The Danish brewer and its subsidiaries have benefited from relaxed social distancing measures, the rise of health consciousness, and the return of eating out and nightlife. Andrew Khan, Vice President & CMO at Carlsberg Group China, speaks to WARC’s Jenny Chan for the Marketer’s Toolkit 2021 about the gradual normalisation of operations and the importance of investing in your brand's share of voice during difficult times.
What was the biggest change to your marketing function this year since the COVID-19 pandemic?
We didn't expect at the beginning that this crisis would last for so long. Early this year, we took a lot of actions to react. But I don't think we've estimated that it will last for such a long time – this would probably still be a challenge for us next year. So we're anticipating a more challenging 2021 and a continuation of some of the measures that we've taken this year.
The biggest change for us was a shift in business focus. E-commerce and O2O have become even more important, and home and community delivery has been key for us. So, the digitalisation of our business would become more significant for the most part of next year. When I say digitalisation, it will not just be about the way we market our brands. Digitalisation is not new anymore. Most brands have already embarked on this for a long time. But we will increase our investments – more than before – in the digitalisation of our channels, our sales touchpoints, our Salesforce capabilities; and in how we connect with our consumers. A big portion of our business before the pandemic was on-trade, meaning restaurants and bars. Even when they are open, the on-trade business will not be at its peak compared to before.
Where will you specifically reallocate your money?
For instance, there's a team now dedicated to O2O. We have been in 2020 focusing more on O2O and this will continue even after the pandemic. Our job is even more complicated now because you have such a proliferation of different channels in China. With O2O added into our scope of sales channels, this basically makes our integration work of brand marketing slightly more challenging. It is already tough to extend marketing campaigns beyond just communications and media. Now we have to make sure that the different touchpoints: on-trade, off-trade, retail, e-commerce, are integrated with O2O. It's necessary because that's what we see as a key channel for us moving forward and what will be a significant contributor to our business in the coming years. Our partners, like Initiative, for instance, will also be tasked to look into how we can make the integration with O2O more seamless so that our campaigns can reach different touchpoints more effectively.
The other area is in our portfolio of brands. The way that consumers drink at home and the way they drink out of home is slightly different, so we want to make sure we have the right products to cater to different consumers drinking less in quantity. People will be drinking less, but they will probably be drinking healthier, so they will want to have better choices. This helps our premiumisation strategy as well, as we try to get people to trade up by giving them more options. In terms of options, we have products that are a bit healthier, like alcohol-free or fruity-flavoured beer.
What does the new interpretation of health and wellness in the alcohol industry look like? Is it hard for consumers to associate alcohol with health and wellness at this moment?
'Healthier' can mean different things to different consumers. It doesn’t necessarily mean not drinking at all, but of course, that can be an option. And we always promote responsible drinking externally and internally within the organisation. Say, I could be drinking something that has 53% alcohol content before and by reducing the alcohol level significantly, that could be considered a much healthier drink.
You can drink healthier in a few ways. One way is lowering your alcohol by volume (abbreviated as ABV). The other way is lowering your consumption volume. Before this, you might be drinking a lot outside either because of business entertainment or social occasions. Now because of the pandemic, people are spending less time outside to avoid crowds.
Alcohol-free beer has been around for some time, but it takes time to build a category. We believe that this will work in China eventually because when we look at developed markets like Europe or the US, it's a trend that is already happening. We also have low-calorie and zero-sugar beers that have been quite popular. To cater to this pandemic we needed to have a wider and healthier portfolio of brands and selections so that consumers have a choice, given the situation. Our most recent launch was Chongqing Beer's alcohol-free version. It is being distributed, not just in restaurants, but also to offices and workplaces as well.
Was there more data available for you to make new decisions during the pandemic, or did you have to rely on internal assumptions?
Data has been a big initiative in the last few years for us, and that's happening even at the Carlsberg Group level in Denmark. In China, we are a bit more slightly ahead of the game than the rest of our counterparts. So consumer data models have been something that we've been building within our brands for some time now. So that will obviously be another key driver for us to understand our consumers a bit better, and to be a bit smarter in using this data to either communicate, advertise, or initiate some specific products for certain consumers. Before this year, data was housed in different parts of the business and everybody was working their own data, whether in the e-commerce team, the brand team, the sales team and so on. We are organising them all together in a CDP (customer data platform).
Methods to acquire more market share from rivals in the alcohol sector include launching fresher flavours, more premium products and more attractive packaging. Do you have packaging plans?
There are a few new things going on for our packaging, like different materials, sizes and formats. The Carlsberg brand, specifically, has always been quite serious about the environment, so we are developing packaging that is environmentally-friendly. Some of our labels are made from recyclable paper and printed with recycled ink. For example, in some markets, we are not using plastic packaging and replacing it with paper, and also experimenting with recycled paper bottles instead of glass bottles.
New formats and sizes were launched during this pandemic because people are buying from home a lot more, so they prefer multipacks as it's a bit easier for them. Cans have been quite helpful for us; bottles are not so convenient in the home environment as you do need to manage the rubbish after drinking. All these things add up to make the whole consumer experience better.
How would the strategy for your on-trade business, like the restaurants and karaoke bars in China change next year?
I think we all agree that China has managed this pandemic well. By now, most outlets are open. So that's a good thing for us in China, compared to other countries in the world, sadly. However, during the pandemic, we needed to make sure that we help them in as many ways as possible because they are still our business partners. We give them the support either by taking back some products so that they can free up some stock and inventory space, or even extending credit terms to make sure that they are still able to be in business. We foresee this channel to continue to be slightly tougher. Because whenever there is a reinfection case in China, there might be a high chance that these outlets will be asked to shut down again.
Marketers have to be planning for uncertainty. How many scenarios are you planning for at Carlsberg?
Since the beginning of the pandemic in January, we've always adopted an approach where we've had a high, mid, and low scenario, and the course of action to take [for each risk scenario]. And we do this for most of our campaigns and activations because things are happening so fast that we needed to make sure that we get alignment and approval ahead of time. From past experience in dealing with crises, we don’t want to be in a situation to deal with decisions and approvals when something happens abruptly. Now, I think the situation is slightly better, so instead of having three options, now we adopt just one 'worse-case scenario'.
And how does that affect your media mix from now until things get back to normal?
In terms of our media mix, we still haven't gone back to pre-COVID times in our mix ratio. We're still a bit heavier on social and digital platforms like Weixin, Weibo, Kuaishou, Meituan, Dianping. There are some media touchpoints that we are slowly getting back in, like outdoor and cinema, and come Chinese New Year, we'll probably be at a more normal stage.
One thing that we are also working on is our social CRM. All our touchpoints contain a QR code, so consumers can scan the QR code to accumulate points, or get invited to different activations or events, or find out more about a product, or order online. That's something that we are pushing and that's related to the CDP I talked about. Right now we have a pilot with one brand, and hopefully, we will roll it out to our entire portfolio next year. Subsequently, we will have more comprehensive campaigns for consumers and make sure that they continue to stay on the loyalty programmes of our brands. Retention of our consumers will be important in the next year.
In your CDP pilot, were there any new consumer behaviours and nuances that you have discovered which were helpful?
Yes, we have a deeper understanding and insights into purchase behaviour, such as how frequently people buy, and how much they buy each time have helped design our packaging a bit better because, from average purchase sizes, we know whether they needed three or six bottles or cans at one time. Also, this has helped us design our promotion calendar, so we know when is the most effective time to speak to consumers, and the time periods when they are more receptive to us.
As a Danish company, what is the positioning of Carlsberg when it comes to huge cultural consumption occasions like Chinese New Year when consumers might prefer buying local or supporting national brands?
Obviously, our group name is called Carlsberg, but actually, within the Carlsberg Group, we have a lot of domestic brands. Together with Tuborg, Carlsberg, K1664 and other brands, we are establishing a brand matrix of “local power brands + international premium brands”. Actually, a big portion of our business is contributed by local power brands. For instance, Wind Flower Snow & Moon, Xixia, Wusu, Tianmuhu, Shancheng and Chongqing Beer. Wusu is one regional brand that we will probably focus to expand it nationally; hopefully one day it can be as big as Harbin Beer or TsingTao. Carlsberg is more than 150 years old, and we have accumulated great expertise in brewing, international distribution and brand building.
In sum, what we can bring to our local power brands is how to be more efficient in brewing. Our brewing capability has been something we are proud of and well-recognised. Historically, Carlsberg has been one of the pioneers in terms of beer production. And to help local breweries expand their influence down the road, what's also important is our brand-building expertise; that is an area where we have a lot of experience globally with more than 130 brands worldwide.
What are you expecting next year in your overall macro outlook, and how do you plan to overcome expected challenges?
In China, our sales rebounded strongly this year as lockdowns were relaxed over the summer. In fact, we've even gained market share against our competition. We are going to use this success to make sure that we accelerate our expansion next year. We will continue to invest even during difficult times because we believe that brands that invest during difficult times would have a stronger chance to win when we return to normalcy.
Did you gain market share because you doubled down on lower-tier cities and rural areas in China?
On the contrary, our brands and our subsidiaries have always been stronger in the rural and lower-tier cities. We are the opposite of some of our competitors who are stronger in the bigger, tier-one cities (mostly coastal cities and in the Eastern part of China). We are very strong in the West, all the way from Xinjiang to Chongqing. This is something that has worked well for us having strong distribution in these low-tier cities.
But next year, we will have a more balanced outlook in terms of city expansion.
The pandemic had stalled our business to some extent, and hence, we had to redo some of our investment plans, so that we still have a profitable business in the end. We will continue to invest so that our share of voice is either maintained or if reduced, is not significant and will not impact our overall brand-building outcome. We were probably not the most aggressive in terms of our reduction in marketing investment. I think we've reached a relatively good position in terms of how we invested in our brand.