This article reviews the four key questions which Labatt/ Interbrew asked and answered before establishing a new e-commerce subsidiary. The new subsidiary Beer.com is a stand alone business and multi-dimensional web site created to build the beer category, and Interbrew brands. The key questions considered (and reviewed) are: (1) How much closer does it get us to our customers? (2) Do we have the core competency to succeed with a major Internet initiative? (3) Is now the right time? (4) How much value does it create?
Virtually every organization is questioning what its Internet strategy should be. For many executives, the unsettling reality is that they do not even know how to approach the issue. Others are uncertain about whether they are asking the right questions.
This article reviews the four key questions that one organization asked and answered before it established a new e-commerce subsidiary.
In October, 1999, Labatt Breweries of Canada, via its Belgian-based parent company, Interview, launched beer.com. The entertainment-oriented site was based on the underlying logic that a rising tide floats all boats. In this case, the tide is made up of beer rather than water because the emphasis is on building the entire beer industry, not a particular brand.
WHAT IS BEER.COM?
Beer.com is a stand-alone business and multi-dimensional Web site created primarily to build the beer category and, secondly, the Interbrew brands. It is made up of five major categories linked to generate a high volume of repeat traffic, as seen in the figure below.
Its creation was motivated by the:
a) rapid growth of the Internet as a mass medium
b) continued media fragmentation (and especially a reduction in the amount of time young adults spend watching television)
c) growth in Internet advertising
d) need for a cost-effective way to conduct global research on beer-drinkers’ preferences.
Labatt/Interbrew purchased the beer.com site/name from its Massachusetts owners in June, 1999. They already had 100,000 people registered for its free e-mail service. In the first three months after the “new” beer.com was introduced, over 150,000 people worldwide registered to use their name with the handle “@beer.com.” With a massive advertising support campaign under way, this is expected to grow to 600,000 regular visitors by the end of 2000. The key element of this support will be the printing of the beer.com address on almost one billion bottle caps, cases or neck labels.
This made-in-Canada strategy was developed in conjunction with various other groups such as Total Sports, Internet Sports Network, Webpersonals.com and Core Audience Entertainment. In addition to having numerous suppliers of content, beer.com contains a key segment focused on fun. This was deemed essential for achieving repeat traffic. This segment allows surfers to respond to tongue-in-cheek surveys (see sidebar: “In the Event of Y2K Chaos”]. As of February, 2000, a site visitor can virtually visit—via a video camera—a pub anywhere in the world, 24 hours a day, and buy and have a drink delivered to anyone seated in certain chairs. Visitors will also be able to participate in contests and other promotions.
The reaction of many young adults to this new site has been, “Why did it take so long for someone to think this up?” Before introducing it, however, some not-as-young adults had to resolve four key questions.
How much closer does it get us to our customers?
By the end of 2000, over 80 million people in the U.S. alone will be on-line; the same number will be on-line in the rest of the world. In many major cities in North America, over half the population has accessed the Web in the previous 30 days. All of these numbers are growing rapidly. Users are an upscale group and three-quarters of them indicate they are spending less time with other media, especially television. With the rapid growth in Web usage has come an increase in Web sites—now totalling nearly four million worldwide—and a shift to the use of the Internet as an advertising medium. With such growth and fragmentation, it is not surprising that most companies have not been able to develop a site that takes full advantage of the medium. For many companies, the Web is simply one more place to “print” company brochures.
The brewing industry, like many others, depends heavily on brand recognition and loyalty. Given that beer is increasingly about “global” brands (or at least strong “regional” brands), a key challenge is to get and stay closer to consumers of beer. It was deemed that doing so would require in part a heavily interactive and broad-based site. Very simply, the Internet was deemed one of the media necessary for getting closer to an increasingly large number of customers. How much closer? A major advantage to building such a large, registered list of users is the opportunity to conduct research. This site creates the single largest on-line panel of beer drinkers in the world, a database that can provide insights that would previously have been prohibitively expensive to build.
Do we have the core competency to succeed with a major Internet initiative?
Breweries, like most consumer goods companies, are effective marketers. Otherwise they do not remain in business. They must be able to adapt that superior marketing to their on-line strategy.
It is also crucial that they be willing to ally and partner, given the need to build a site with broad-based appeal, one that goes beyond beer to include larger entertainment dimension. Certainly in the case of beer.com, a variety of partners were able to provide top-level technical skills and content.
A sometimes under-appreciated competency of some organizations is the ability to leverage their global presence and expertise. For an effective multinational enterprise such as Interbrew, using the World Wide Web is consistent with its existing international activities.
Is now the right time?
Any organization contemplating a major Internet-based initiative must decide whether it will be a leader, fast-follower or laggard. While arguments can be made to support each option, Interbrew chose to be a first-mover, in order to capitalize on the existing market fragmentation. Its objective is to become one of the top 100 Web sites in the world, the kind that millions of Internet users will “bookmark” for easy, repeated access. Waiting would make such an objective much more difficult to achieve.
Interbrew also decided that it should spend a portion of the existing marketing budget on Internet-related activities. While the correct portion to spend was and is unknown/uncertain, it was clear that doing little or nothing was not an appropriate way to stay close to the customer.
How much value does it create?
While the costs of developing and maintaining beer.com or any major e-business can be substantial, those costs are not as important as the potential for creating shareholder value. For Interbrew, there are four ways to create value:
- more efficient spending of the marketing budget, in an era of media fragmentation
- the lower cost and higher sample size of customer research
- the opportunity to more easily continue to build its Stella Artois global brand
- building a stand-alone subsidiary which in theory could eventually be spun off profitably.
As with any new technology or process such as e-commerce, there is only a limited amount of history on which to base precise estimates of success. The initial evidence would suggest that beer.com has been able to start building and maintaining a virtual community. By the end of January, the number of visits had risen to over 85,000 per week. Visitors stayed for an average of eight pages per visit and retention was high.
Interestingly, the questions which organizations must ask before undertaking such ventures are not specific to e-commerce. They are the classic ones associate with managerial best practices anywhere.