drinking experience. You communicate what it is, but make it much more accessible to the consumer.

The way you make it more successful is by lightening Guinness up. Lighten it using humor...not taking ourselves too seriously.

We've got this incredible brand that has been around for almost 250 years. We want to utilize these core values that are enduring, but express them in a contemporary way that's relevant. There has to be a sense of humor, a sense of accessibility. That will bring people into the franchise.

MBA: And Americans will drink stout.

OLSON: Americans will drink stout. Americans are drinking stout.

MBA: You said Pilsener Urquell was up 50 percent?

OLSON: Yes, from a small base, but it has incredible potential. It's the ultimate draft experience. Our partners in Czechoslovakia recognize that. Now that we have draft in the marketplace, it's generating greater awareness. If you ask consumers, they are aware of the brand. Premium beer drinkers know about it, but there isn't top-of-mind awareness because they never used to see it. Now they see a porcelain tap handle, and you get that top-of-mind awareness. You get the trial. It is the ultimate bright beer in the world.

MBA: Do you think that the Miller purchase of a FEMSA stake will affect your Mexican brands?

OLSON: We have a good relationship with Moctezuma, and we have a long-term agreement in place. We're confident that, as long as we perform, that we can be their strategic alliance partner here in the U.S.

I think they feel that we understand premium brands, and Dos Equis is a premium brand, with a lot of latent potential that we want to exploit. Because we've had some success with that, I think they're confident in our ability to build Dos Equis long-term.

We're not naive. We understand the relationship with Miller, but we have a lot of confidence in our partners, and I think they have confidence in us.

MBA: What were your priorities when you took over at Guinness?

OLSON: We wanted to go through a rigorous portfolio plan, and to create strategies with our advertising agency, and develop unique brand strategies that express the relevant personalities of our brands. I wanted to get the strategic positioning right for all these brands. You don't keep changing the positioning, but you want to make sure that you're current and relevant.

Then we wanted to make sure that we were allocating our resources properly. Again, putting a high-focus definition on the business.

Then, defining our clear core competencies. What do we do well, and how we can continue to do it well.

Then we promoted and moved a lot of high-quality people, and I think that energized the business, and created some excitement.

Finally, we tried to do everything with a sense of speed and focus. We're small, so we have to be able to adapt. We have to process-driven, we have to be faster than our competition, or we won't prosper. We have to beat them with brains and speed, and not brawn.

I believe we have great people in this company, and I want to continue to build leadership at all levels of this company. I think what makes you successful in this business is to work with your customers with a sense of leadership. You're open and honest, but you're bringing in ideas and innovation, and a sense of possibility. We have to provide that service...our ideas, our leadership, our professionalism.

We spend a lot of time inculcating leadership. I think that's a competitive advantage if you can do that successfully. I want the industry and the wholesalers to feel that we have very high quality people who will impact their business in a positive way.

MBA: Have you been happy with the way things have panned out?

OLSON: I'm a discontented person, but I'm very proud with the way we performed at the end of '91, through '92 and this year. We have a lot of momentum in our system, a lot of excitement. Morale is positive, our relationships with our wholesalers are very good. We are getting honest feed-back from them.

MBA: Do you believe in getting people out on the street....the old salesman ethic?

OLSON: We certainly believe in working in the marketplace, calling on the retail accounts. Once we create strategies, we allow our people to make decisions in their local marketplace, within a fundamental financial and strategic box.

We have a couple hundred people, and they probably make 10 decisions a day. That's 2000 decisions a day. I don't want to work that hard. I couldn't make that many decisions. But the speed and the accuracy of a decision creates the value.

Our people are on P & Ls, they all have notebooks that give them access to all our systems. And as a small company, we have to be fast and focused and close to the marketplace.

We believe in pushing decisions down to that local market level. Our district managers and sales reps, our area managers and division managers have budgets, and P & Ls, so they know the financial and strategic implications of decisions. But they are given parameters, but also the flexibility to make decisions. This business moves very quickly. So you need capable people who are able to make decisions.

MBA: How many employees does Guinness now have in the U.S.?

OLSON: We have 130 now, and I think we have as many people on the street as any other importer.

MBA: Would you say Guinness remains strongly committed to the U.S. market?

OLSON: More than ever. We believe there is tremendous opportunity here. It can be a high-growth market for us, if we apply our resources successfully and leverage successfully. And, we keep a high-definition focus on that premium segment. The company believes this could be a high growth market for us, and I concur.

We're more than ever committed to the North American theatre.

MBA: Your use of the word 'theatre' gives the business a military sound.

OLSON: I also say it in the sense that there is great theatre in this business, so it's a double-entendre. It's war, but there are some interesting Off-Broadway aspects to it as well.

MBA: Thank you for speaking with us, Mr. Olson.

William T. Olson is president and chief executive officer of the Guinness Import Co. of Stamford, CT. Olson joined Guinness in 1986, serving as eastern division sales manager. He was vice president of sales from 1988 to October, 1991, when he was named chief operating officer. Before joining Guinness, Olson served as division manager at Coca-Cola U.S.A. and worked in sales and marketing at 7-Up and Procter & Gamble. Olson, who is 35 years old, holds a bachelor's degree from Temple University.
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Title Annotation:Guinness Import Co. President Bill Olson on premium brand equities
Publication:Modern Brewery Age
Article Type:Interview
Date:Jul 12, 1993
Words:4646
Previous Article:Making advertising work for the industry.
Next Article:Selling beer style.
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