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Emersons 1812 IPALast week I was lucky enough to stay at The White Swan Hotel in Greytown, home of the modern Arbour Day celebrations and claiming what is apparently one of the most complete main streets of Victorian architecture in New Zealand.

The White Swan began life as the New Zealand Railways administration building at the Woburn railyard in Lower Hutt, but in 2002 the building was cut into six pieces, relocated over the Rimutaka Range and reassembled in Greytown.

When I visited last week it offered great food, stylish rooms and warm service. The only thing missing was some great Kiwi craft beer.

Craft beers in New Zealand have moved from the fringe to the mainstream thanks to outfits such as Christchurch’s Three Boys and Harrington’s, and Wellington’s Garage Project and Yeastie Boys. No such tasty brews were available at the White Swan, which I thought a tad unusual for such a tasty pub.

Then I noticed a pattern to all the brews on offer – which included Monteith’s, Sol and Tiger – all were brewed or distributed by Heineken-owned DB.

It’s pretty well known, by drinkers anyway, that New Zealand’s brewing market is dominated by Japan-based Kirin and Netherlands-based Heineken. Together this duo controls virtually all of the big beer brands sold locally, from Steinlager and Canterbury Draft, to Heineken, Tui and Stella.

And last week Kirin grew a little larger thanks to its acquisition of Dunedin’s Emerson Brewing Company, via its 100 per cent-owned local subsidiary Lion.

The purchase was more than a little ironic, given the colourful Richard Emerson set up his craft brewery in 1993 selling unpasteurised beer after becoming disillusioned with the generic taste of the big breweries’ offerings.

I first sampled Emerson’s when a Dunedin scientist mate sent me some London Porter claiming it had aphrodisiac qualities. Soon after, I discovered Bookbinder which became a quick favourite. Thereafter, if I was within 300 kilometres of Dunedin, I would detour via Wickliffe St and fill the boot of my gently corroding MGB Roadster.

Subsequently Richard Emerson became a central figure in the craft beer vanguard, celebrating taste, tradition and idiosyncrasy. The quality of his output became recognised globally, and invariably he attracted the attention of the Dutch and Japanese giants.

Contrary to the PR spin, I’m not convinced brewing moguls like acquiring small breweries. The little guys spend too much on ingredients and their volumes are too small to deliver the cost efficiencies of the mainstream brews, so the moguls begin “value engineering” them. And the iconoclastic founders often make poor team players. However, as the popularity of their product grows, so do the value of these crafty brands until they reach the point where they become too painful to ignore.

I don’t blame the big brewers for buying brands like Emerson’s, Mac’s and Monteith’s – it’s commercially astute, as long as they don’t overpay. And I have nothing but admiration for the likes of Richard Emerson who turned a vision of quality ales into a global brand and a commercially successful company.

But there are two things that make me cough into my beer glass.

The first is, what will happen to the diverse and tasty lineup of unpasteurised beers that Emerson’s offer up? Big brewers make money out of volume, and I would be surprised if the likes of Taieri George or Whisky Porter will last for long. Mind you, as my wife constantly reminds me, I am not in the middle of the bell curve when it comes to beer.

The second and more worrying thing is the impact of the large breweries tying up distribution in New Zealand. Pubs are not always particularly profitable businesses, so the rebate structures offered by the big brewers are hard to resist.

But enticing pubs to enter into these exclusive supply agreements keeps craft breweries out of pubs, and tasty brews away from customers’ glasses.

More important from a commercial perspective is the exclusionary effect such control and incentivisation has on new entrants.

The Commerce Act has provisions which are designed to prevent a business taking advantage of its dominant position in a market for an anti-competitive purpose. I wonder if the independent brewers have ever thought of taking a class action against one of the two biggies?

If you go to Greytown, you should check out Stella Bull Park, named for the Wairarapa woman who did so much to make the town beautiful. There is a park bench there which notes: “Only God can make a tree.”

I’m of the mind that only an iconoclast can make a truly great beer. It’s just a shame that the incentivised distribution structure barricades these brews from the fridges of so many pubs in New Zealand.

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Bob Dylan by Alberton Cabello Via Wikipedia

Next week is Bob Dylan’s birthday. Born Robert Zimmerman, this chronicler of 1960s social change changed his name to Dylan after being influenced by Welsh poet Dylan Thomas.
While opinions differ around the musical integrity of his later work, his first few albums came out of nowhere with a sound so different, and lyrics so innocently cutting, that they became the anthem for civil disobedience and social change.

While most agree his 1965 album “Highway 61 Revisited” is the best, the previous record “Bringing it all back home” is my favourite. And I reckon the opening track “Subterranean Homesick Blues” is pretty near perfect.

Amongst the plethora of eclectic references in the song is the line “You don’t need a weatherman, to know which way the wind blows.” While he wrote it as an empowering line for angry young men and women abandoning the social and political paradigms of their parents, it’s also salient advice for retailers trying to future proof their business.

The latest retail shopping study from Nielson Online shows that almost half of all New Zealanders adults are now shopping online. Almost 1.5 million New Zealanders aged over 18 bought stuff online in 2010. While only seven per cent ahead of 2009, it was effectively double the figure of six years ago. (see  http://nz.nielsen.com/news/documents/NielsenNewZealandOnlineRetailReportFINAL_TB1.pdf)

Not only is the percentage of local online customers increasing, so is the amount of things they are buying with the number of people purchasing four or more items increasing 25 per cent over the last year. So to take Dylan’s advice to heart, if you are retailing and want to future proof your business you are likely to be a mug if you haven’t at least started to migrate your business to online.

For some it’s an easy decision. If you have a limited range of products, physically disparate customers, an electronic database and transparent pricing, then moving to an online ordering and payment system is pretty much a no-brainer. However for others with huge inventories, poor stock management systems and customised pricing, it’s a nightmare.

One of the classic traps to fall into is the assumption that once you build a website for your business that customers will automatically go there. I’ve lost count of the number of websites I’ve seen companies build for large amounts of money, only to sit and wither. Big companies can afford websites which are effectively just a digital laurel wreath placed on the steps of corporate ego. Small companies have no such ability.

So a core question any widget-seller should ask themselves is whether they have strong enough brand, decent enough customer data and big enough marketing spend to attract sufficient traffic. A much cheaper option is to go where the existing traffic is, namely online portals and marketplaces, and sell your product on their platform. The downside of this is that your products will be listed alongside your competitors, so prepare to compete on price.

Assuming that you reckon you can get enough traffic to your website, the key question is how to put together your customer proposition. Oddly enough the traditional marketing notion of “the four Ps” – product, promotion, price and place – are a pretty useful place to start, particularly the first three.

In most cases it makes no sense to try and replicate all your offline products online. Instead focus on products that are easy to ship and unique enough not to have direct competitors at The Warehouse or Ebay. In addition to offering your regular products online, it may be that you can source particular lines at good prices, then offer these as online targetted specials. The beauty of this is that you can offer prices lower than you would in your store.

In terms of price it’s offline suicide to offer identical products online for less than you can buy them in your store. However to enable a level playing field consider offering free postage to mean the actual “in hand” price is the same. If you want to discount, then do it with the online-only specials outlined above, where you can tweak the elasticity between pricing, demand and revenue.

Lastly, when it comes to promotion there’s the holy trinity of search engine optimisation (so you appear on organic results), search engine market (so you show on paid results) and social media (so you show harness the strength of human networks). And don’t forget stunning customer service. Amazon in the United States and ASOS in the UK have immediate shipping and slick return policies, which results in powerful word-of-mouth promotion.

Beyond this the smart money is on marketing to your existing and new customers electronically. This typically takes the form of an electronic direct mail or EDM, but more recently it’s extended to the new generation of daily deal websites.

In a world where power has passed from the corporate to the consumer, retailers are foolish not to avail themselves of the same distribution network that their new global competitors use. As Dylan has also noted “you better start swimming or you’ll sink like a stone, for the times they are a-changing”.

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They say that midlife crisis for men typically expresses itself in one of three ways: developing a drinking problem, buying a boat or seeking a mistress. I seem to be pursuing a different path, and instead am trying to connect with the television heroes of my youth.

In the early 80s the definitive cop show on television was The Professionals, where two roguish CI5 operatives screamed around the streets of London in Ford Capris protecting the Crown from all manner of spies and dodgy foreigners. This unlikely association gave the pedestrian Ford Capri serious cutting edge cool. And now in my 40s I am in search of such cool.

So last winter I spent months seeking out a rust-free Capri. And then having sourced one, I did what all good Kiwi blokes do to Ford Capri’s, I tried to soup it up by fitting a pair of twin throat side draught carburettors. Carmakers abandoned carburettors in the 1990s, in favour of more efficient and controllable fuel injection, meaning few people now know how to set up and tune twin side draughts. Everyone I spoke to kept on referring to it as the last black magic.

This phrase came up again recently when a small manufacturing business came to me having received advertising bumf from a number of web design/hosting outfits, all of whom were offering to build basic business websites for capped prices of less than $5000. The owner, Rebecca, wanted to know if it was a good deal.

I don’t bemoan any web shop marketing its services, but in this case the more I looked into it the more it became clear is what Rebecca would receive for her money, was a generic website lightly painted in the livery of the customer. Importantly, any additional changes would be charged for and monthly hosting fees seemed exorbitant for plugging in a server and keeping the switch on.

Now $5000 may not be a lot of money if you are a Telco or dairy company, but it’s a heck of a lot if you are a small business battling tough trading conditions and trying to keep costs below expenses and hopefully pay yourself a bit as well. In the case of my manufacturing mate, it was clear that once the $5000 had been paid Rebecca would be paying more for consequent tweaks.

I suggested to Rebecca that she do it herself. She laughed at the suggestion, saying that she didn’t know how to build a website or any of the associated internet black magic. That anyone would see putting together a basic web presence as anything but straightforward and free in 2011 I find surprising. That they think of it as black magic is simply astonishing.

There are a huge number of packages and systems that can provide anyone with a free website, however the one I directed Rebecca to is http://www.wordpress.com . WordPress is a free and simple online content management system which allows almost any web surfer to sculpt up a reasonable website in an hour or so thanks to a heap of sample themes and templates.

Best known as a blogging tool, WordPress is used by over 10% of the world’s biggest 1 million websites as a hosting tool, so it’s industrial strength. Plus it’s got built-in applications for most of the big handheld devices including blackberries and iPhones. For those that find WordPress too complicated there’s the super simple Tumblr or for easy eCommerce there’s Shopify.

Services like WordPress, Tumblr and Shopify take care of basic stuff like search engine optimisation, synchronising with social media platforms and providing comment functionality. Importantly there are limits to what it can do, but you can usually pack it up and take it elsewhere when you grow up.

These services don’t not make you a design genius. But they do steer you so that you don’t make a complete hash of it. However if your budget extends to $30 you can buy a copy of Steve Krug’s “Don’t make me think” for the basics. The other money that you should spend is buying a domain name, also known as a URL unique reference locator, specifically your domain name, before someone else done. (NB WordPress will also charge you to bolt this on).

The trick here is going for simple, descriptive URLs. Ideally you should buy two – your name (eg: http://www.bobsmith.co.nz) and your business name (eg: http://www.smithjewellery.co.nz). To do this go to http://www.discountdomains.co.nz or http://www.registerdomains.co.nz and buy online for around $30 a year. Good insurance lest someone else pinch it.

Free websites through the likes of WordPress are no panacea for small businesses getting online or increasing revenues. But they are a great option if you just want an online company profile, contact details and product overview. And it’s a great way to save $5000. Never having to take customer calls saying “hey cobber, your site’s down” is pretty appealing as well.

Meanwhile if you really are after someone that knows the black magic of tuning side draughts, I can recommend a bloke called Murray in Silverdale. He’s the real deal.

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It’s official.  The Prime Minister has too many friends.  At the recent TRENZ tourism conference in Auckland, John Key let slip that he had maxed out his allowed number of Facebook friends, hitting the magical 5000 figure.

The problem here is more significant that you would think, as it means that Mr Key is not able to be “friends” with either of his teenage kids, as the Facebook commissars have chosen 5000 as the ceiling number of friends you can have.  And speaking from personal experience, while hell hath no fury like a woman scorned, it’s chickenfeed to the damage a dumped teenager can wreak.

The Prime Minister’s dilemma has come at a time when Facebook has just passed 500 million members.  Certainly the site has come a long way since Harvard computer student Mark Zuckerberg built the site in 2004 to allow fellow students to get to know each other.

Zuckerberg based it on a printed document his old prep-school used to distribute with photographs of all students and staff, which was unofficially called “the facebook”.

Early growth was strong, with the site growing to 100 million by August 2008.  But that was peanuts compared to the last two years when membership increased five-fold to a staggering 500 million last month.  But if you think that’s staggering then consider that the business only became profitable in September 2009.

With the possible exception of British petroleum companies, where else but the internet could you have a business with hundreds of millions of customers but still be revenue negative?

In grabbing the social networking crown, Facebook systematically took out Friendster, Second Life, Bebo and Myspace over the last five years.  But it doesn’t rule every roost, as evidenced by Yahoo!’s Wretch in Taiwan, Mixi in Japan, Google’s Orkut in India and Hi5 in Latin America.

The questions on everyone’s lips are how long will it last, and what will kill it?  The internet is no respecter of hierarchy or history.  Last month Bebo provided a superb example of how the distance from hero to zero is breathtakingly short.  In its short five years this former shooting star navigated its valuation from $0 to $1 billion, then down to $10 million.

As it stands right now Facebook faces threats from four main quarters – privacy, data-mining, commercial imperatives and generational creep.

Of all the internet giants, Facebook appears to have the most problems with privacy.  From mistakenly displaying millions of private online chats and friend requests, to unilateral privacy policy changes and Zuckerberg’s own declaration privacy was no longer the norm in the modern world: Facebook has become privacy’s anti-hero.  If you have any doubt just ask the EU’s Privacy Working Group.

Allied to privacy concerns is the data-mining practice of Facebook.   The company’s 5888-word privacy policy gives the company permission to collect information from other users to learn about you and market things to you.  It also gives them the ability to provide members’ aggregated data to private companies for promotional services.

Data-mining is about transforming data into information and providing it to companies for profiling, marketing and surveillance.  Not only does Facebook have huge data, and the technical ability to transform it into information, it also has a privacy policy that is flexible enough to complete the process.

One of the genuine benefits that Facebook provides businesses with is the ability to engage directly with their customers and opinion formers in a meaningful way.  Certainly it has real value in initiating useful conversations about issues and opportunities.  This has seen most progressive corporates invest time and money into social networking.

But the global financial crisis has caused many corporates to look beyond mere soft engagement to hard return on investment.  This has seen many businesses looking to more effective platforms for product distribution, with Twitter being a real winner in these stakes.  Consider Dell who last year sold more than $3million of product through Twitter.

But the biggest threat to Facebook isn’t any of these things, it’s nana.  Some of Facebook’s biggest growth right now is among the oldies – Mums, Dads and grandparents.  And this is far from cool.  Some recent research out of the United States by Ketchum found that 42% of teen influencers hated it or were annoyed when they found their parents on the same social networking site.  If you’ve ever had to drop your kids off a block from school because you’re not cool then you’ll know this feeling.

So the good news for the Prime Minister is that pretty soon his kids won’t want to be his Facebook friends, so he won’t have to delete any of his 5000 friends.

That’s good news for Mr Key, but not such good news for Facebook.

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