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Posts Tagged ‘Public Policy’

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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The most surprising aspect to the conviction of blogger Cameron Slater (better known as Whaleoil) two weeks ago, was the audaciousness of the defence council’s argument.

In violation of court name suppression orders, Slater had identified several high profile Kiwis on his website in connection with a range of offences.  Slater has long argued for the reform of name suppression law and his decision to publish and be damned was in line with these beliefs; that and a laudable desire to stick it to the privileged.

Under New Zealand legislation, it is unlawful to publish the name of any person who has been granted name suppression.  So to me it seems Judge Harvey only had to confirm two things before delivering his finding.  Firstly that it was Slater who defied the court orders.  Secondly that putting this information on his blog site amounted to publishing.  There was no argument against the former, so it came down to a decision as to whether putting that information on a blog was publishing.

But what was surprising was Slater’s defence counsel suggesting that a core issue was whether the suppression orders should have been applied in the first place, and that it was the duty of Judge Harvey to reassess the validity of the original order.  This was effectively asking one Judge to question whether another Judge’s decision should be complied with, and was never going to be a flier.

More amusing was an additional line of defence suggesting that suppression laws only referred to direct reports of court proceedings, and the way they were published did not contravene the precise orders of the court.   In other words a rose by another name is not a rose.   Again, not really a winner.

Beyond the amusement level however, there were three interesting things to come out of the Whaleoil case.

First, blogging is publishing.  While few sentient beings would doubt such a thing, this is the first local decision that confirms that if you write down your opinions and make them available via web log then you are unmistakably publishing.

Second, playing silly bugger games around text speak, pictographs or cute code doesn’t cut the mustard.  Don’t say you haven’t been warned.

Third, if you put a hyperlink on your website to offending material on another website then this also amounts to publishing.  Harvey even predicted the first such local prosecution along these lines.

The Elephant in the room however is what caused Slater to defy the name suppression ban in the first place.  Namely whether name suppression is either desirable or practical in the internet age?

As Judge Harvey noted in his finding, if a person overseas decided to post information on their website that was subject to a non-publication order, it is unlikely to be caught by section 7 of the Crimes Act.  And once the existence of this information becomes known to others it’s able to be spread virally by individuals or groups, indexed by autobots, cached for eternity by servers and located instantly by search engines.  All of this arguably makes the prosecution of a local offender largely a waste of time and energy, albeit mandatory under section 140 of the Criminal Justice Act.

This is far from just an academic discussion.  Justice Minister Simon Power has a passion for simplifying the criminal justice system and he’s in the process of giving glacial justice officials a damn good serve.  Power has set up a joint Law Commission/Justice Ministry project called the Criminal Procedure (Simplification) Project with the aim of giving people easier access to courts and simpler criminal procedures.  While the main thrust is aimed around reducing unnecessary court delays, it also includes controversial changes to name suppression laws.

Ten months ago the Government released what amounts to a draft bill for consultation. It included a blank clause to be written on name suppression.  You can get your last pint of virtual whale oil that he will be getting a truckload of submissions on this, and a key point will be whether it’s worth trying to close the stable gate long after the horse bolted and posted the details of his escape up on his Facebook page.

Power has also expressed his interest in having a national register of court suppression orders.  This is such a blindingly good idea it should just happen.  If you are some poor sod running a web business or overseeing an online community there’s no easy way to find out what suppression orders are in place, potentially putting you at serious risk given last week’s finding.  Even if you want to do the right thing, it’s tough getting information to act on.

Good compliance is easy and transparent compliance. Having a national register would make it easy for any local website operator to ensure they did their best at complying with the law, at least for the period it takes for the law to catch up.

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