Operating in a declining category can often feel difficult – where’s the opportunity? What’s the point of investing in a market that’s declining?

But for Grant McKenzie, former-CMO of Asahi, it’s exactly because a category is declining, that brands should be excited.

His view: “It might be easier to make money in a declining market than it is in a growing one.”

Grant has a huge amount of experience working in declining categories, most notably beer, turning brands from regular players to category leaders – and making big profits along the way.

In this episode of The Persuasion Game podcast, he shares his experiences  about the different levers marketers can pull to grow in a category that’s in decline.

Episodes are released bi-weekly. Follow us on LinkedIn for updates.

Subscribe to The Persuasion Game Newsletter on LinkedIn.

Want to know more about us? Visit our website here: thisistheforge.com

This is an 18Sixty production for The Forge.

CHAPTERS:

(00:00) Introduction

(02:51) Strategies for growth in declining categories

(04:08) How Grant tripled beer sales

(05:54) Look for the people who’ve given up

(19:52) Innovation and Long-Term Strategies

(22:05) Private labels

The Persuasion Game is available on all your favourite podcast apps: https://link.chtbl.com/PersuasionGame

Episode transcript:

Grant: I am actually gonna make a provocation that I think it might be easier to make money in a declining market than it is in a growing one.

Adam: Welcome to The Persuasion Game, The Forge’s podcast about growing brands and persuading consumers in the modern age. I’m Adam Rowles, and I’m from The Forge, and I’m joined this week by Simon.

Simon: Hi Adam. Nice to see you again.

Adam: So Simon, it’s a really interesting time to be a marketer and a brand leader. We are living in interesting times, shall we say. You know, you have the threat of private label, the cost of living, and there’s new things on the horizon. Things like Ozempic and Wegovy. Which might challenge, you know, the way that we see all sorts of different categories today.

Simon: I think that’s right. I think increasingly we are seeing briefs from clients who are facing increasingly uncertain category waters, categories that are under a lot of pressure, if not in actual decline, then certainly in reduced growth rates.

And we’ve been through a period where, in response to inflation, we’ve seen a lot of price increases go through, which have helped prop up value, but increasingly that’s coming to an end. We know the challenges around shrink inflation and actually that reality of, can I buck this category trend, can I grow in a declining category? Feels quite existential, quite real for a lot of brands and a lot of our clients.

Adam: It’s a really big question, isn’t it? And we’ve got no better person to come and share their advice with us than Grant McKenzie, the former CMO of Asahi. He’s been on the podcast before you met him previously.

Simon: Indeed, Laura and I had a great chat with him about the incredible success story around 0 percent beer and the journey he took Asahi on to create the energy, the belief, the momentum, to really develop that category.

Adam: Grant spent a long time at SABMiller and then Asahi. Working on many different beer brands across different markets in Europe. And actually the backdrop to the challenge that he faced in so many of those examples was a declining category, and he’s got plenty of examples to share with us today about the different ways marketers can pull different levers to grow in a declining category.

Simon: Great. Notepad at the ready. I’m all in. I’m keen to hear his wisdom.

Adam: Just before we hear from our guests today, a quick ask from us. We’d love it if you could tell one person about this podcast in the office or on a call today, or leave us a review and a rating wherever you get your podcasts. Okay, here’s the interview.

Well, welcome Grant. Welcome back, Grant. I should say.

Grant: Yeah. Thank you very much. Great to be back.

Simon: Grant, you are, you are joining us from Prague, is that right?

Grant: I am, yeah. And your studios do look very swanky guys.

Adam: Grant, last time you spoke to us about innovation, that was a fantastic story. Lots of people found it really interesting. This time we’re gonna be talking about a wider growth story, but specifically in declining categories, and you spent a career working in beer, which in some cases, in some markets has been in decline.

You know, many of our listeners will be working in declining categories of their own. It’s not all doom and gloom, is it? You know, within a declining category, there’s still plenty of opportunity to find growth, isn’t there?

Grant: Well, absolutely. I mean, first of all, it’s not that I just have bad judgment. You know, I choose the wrong places. You know, I worked in chocolate and I worked in beer because I love those categories and I’m actually gonna make a provocation that I think it might be easier to make money in a declining market than it is in a growing one.

Now, of course, we’re excluding obsolete categories here, so we’re not talking about trying to sell regular cameras in the digital camera era. Now we’re talking about things like chocolate or beer that people still enjoy, but perhaps, you know, less people less often are enjoying.

The reason I think it might be easier to make a lot of money as a business in these categories is a lot of people give up, a lot of competitors give up on these categories, and therefore if you’ve got the motivation and the skill to participate well I actually think it might even be easier than when you’re in a growing category and everybody’s diving in.

Adam: Yeah, I mean that’s an interesting provocation. I think it’s an excellent provocation for the subject for this podcast. So why don’t you give us a very short or a couple of examples, potted history of where you’ve seen or found growth in categories that have been in decline?

Grant: What usually happens is you try to seek out value and revenue growth. So even if your volumes are declining, so in the case of chocolate I guess you’re talking about kilograms. So as they decline, you can still see very substantial revenue growth. So I don’t know for sure, but I guess the UK chocolate market is not growing much in kilograms but it’s definitely growing in value. In the case of beer- beer unsurprisingly is a category in Europe, and I say unsurprisingly because the consumption historically was so high, where you see volumes gradually decline year by year.

Where I’m based now, the Czech Republic has the highest consumption per capita in the world of beer but it’s about 30% lower than it was at its peak. It’s only got one way to go. Then of course, you look therefore to the revenue. The revenues of the profits in this industry have continued to grow. So although the industry’s 30% smaller, it’s never been more profitable, and that’s a consequence of the portfolio decisions, the pricing decisions, and the branding decisions, successful ones that have been taken by a number of players.

The examples that I know of that I worked on personally, I worked in the Romanian beer market or the Czech beer market, slowly declining markets, and we had individual brands that tripled their volumes and more than quadrupled their revenues over a period of six, seven years. And that’s an example of how, you know, successful branding, commercialisation as well because it needs distribution,

can actually lead to huge growth.

Adam: We’re talking about branding here, then obviously everybody in a declining category is trying to do the same thing, right? Make their brand stand out, get them into the hands of more consumers.

In your opinion, what is it that really cuts through when, when creating propositions that work in these, in these contexts?

Grant: The first great opportunity is look for the people who’ve given up. So you’ll read the annual reports or the PowerPoint presentations of large companies where they’ll say, market X or category X we’re disinvesting because it’s declining, fantastic news!

And we saw our competitors and we knew the ones who were giving up because the guys and girls in head office consultants had told them, you should give up. Right? So reduce your marketing investment, reduce your efforts. Fantastic news. So then you say, right, they’re weak and they’re ready to be eaten. So let’s look at their consumers that they no longer care about, and these are consumers who still want to drink beer, eat chocolate or whatever. And how can we address their needs with our portfolio? How are we gonna grab all those people?

I’ll give you an example from Romania. So when we relaunched Ciucas, Ciucas was fifth, sixth largest brands sort of staggering along today it’s by far, by far the number one brand in that market. We changed the recipe. We made the beer lighter, easier to drink because we recognised that some of the consumers of competitors were drinking lighter beer. So we said, hey, we need to offer something closer to them.

The second thing we did was we recognised life in Romania is pretty intense, pretty tough. So the number one category driver for beer consumption is relaxation, but most of the beer brands were talking about lifestyle like yeah, stand out, look good, feel impressive. And actually we thought, man, no one is just saying, just relax, in a relevant way. So we really tried to own this, this word, this concept of relaxation.

And then finally we did that old trick, which never, never ceases to succeed, which is we found an animal character. Oh yeah! In this case it was a stag. You know, if all else fails, find a character and if it can be an animal, it’s even better. So this is all bread and butter. Great characterisation, relevant idea in emotional space. Little bit better product, improved design and volumes I think the first year with the relaunch we’re 25% up in a market down 1- 2%.

Simon: Amazing, amazing story. I just wanted to pick up on two things if that’s all right. So the first thing that I want to do is just an observation. And it’s an observation about your language, your energy, your positivity when you are talking about this. Fantastic, exciting look for where they’re…that energy comes across.

And it’s really interesting because so often a declining market feels like the opposite. It feels like a shoulders down, hunched, it feels like a slog. And I wanted to ask you, how important do you think that is? The narrative around changing perceptions that actually a declining market is an opportunity, not just going to be a hard slog.

Grant: Yeah, I think it’s a good question about the people you select to go on this journey with you. Not everybody has that degree of enthusiasm. And again, I’m not talking about minus 50% declining market. We’re talking in most of these categories it’s single digit decline, so it’s relatively small, but you’ve gotta have huge energy for this because in marketing you have to see the opportunities in the spaces that the others don’t.

If you’re blinded by the problems, you ain’t gonna find them. So the people that I would choose in the teams were the most talented. I didn’t put the most talented people on the growing segments. Right? Because there’s a degree of momentum there, the business is behind you, et cetera, et cetera. The ones who are gifted, you put them on this.

Simon: And then the second question I wanted to ask you, so in the example there, you gave us of Ciucas in Romania, obviously a number six brand to turn to number 1 is an incredible growth. What were some of the challenges though, around, so you talk about sort of identifying some of the opportunities, what did the market want and reformulating your beer and things.

Of course there’s a risk with that, right? Which is that you end up almost seeming slightly schizophrenic. We were this type of brand now we’re that type of brand, we were this type of flavour, now we’re that. Talk to us a little bit about some of the ways in which you trod that line to be able to take advantage of the opportunity, but in a way that felt genuine and authentic with what the brand was to those users and drinkers and people who were familiar with the brand.

Grant: We simply made it more of what it already was. So I’ll give you a different example, which is a similar story.

So in the Czech Republic we had a brand called Radegast, which was fifth or sixth largest, a very similar story. Radegast was essentially a regional brand. It was very strong in the east and irrelevant, frankly, in the rest of the country. But I saw huge potential. I said, this brand promises extra bitterness. You know, its slogan in Czech was “Život je hořký: Bohudík”. Which translates as “Life is bitter: Thank God”.

I said the promise we’re making people about bitterness, is this beer actually more bitter than its competitors in the field? And the answer was no. It’s pretty much the same. So I said, well, here’s a wild idea. Why don’t we actually make the beer like we promise and make it more bitter? To cut a long story short, we relaunched Radegast by changing the recipe, making it more bitter. The head of the campaign was the brewmaster who’d been there 20 years, his story. He goes, I’m not a PR guy. I said, just tell the truth. So he said, “okay, in 20 years, this is the best beer I’ve ever made”. Thank you very much, you can go home now, because you’re the credible guy, right?

And the brand flew. At the same time we invested in it. So we doubled the marketing investment when the others were backing out saying, “oh, this mainstream beer category is not worth anything, it’s declining, just give up”. You double your investment behind a better product. New packaging, you know, new design. We increased our sponsorship from nothing to sponsoring the Ice Hockey League. Ice hockey is the biggest sport in the Czech Republic, number one brand in the market now.

Adam: Fantastic.

Grant: I couldn’t even tell if it’s tripled or quadrupled revenues, but it will be in that ballpark. I mean, massive growth, right? Doubled volumes and a lot more. We made it more of what it already was, or sorry, what it should have been. I think it goes wrong if you, as you put it, do a u-turn or say, oh no, we’re not that anymore, we’re something else. And people go, well, what? Whereas if you make yourself more of what you’re supposed to be, it’s credible.

Adam: In that situation, Grant, did you almost become a subcategory within that beer category of the more bitterful flavour one, the one that’s promising more to the beer lovers of the world?

Grant:  I think for the beer market people, and you’re correct, the beer drinkers, these are existing consumers. Bitterness in this country was considered a sign of quality because the bitterness is given by the hops, and the hops are by far the most expensive ingredients in beer. So for those who know, many people don’t know that, but for those who know, aha!

So it was very much playing into the existing market, which is an important insight for winning in a declining market. It’s not to run off and keep chasing new consumers, although there’s a degree to which you have to do that sometimes. But it’s also recognising the core users of the category love the category. They just love it. They love chocolate, they love beer, they love cakes. Whatever it may be. The more you can deliver something that’s very relevant to them, the more likely you are to gain market share because they’re saying these guys, these guys and girls, they’re talking to me. They understand me, and this is what I think happened, is happening, with Radegast. They say, ah, someone understands me!

Simon: So you talked there about that on Radegast you really invested behind the brand. That requires a level of buy-in, a level of belief, a level of kind of excitement, particularly in a category that is in decline.

Talk to me just about some of the successes, maybe some of the war wounds that you learned along the way about bringing the decision makers, the investors behind you and, and what really helped convince people that your ambition and your belief in growth was one that they shared with you?

Grant: Yeah. I mean, I guess the first important group of people were the people that worked in the east of the country, in the brewery and the sales team who were responsible at that time for 90% of the sales of this brand. Right. So to say to them, “hey everyone, I’m gonna change the recipe, I’m the guy from Scotland and I’m here to tell you we’re gonna change your recipe”. Yeah, you need to be very careful and clear about why you’re doing that and what you want to achieve, and they have to look at you and see it, that the reason you’re doing this is to really grow this brand.

So I told them my ambition is to make this brand the number one in the country, which at the time they were, like pfft. I said, I know. I might not achieve that, but this is the ambition and this is why I’m doing it. And by the way, I did it in the Czech language, which made a huge difference. So I learned enough to be able to say that to them. They then said, Hmm, this guy is crazy, but maybe serious. Therefore, the intentions are good. That’s the first thing, because the first point is internally their suspicion that this is about saving money or you know, or something like this.

Then you have to write a business case. So for the internal management, of course there’s a business case and there’s also a kind of exit clause. Two, three years in, it doesn’t work, how do we extract ourselves from expensive sponsorships or what do we do there? But ultimately, and it’s difficult to articulate this, people just have to believe you. Yeah, because you can have numbers and business cases, the question is, do the stakeholders believe it? And I suppose that’s a consequence of how well it’s been prepared, but also how much they trust you.

And I say me, but that’s actually the team as well. Of course. Right. I didn’t do this on my own in the dark room.

Simon: It just goes back to me, that first point that I made just listening to you, observing you, you know, that energy, that positivity, that determination to write a different script and not accept the status quo came through right from the beginning of you just talking about it. So it does feel that that is such a key thing. It’s challenging that sort of what almost has become just an accepted wisdom.

I remember when I worked on Guinness back in 2007/8, it was just the objective was not to decline a brand by more than 1%. And you look at what the brand has done since, and the incredible turnaround of that brand and just this fundamental belief that actually no, this brand can do more. And creating that internal momentum is so huge and creates this sort of almost self-reinforcing. I wouldn’t necessarily go as fast as self-fulfilling because there’s clearly an awful lot of hard work that is done, but self-reinforcing that success begets success and belief begets belief.

Grant: It’s an intangible but incredibly important thing and anybody who’s worked in a large organisation sees it.

Simon: So if I can be the voice of the skeptic for a moment, then I’m sure you probably heard this, right? Which is, this is great for our brand, fantastic, totally see Radegast’s opportunity. How are we gonna sell that to the trade if it’s just a share steal opportunity if we’re not growing the overall category?

What’s the story for the trade? How have you gone about addressing some of those concerns?

Grant: It’s a very good question and a very common one. In the case of Radegast that’s why we set out to relaunch and remarket the premium variant first. So in Czech it’s normal that a brand has two variants, like let’s call it a mainstream and a premium.

By doing that we would convert a lot of consumers to pay more. So the trade story was a margin one. Even if you sell the same number, physical litres, you’ll make more money and it’s not trading. That was the critical trade story. From a broader point of view it was also about time that this is a five, six year journey. You do not convert in a category like this. Lots of trade and lots of consumers in the first year, it’s just not how it works. You have to create space in their mind that a brand that was never in their consideration gets into their consideration. Then they try, and I know other categories are different, but certainly beer, it takes at least in my experience, 5, 4, 5 years to get into that substantial, you know, shift, right?

Short term shifts can be driven by pricing or a new pack or something funky. But when you’re offering essentially a similar concept as others, just better done, it takes a little time.

Adam: Yeah. I think when we spoke before this call, Grant, you were telling me about the example in Poland, four brands there, I believe, was it four brands?

You had to manage the pricing tiering very, very tightly in the face of a competitor that was discounting.

Grant: Well, I think that’s on a portfolio level. You know, at Asahi we were very clear about managing value. And if that meant in the short term, you lost some volume market share, it was part of the cycle of managing value for the business.

And some of the competitors would aggressively price and they would get some volume market share. But then when the end of year results came out, they were making virtually no money.

That’s the purpose of business is to make money, sustainably over the long term. And it’s amazing how many large and successful companies were just operating in such a wildly short term, tactical driven way, but we tried to take a very different view. But we tried to take a very different view.

So in the case of Poland, yeah, market share, we could have had higher volume market share for sure. But it was much more important to preserve the value of that business so that we could reinvest in it.

Adam: It seems to be a recurring theme, Grant of you coming on this podcast about playing the long-term game. It seems to be something that you bring up quite a lot.

Grant: It’s the biggest struggle for marketeers, isn’t it? It is tremendously difficult, and I didn’t succeed all the time in convincing my colleagues. I’m giving you the nice examples. There are plenty of times when I think we gave up on innovation too early. But, you know, it’s part of life. You can’t win ’em all, so to speak.

Adam: So it’s really interesting that you’ve mentioned innovation there. And you know, obviously last time you came on, we talked about innovation at length, but what role does innovation play specifically in this context of trying to grow in these declining categories?

We know obviously that core is incredibly important and protecting and nourishing your core, but what about innovation itself?

How does that help?

Grant: Well, I think there’s two ways to look at that. One is innovation that helps you stronger sustain your brand promise. So in the case of Radegast, we had this promise of being the more bitter beer. We did a couple of innovations, one worked, one didn’t, where we brought bitter beer innovations. One of them was an IPA, didn’t work so well, but then we brought another one, which was a very, very high bitterness, light lager. So in other words, it was 4% ABV. Not very strong, but very, very high bitterness. So surprisingly sharp, and that one worked very well.

It reconfirmed the core brand promise. It was priced at a premium relative to those kind of beers, so it brought value for the trade. It was unique, essentially, it wasn’t for everyone, but it created a strong synergy. The most successful innovation, unsurprisingly. Is the one that leverages what your brand is and puts it in a much more relevant format for some consumers on some occasions. And the example of course is non-alcoholic beer.

So by far, by far the most successful brand innovations of the last years in beer have been in zero-zero. Not for everybody, but for those who’ve done it well. My general view is a bit hesitant on this as it’s a solution to growing in a declining category. I think renovation, which are the examples I’ve described with Ciucas and Radegast, is a much more scalable, sustainable success story.

If you renovate on the core category, you know they call them category entry points now, whatever, your core benefits. I think you’re likely to see much more profound business effects than if you bring out a new flavour, a tweak, a lemon chandy version of this and that, you know what I mean? But non-alcohol is different because that’s a profound change in the way people consume your brand. It’s a fundamental requirement with the category.

Adam: We’ve talked a lot about beer and chocolate. It’s fair to say that beer hasn’t got the same challenges with private labels as maybe some of the categories that our listeners will be facing into. There are many reasons why you don’t want to have a private label beer, brand is obviously more important to your point about being stylish and representing yourself well amongst your mates.

Beyond the kind of brand stuff, is there anything else kind of fundamental to beer, do you think that is affecting why it’s not a private label dominated or threatened market?

Grant: Yeah, I think this is the big, always the big threat, always over the horizon because at a product level, you can obviously make a drinkable beer at the high end. There are fundamental product differences, which are expensive to replicate, but at base level, you can make a beer guys. As you say, the most profound reason that in most markets, private labels haven’t achieved the scale they have in other categories is because it’s a lifestyle product. It tells you about me, my choice.

However, that very much depends on the occasion because if I’m sitting alone watching TV, who am I impressing? Those occasions, so when you have markets where the occasion is very personal or individual or home-based. You can clearly see where private labels would play. As opposed to even if you were organising a party what does it say about your guests if you buy them privately? You know, says, I like you, but not that much. So you’re just, you’re not gonna do it for those occasions. Right. But you might, for just me watching the latest Netflix series.

I guess, you know, when I worked in Spain, that was the market with the highest share of private labels. The Spanish market is actually similar in shape to the UK in the sense that roughly half the market is on trade. You know, pubs, bars, restaurants, and half the market is retail. So the on trade is a different world. It’s branded, full stop. The retail market is very, very high share of private labels, and that’s because the Spanish brewers overpriced their core offerings and they left a huge price gap. Because if I said to you, look, it’s 20% cheaper, you go, eh. But when it’s, you know, a third of the price, one third of the price to buy a private label. You’re gonna try it. I’ll give it a go, I’ll buy one and you drink it and it’s okay. Three times the price for a mainstream beer. It’s just not sustainable. So they got themselves into a problem.

In other markets, typically we use a portfolio, of course, so we have a mainstream, but we have something that sits below that. But in Spain, they didn’t. You would just have these big famous brands and they left a massive price gap and that created the fuel for private label. I think in the UK market I don’t expect anytime soon that it’s going to fly because the relative pricing is fair and low. I would say for beer, branded beer, I’m talking about, yeah. It doesn’t leave much opportunity to be a third of the price. I can’t see that happening. And of course in Scotland and other places, you have a minimum price for alcohol, which helps branded players.

Simon: But it’s good sort of salutary tale about where you’re keeping your perspective and making sure that you are kind of watching what the market is doing and not getting overly caught up in a premium brand battle and thinking the only people we compete with are the other premium players who are also advertising and sponsoring, et cetera, et cetera.

Grant: At the value end, as we would call it, you also have to build brands with emotional value, right? Because people want to feel special drinking your products, and you are asking them to pay more than a private label, which let’s call it a commodity, right? There’s a commodity price. You’re asking them to pay 20% more.

You have to bring that in emotional value guys, you have to do interesting and cool stuff.

Adam: Brilliant. Well, look Grant, that’s been absolutely brilliant. We love having you on, you share such brilliant insights, so honestly and provocatively in some cases, which is just excellent for our listeners too.

Simon: Yeah. Thank you. Thank you, Grant. I’m not gonna lie, I’m going back to your first comment where you said a provocation of growing in a declining market might actually be an easier way to make money. And yeah, you’ve certainly got me thinking on that one. So thank you so much for your time, Grant.

Grant: No problem.

Thanks a lot guys. Good to speak to you.

Adam: Well look Si, that was the second time you’ve met Grant, first time for me, I thought that was brilliant. What I really enjoyed about that was just how to the point he is and he’s not afraid to speak his mind and actually that makes him give some great provocation to us, doesn’t it?

Simon: Yeah. I love that. I think the thing, possibly unsurprisingly given me, but that’s really stuck with me is just the reframing and the positivity and the energy and the excitement about the opportunity that comes from growth in a declining market. It’s so often something that feels difficult. It feels challenging, it feels heavy. It feels like, oh, there’s gonna be a slog. And talking to Grant, it was almost like, well, this is the best thing that could possibly happen. I long for these opportunities .

Adam: And they’re gonna put my best people on them.

Simon: Well, exactly, exactly. You and I have talked in the past that my personal belief is that if I went back client side. The number one attribute that I would recruit people in an innovation role for is not creativity. It’s not project management. It’s resilience.

Adam: Yeah.

It’s the ability to deal with an ox. And I almost got the same sort of thing from Grant here today, which is actually the biggest thing is looking for people who can go, I’m not gonna accept the status quo. I’m gonna change it. I’m excited by that. I want to do something different, rewrite the rules.

And I think that that level of energy is infectious and is exciting and it brings people with you, particularly if you can address the brewers in Czech, which is a skill that I’m sadly lacking.

Adam: Yeah, I mean, we see it, don’t we, with new categories where they steal some of the traits of the adjacent categories to reframe the category and make things kind of more interesting and bring people into them.

But what we talk about here is actually applying that same kind of magic to a category that might be on the way out or a category that’s declining slowly. And while all the attention is focused on the new shiny stuff that’s growing quite quickly, there’s the opportunity just to completely turn it on its head and do something different and look after those consumers who are buying into that category in a way which they’re not being kind of serviced.

I loved it. And the theme for me that just rings through both of Grant’s interviews is he just has this very long term view on everything.

Simon: Yeah.

Adam:  I think it’s very, very difficult to keep that. But he does it so well.

And now’s the bit of the podcast where we get to be YouTubers and other podcast hosts and say, can you help us to spread the word of this podcast further?

It really does help us. If you can subscribe to it, you can follow it like it. Or even ask people if they’d like to be a guest on the podcast. It really helps us to grow it and enable us to get more guests to come on and share their wisdom with you.