Guinness goes alcohol-free in Indonesia

Mark Willingham Uncategorized

Guinness goes alcohol-free in Indonesia

 

Diageo tries to change tack after beer sales clampdown

 

Source: FT

by: Avantika Chilkoti in Jakarta

December 26, 2015

 

Diageo has been forced to change tack in the world’s biggest Muslim-majority country with the introduction of alcohol-free Guinness after Indonesia’s government clamped down on beer sales this year.

 

The brewer is still selling its regular Guinness in large supermarkets and restaurants where sales have not been curbed, but it has invested about $1m so far to launch Guinness Zero and is planning a facility to produce the drink locally.

 

“We already had plans to enter the zero-alcohol beer market,” said Graeme Harlow, managing director of Diageo. “After the ban came in, essentially it made it even more important.”

 

UK-based Diageo has about 15 per cent of the Indonesian beer market, which until last year was the world’s fifth-biggest market for Guinness with annual sales of about 400,000 hectolitres.

 

Since the ban, sales of Guinness and Diageo’s other alcoholic beverages have fallen 40 per cent year on year, said Mr Harlow, as the number of outlets across the archipelago carrying the beer shrank from about 70,000 to just 40,000.

 

The company blamed the new Indonesia restrictions as it reported a 28 per cent decline in net sales in Southeast Asia for the year that ended in June, even as Asia Pacific sales rose 64 per cent year on year to £2.2bn.

 

Guinness Zero, marketed with the tagline, “bold taste, zero alcohol”, is aimed at much the same consumers as the regular Guinness brew – for instance, men looking for a “masculine” drink while avoiding alcohol in a society where drinking is often taboo, said Mr Harlow.

 

Diageo has introduced alcohol-free drinks under other names elsewhere, as Kaliber in the UK and Malta in Nigeria, but its aim in Indonesia is to keep the Guinness label prominent in popular minimarkets.

 

“We wanted it to be Guinness-branded and we wanted the product to be distinctively Guinness,” Mr Harlow said. He said there were no plans to introduce Guinness Zero beyond Indonesia.

 

Diageo’s shift brings it into line with Indonesia’s other big beer producer, Multi Bintang – majority-owned by Dutch brewer Heineken – which already sells two popular alcohol-free drinks.

 

The UK group is aiming to capture 10 per cent of Indonesia’s 150,000 hectolitre non-alcoholic beer market within two years, from about 7 per cent, said Mr Harlow.

 

The most immediate hurdle for the world’s largest distiller is the high production cost of the zero-alcohol alternative, which sells for half the price of a can of regular Guinness at Rp9,000 ($0.65).

 

Diageo is importing Guinness Zero from Ireland, paying about 10 per cent in duties as well as expensive transportation costs, until it opens its production facility on the island of Bali in a few months.

 

But it also faces a hard sell countering Multi Bintang’s Bintang Zero, which with its light and lemony flavour is the country’s favoured zero-alcohol beer.

 

Local consumers such as Abi Dwi Natadipura, 20, say the distinctive bitter Guinness flavour of hops, malt and barley remain an acquired taste for Indonesians.

 

“I have seen Guinness Zero in cans, but I’ve never tried it,” he said, while shopping at the Circle K minimart in central Jakarta. “I guess the taste would be more or less the same as regular Guinness – and I’m not interested.”