While all industries have marketing challenges that are specific to it, none is probably more constrained, in many ways, than the beverage industry. Government regulations and a three-tiered sales and marketing system are just the beginning of what marketers in this vertical must deal with every day.
To get a better understanding of the beverage community, CMO.com editor in chief Tim Moran recently attended the American Beverage Consortium’s eBev 2013 conference, in Denver, where he sat down with four marketing leaders from Heineken, Pernod Ricard, Moet Hennessy, and Mead Johnson to explore the state of digital marketing.
CMO.com: What is the state of digital marketing in the beverage industry today? Is it ahead or behind what you know about other industries today?
Christian McMahan, Managing Partner, Smartfish Group/Former CMO, Heineken USA: So behind. Everyone talks a good game, everyone says, “Hey, it’s now 20 percent of my investment.” And partly some of the barriers to that are that this is a direct-sell business. It’s not Zappos. It’s not anything that you can do with e-commerce, for the most part. Part of it is the regulations about age-gating and companies being a bit cautious. The spirits industry and beer, to a degree, don’t want to be the early adopters because they want to make sure it is appropriate, it’s not abused, and that products aren’t being irresponsible. But, overall, the industry should get a D for what it does. And while it’s getting better, in terms of using social media, in terms of really driving digital—all you have to do is look at what the Red Bulls and the Cokes and some of the brands do. So I still think there’s a long way [to go].
Tim Murphy, VP of Digital and Media, Pernod Ricard USA: First of all, the beverage industry is a pretty broad industry. I’ll talk about what I know, which is distilled spirits and wines. Because if you look at what Coke is doing, what Pepsi is doing—they’re the best in the business. For those of us in distilled spirits and wines, we’re at an inflection point. I think we’re opening our eyes to the opportunities. And I think the technology is advancing in such a way that we can leverage it while still staying within the guidelines that we have in terms of regulations, social responsibility, and so forth. I think it’s ready to take off in terms of the use of mobile and online engagement to offline purchases.
I think it’s hard to operate within a three-tier system. I think that with our major retailers, we’re not the biggest contributor to volume and profit and sales, so we don’t get as much attention as, say, P&G or Unilever or even Anheuser-Busch or Coke. So the structure of our supply chain and the laws that dictate how we can go to market do make it a bit of a challenge.
Montana Triplett, Director of Digital, HennessyBrand, Moet Hennessy USA: It’s interesting that we sort of throw beverages into one bucket. I think that, whether it’s alcoholic or nonalcoholic, it’s all about status and about lifestyle. In terms of nonalcoholic, I won’t necessarily touch too much on that since it’s not really where I am. I think nonalcoholic is doing a great job in digital, though. You’ve got the Pepsis and the Cokes that have bigger budgets, but they’re doing a good job. I think it’s a CPG mind-set. But speaking in terms of spirits, one of the reasons I did come on board at Hennessy was they did have a CPG mind-set from a marketing perspective. It was about building a new brand positioning and a creative idea that was going to extend past just the party atmosphere.
In the past, a lot of the spirits advertising that I have seen is very programmatic. They’ll do one program, and it’ll be done, then they’ll move on to the next program. And there’s not necessarily an overall brand idea that weaves throughout it. I love that about the work that we’re doing, and I think that the spirits brands are a bit behind in that—although I am seeing more and more of it. It’s encouraging because with an overall brand platform, you actually can build a lot more amazing content. You can have a longer-term relationship with your consumers, and it’s a little more authentic and meaningful versus, hey, we’re having an event, or we’re having a party, or we’re having this sweepstakes giveaway, and that’s done, and we move onto the next thing. So I think we’re a little bit behind, but we’re definitely moving in the right direction.
Stephen Surman, Global Head of Digital Strategy and Social Media, Mead Johnson Nutrition: I think beverages are slightly behind the learning curve in terms of digital marketing, largely because the distribution and retail environment for beverages is very complex, particularly the three-tier system. Many beverage brands have historically enjoyed stiff barriers to entry and distribution, so marketing hasn’t been a critical component of their go-to-market system until more recently.
A number of these brands are still putting in place marketing training programs, marketing processes, and I won’t mention names, but there are a number of very, very large beverage companies that until recently didn’t have any formal marketing processes. Digital, with all the complexity involved, really requires some kind of process.
So I think the beverage industry has been a little bit behind the learning curve. I think nonalcohol beverage brands are probably a little bit further along, and likely because a lot of the brands in that category are either closely aligned or have their legacy with larger CPG companies, so there’s greater brand marketing legacy.
CMO.com: What are the main challenges you see? Regulation is one we just talked about a bit. What are some of the others, and what are the solutions?
McMahan/Heineken: First I’d mention something this industry does very well–something tobacco didn’t do–which is regulating itself. They have their own code, and they have their own agreed-on laws that they follow because, I think, they’ve taken the stance of, “Let’s police ourselves before we allow someone else to come in and do it if we don’t do it properly.” So they’ve naturally taken a cautious position.
But, yes, there are a variety of barriers that must be crossed—age-gating, for instance--but I do think it has gotten to the point now where this is not a cutting-edge thing. It’s marketing. It’s about the screen. There’s no difference in my mind now between a TV screen or an iPad screen or a location B screen in a bar or a subway. They’re all the same now. So while I do applaud the industry for doing a good job of being cautious, I think the tipping point is here. It’s kind of time to go all in.
Murphy/Pernod Ricard: Well, some of the challenges, of course, are regulation, industry structure, that we don’t have access to the shopper journey. But we’re gaining access to it. And I also think that even some of the major retailers out there who support our business are hindered by the fact that, in our industry—especially in distilled spirits—pricing, taxation, and regulation varies from state to state. So if you’re a major retailer, and you want to support a product on your Web platforms and your mobile apps, you need three dozen different versions of whatever you’re doing because the regulation, pricing, and everything varies so much.
And then, at the same time, a lot of our business is done through independent wine and spirits shops and independent bars and restaurants that don’t have the sophistication. So a lot of the activation that we’d like to do at the point of purchase, we just can’t do because they don’t have the POS systems and the technical wherewithal to do it. But, like I said, I do think a lot of that is changing with consolidation and the fact that we can now target people on mobile in a bar just through existing suppliers.
Triplett/Moet Hennessy: Of course, regulation is obvious, but we, as spirits, get the biggest brunt of it, if you will. You have to keep that in mind. If you say spirits are behind, well, there are some reasons for that. Regulation is key. Budweiser can be all over the NCAA, and they can be all over the NFL, and spirits cannot. And I’m not challenging that at all. But we just have to be a bit more creative in things that we do.
I think another challenge in what we deal with at Hennessy is that it’s not necessarily an either-or in terms of beverages that you’re choosing. Most people we see are not just Scotch drinkers or just vodka fans. Our competitive set goes beyond cognacs. Our competitive set is vodka. What are they choosing that night, and how do we make our brand stand out among a lot of different competitors? It’s not just about the cognac industry. And I don’t know others’ brand marketing plans, but I would assume that a lot of other brands have that challenge in the spirits industry, as well. Because it is a lifestyle. It’s all about what you are holding. These days, it’s very cool for a woman to hold a Scotch on the rocks, right? Whether she likes it or not, it makes her look and feel very different than, say, ordering a Cosmopolitan.
Surman/Mead Johnson: The most significant challenge is shiny objects. There are a number of buzzwords, a number of solutions to problems that don’t exist, and it’s very easy to get distracted as a digital marketer.
Particularly when measurement is tough, many brands default to doing half a dozen or a dozen things, trying to find the one that works, rather than focusing on the one or two things that they can do well, that they can scale large enough to be able to measure. So by doing half a dozen or a dozen things, you’re not necessarily doing any of those things well enough or at enough scale to be able to measure. Then the next thing comes along, whether it’s the Pinterests of the world, or it’s the Snapchats, and the naturally inclination is to say, “Let’s do that also because we don’t know what we’re getting for these other half a dozen or dozen things.”
CMO.com: With all of that going on, there should be a lot of opportunity here. What do you see as some of the major opportunities and ways you can take advantage of marketing in the digital beverage world?
McMahan/Heineken: There’s a ton of opportunity. The biggest one is that everything has to be social, local, mobile, right? I worked with Verizon last year on a project, and they put a tremendous focus on their network and 4G, to the point now where YouTube just released stats that last year 25 percent of all their views were mobile. Amazing. But already, one year, later, it’s up to 40 percent, partly because the products are getting better, partly because the network is getting better, but that’s the nature of it.
And if you’re a brand, and you obviously want to capture those consumers on location--whether it’s at a bar or a grocery store or a wine store--the ability to harness that user in that location is key. But we’re not even 1 percent of where we should be. In terms of checking in, in terms of being able to talk to customers, in terms of being able to send a friend a drink in a bar and have them be able to capture that—we’re not there yet. There’s so much that’s out there that no one has been able to crack yet. Once that happens, I think it’s going to open the floodgates tremendously to all the marketers.
Murphy/Pernod Ricard: I’ve often described our business as archeology, you know, from a data perspective. I don’t know the exact number, but in distilled spirits, maybe 20 percent of our volume goes through retail channels that are measured. The rest goes through hotels, bars, nightclubs, small liquor stores, and so forth. So we have to take a piece of a pot here and a piece of a tool there and re-create a civilization.
With technology, we’re able to do that in a much more efficient way. As I was saying in my presentation, take Sense Networks as one example. Sense Networks has a network of consumers with massive amounts of third-party data that can identify them as high-value consumers to us because they’re whiskey drinkers or vodka drinkers or even Absolut drinkers or Jameson drinkers, and then we can geotarget them when they do something like open Weather.com or open Zynga or whatever. So it gives us the opportunity to create access to them at that last millisecond.The one thing we can’t do yet, which is sort of the Holy Grail for us, is to say, “Let me buy you that drink.” I know you’re sitting at that bar, I know you’re a whiskey drinker, so let me say, “Let me buy you that first drink.”
Triplett/Moet Hennessy: Just as I talk about the lifestyle aspect as being sometimes a curse, it’s also a huge blessing because what that really means to me is that we have a lot of places that we can play. And it isn’t just about the intrinsics of the product; it is also about the lifestyle and that extrinsic and what it makes you feel like to be a part of the Hennessy brand. And so the opportunities for us, especially as we work through regulations--and we find new and interesting ways to build content that is legally compliant--is we can be in the space of where we are with different types of talent. We can be in the space with different types of content that you wouldn’t normally necessarily see with a brand like ours. I think consumers are open to seeing edgier content come from spirits brands because we’re the coolest part of going out. We’re all a part of celebration, and we’re cool, and, of course, I’m going to watch this if it comes from Hennessy.
In the end, a lot of it has to do with analytics and data. I think the CPG companies, again, have been ahead of the curve on that, and a lot of that is largely because they have a lot of sales data that the spirits brands, because of the three-tier system, don’t necessarily have. We have a hard time finding the on-premise data to help back up some of this. So we’re handling it in a couple of different ways. The first way was realizing it was important, that actually proving out what we were doing was important. I know this sounds sort of obvious, but employing these marketing-mix studies, making sure that we’re attaching brand house studies to everything that we’re doing from a paid media standpoint, is key. And if you look at the investment, those tests are not that expensive compared to what the investment levels are.
So, first, it’s knowing that we need to be using it. Second is finding solutions to house all of this data, this big data. I know a lot of brands are struggling with: Do we bring it in-house? Do we have our agencies handle it for us? And I think that’s sort of where we are right now. We have all of this data. Some of it is sitting in places where we don’t know where it is. We have social data, we have Web site data. How do we build dashboards that are relevant and useful for our senior leadership so that they have a real day-to-day view of things? And how do we bring in sales data, because we have tons of sales data, maybe not as much as CPG, but we do have a lot? How do we bring all of that on board? So for us at Hennessy, we’re just in the process of figuring that out. We’re on a great path.
Surman/Mead Johnson: Oh, sure, absolutely. In particular, [a speaker] from one of the presentations mentioned that one of the advantages of smaller players, in this industry or in any other industry, is not only that they can be more nimble, but they can have a seat at the table. They can’t develop $750,000 or $1.5 million TV spots and buy media behind those TV spots, but they can develop a 15- or 30-second video and field that video online.
And I think you’re finding that either the small players or companies in this industry or again, any industry, that have very targeted markets, they may be very well-served by taking their TV dollars and moving them into digital video. And that’s just one example of the opportunities in terms of efficiency that digital makes possible.
CMO.com: One final question: What is the thing that keeps you up at night, the thing you have to crack going forward now to move the needle, to move into this in a big way?
McMahan/Heineken: Today, it’s still about content. If you look at the brands, whether it’s Red Bull, whether it’s Dos Equis, the real aspirational brands out there right now in the marketing space, are delivering amazing content. So you can have great strategies. You can have efficient plans. But you still need to deliver that content that takes it to the next level. So I think, while everyone will get smarter, there’s still going to be the desire for content, and as Red Bull has proved, it doesn’t have to come in the form of a 30-second ad. It can come in any different way, but it’s still going to be content that really takes the brand to the next level.
Triplett/Moet Hennessy: You know, it’s sort of that thought I had about living in data. It’s a little bit sad, but what keeps me up at night is the fact that I don’t always necessarily know what’s next and I need–we need–to stay on top of the trends and what’s going on and what competitors are doing. With digital marketing, we have to do that more than any other marketer because technology is moving so quickly. I think what keeps me up is making sure that I’m on top of those trends and then, second, prioritizing and making sure I’m making the right decisions about which trends we actually hold onto and which ones we decide to maybe take a step back from and not use.
Surman/Mead Johnson: I think this is somewhat biased by a recent experience within Mead Johnson. We’ve been looking at our mobile program quite a bit. And this is an area I think we’re doing well. I think we’re doing better than most brands, whether in our category or outside our category, but mobile is a particularly challenging area of digital marketing for nearly every brand.
It’s tough to be relevant. But when you can be relevant, you can blow up a category. And Nike is a great example. It’s tough to name a successful branded mobile app. I’ve done quite a bit of research to discover the branded apps that do well. That’s probably the one app that has done well.
The trade press will talk about Kraft iFood’s Assistant. You can argue that’s done well. You can argue that it hasn’t necessarily done well. There are a number of others, but they’re relatively small, and they really haven’t made an impact for those businesses. So mobile is one area we’re looking at spending quite a bit of time.