Foreign Affair

Consumers already familiar with your imported beer may be your best market.
From the July 1996 issue of Entrepreneur

Q: On a recent vacation I took to the Caribbean islands and South America, I came across a local beer I thought would have great potential for sale in the United States. I am not aware of this product being imported into the United States, at least not on any major scale in my region of the country. I am interested in forming a partnership with this foreign brewery to set up a distribution company that would import the product to the United States.

I envision some sort of linkage with regional or local beer/ale distributorships to get the product on the shelves. I have a few friends and relatives interested in the idea and have a business contact in the country where the brewery is located.

What should be my first step in formulating a business plan, and what kind of investment would be required for the start-up?

Ron N. Brandau

Mt. Airy, Maryland

A:Michael C. Bellas, contributing editor ofBeverage Worldmagazine, is founder and president of Beverage Marketing Corp., a consulting and information services firm for the $500 billion global beverage industry:

I must warn you that introducing a Caribbean or South American beer to the U.S. market is one of the most difficult undertakings in the beverage industry. This is true in spite of the fact that sales of imported beers showed substantial growth in 1995, and also despite the considerable advance made last year by the second leading import: Corona beer from Mexico.

Today, there's at least 400 or 500 imported beers on the U.S. market; the precise number is impossible to pinpoint because these brands are extremely volatile, frequently entering and disappearing from the market. We are seeing increased market penetration among the leading imported beer brands, which are strengthening their positions with substantial marketing and promotional efforts. Their market share is growing, and in the process, they are weeding out smaller brands.

At the same time, beer distributors (equivalent to wholesalers, who provide the essential link to the retail market) are also undergoing consolidation. There are only three effective nationwide beer distribution networks today; two of these are very dominant forces in the industry. The biggest is committed to the Anheuser-Busch brands, headed by the Budweiser line; the second strongest network distributes the Miller Brewing brands. The third, considerably weaker, network represents the other nationally distributed brands, such as Coors. All three of these networks already carry full portfolios of imported brands and are consequently not inclined to be receptive to others.

Latin American and Caribbean beers-Corona being the exception-have not earned wide acceptance in the United States. They tend to find their markets primarily among consumers who have immigrated from their countries of origin and are thus both familiar with the brands and favorably disposed to them.

All these conditions make the introduction of another such beer a distinctly high-risk enterprise. Time after time, however, we have seen that nothing can be considered impossible in the dynamic beverage market. Therefore, if you are determined to press ahead, we would advise a course of action calculated to minimize your risk and maximize your prospects.

First, identify your target consumers. Presumably, they would be people of Latin American or Caribbean origin who are familiar with the product and would be more inclined to buy it in the United States. Second, choose no more than two markets where you anticipate the best chances of success. Third, formulate a complete marketing plan.

Your fourth step is to choose the best distributors for your beer. Start by identifying the on-premise accounts you would like to sell to; that is, restaurants, diners, fast-food establishments and the like where beer is served on site. Target a manageable number of these accounts-say, between 50 and 200, and then locate the local distributors who cater to them. You'll have to sell these distributors on taking on your product; they'll want to see your marketing program, including local advertising, literature, signage, table-toppers and any other promotional materials you plan to produce. (One saving grace: At this stage, you don't need costly TV commercials!)

After you've persuaded the distributors to handle your product, monitor your accounts closely to see how your product performs. How readily is it accepted? Once placed, how does it move? If the figures are good, matching or exceeding the realistic estimates in your original marketing plan, you can start adding other retail accounts in your target markets.

What investment capital will you need to accomplish this careful introductory program? We estimate, conservatively, that $200,000 should do the job.

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