By Andrew Patterson
It seems strange that in a nation of beer drinkers New Zealand doesn’t actually have its own distinctive international beer brand.
Think Mexico and you immediately associate it with Corona, or Fosters in Australia or even Kingfisher in India. Even Fiji has its traditional bitter. Lion Red it seems doesn’t quite cut it in upmarket New York and the origins of the Steinlarger brand name are German.
Moa wants to change that with a brand that cleverly uses the name of the country’s most well-known bird; after the kiwi of course; albeit an extinct one.
It has big plans to create a beer that doesn’t just taste good, but one that also becomes an iconic NZ brand globally.
Announcing its decision to IPO recently, Moa will become the first listed brewer to return to the main board of the NZX since the departure of Lion Nathan in 2009.
It’s been a fast and furious ride for the Moa brand since founder and Executive Brewer Josh Scott conceived then name in one of those quintessentially kiwi moments.
As Chief Executive and serial entrepreneur Geoff Ross tells it, the story has already become part of Moa folklore.
“Josh had been doing his winemaking apprenticeship offshore and lot of the winemakers he came across, particularly in California’s Napa Valley, were also into brewing beer. They enjoyed the fact that after a hard day’s work in the vineyard they could sit down and have a cold beer, and a quality cold beer at that."
"So when Josh eventually made his way back to NZ he brought the idea home with him and started doing the same thing in Marlborough but didn’t have a name for his brand; even though it was starting to become quite popular with the locals. Coincidentally, he happened to discover one hot summers day that a couple of archaeologists were digging around at the end of his road and so he took them some of his beer and when he discovered they were looking for Moa bones it was then that the brand was conceived. That was in 2003."
Since then Moa has evolved into one of a growing number of craft beers that are redefining the category and catering for a new generation of discerning drinkers who are more willing to experiment with a range of different brands rather than remaining loyal to a particular favourite.
“Interestingly, Josh also lives next door to Cloudy Bay and that was always his vision to create a beer that was as successful as Cloudy Bay. He thought that Moa and its name and its prominence, origin and the whole methodology behind making the beer could be the foundation for a global beer brand from NZ. He was really one of the early pioneers of craft beer in this country.”
However, take a walk down the beer isle of most supermarkets these days and consumers are confronted with a staggering array of local and imported brews all vying for a place in the shopping trolley. Therefore, how do you stand out in the category?
It’s not something that concerns Geoff Ross, which potential investors in Moa will find comforting, given his former role as an advertising executive.
“What the supermarkets are starting to realise is that they can make a higher margin on one bottle of craft beer than a six pack of packaged beer, so they’re really starting to get interested in this space. So to an extent, at a retail level, it’s being driven by them but increasingly it’s also being driven by consumers who want quality over quantity. They’re also discovering there’s more to life and beer than just an ale or a larger a bit like when we began to work out that there’s more to wine than simply thinking of it as being red or while.”
“So while it is increasingly becoming a crowded category, offshore there remains an opportunity to create a distinctive NZ beer brand. The challenge to establish the brand in global markets will require capital, the skill to execute the marketing and branding strategy, distribution channels and really reaching consumers to secure their loyalty. All of those skills will be critical in gaining a decent chunk of market share.”
As any marketer will tell you, there’s a fine line between growing a brand and its profile and not alienating your existing customers who like the boutique nature of the brand just as it is. It’s a challenge that Moa is going to have to confront in the future as it moves into this next phase of its growth.
“There are risks around taking your existing customers with you on this next stage of our journey. However, you mitigate that risk by being true to your founding principles and not cutting corners. You keep brewing in Marlborough and you keep brewing the same way, that’s step one. Step two involves customers starting to realise that you can remain a craft beer and be really big and successful at the same time.”
“There are plenty of examples in the United States of craft breweries that are bigger than Lion Breweries and DB combined. They’re huge businesses, but they’re still viewed as craft brewers because of their quality methodology.”
Decision to IPO
At a time when cash reserves on corporate balance sheets are growing rapidly and lending rates have never been lower the decision by Moa to list the company on the NZX might fly in the face of conventional wisdom. But listing does have its advantages according to Geoff Ross.
“It does give us a reasonable chunk of capital because there is some impatience on our side for some fast growth and an IPO does allow you to do that. We’re planning to raise $16 million in the float of which $6 million will go towards building a new brewery because we need to significantly increase our production capacity. Right now, if we could make more beer we’d be selling more beer.”
“There are two other benefits of listing that people sometimes forget about. Firstly, it gives you credibility. So if we’re talking to a distributor in the U.S. and we rock up and say we’re listed on the New Zealand Exchange then all of a sudden we go from being seen as two guys out of a garage to someone at the business we’re visiting saying perhaps we should get the company president in for this meeting. So you do get taken more seriously. Secondly, it raises your profile; particularly with consumers.”
Coming at a time when listings on the NZX are at an all-time low and businesses are being risk averse in their outlook why is Moa prepared to run counter to the prevailing sentiment?
“We focus on our particular part of the world and we tend to ignore the problems in Spain and the slowing of growth in China. We’re targeting high end consumers in the U.S. for instance who are wanting a super-premium beer with Marlborough, NZ credentials and we’re getting great uptake in that sector.”
“That leads you to ask two key questions. Do we think craft beer is going to grow both in NZ and internationally and the answer to that is definitely yes. Secondly, do we think we have the ability to export a beer from NZ to other parts of the world that has a long shelf life, which previously it didn’t, and we believe we do; which is why we pulled the trigger on the listing.”
Any investment always contains an element of risk, particularly when businesses over promise and under deliver. Geoff Ross says it’s a lesson he learnt from his time with 42 Below that failing to deliver on your forecasts is the fastest way to lose the trust of investors.
“The risk for Moa is that we don’t end up growing as fast as we think we will. But we’ve done a huge amount of work to mitigate that risk. We’re very aware that as a listed company, if you give the public a number then you’ve got to hit it. So we’re very conscious of that and that’s what drives us and keeps us awake sometimes.”
“I’m also mindful of the fact that we [The Business Bakery] are not seen as a one hit wonder. Ecoya is off to a good start and growing strongly and early reaction to Moa is pretty good. We want to be seen as a group of business people who can grow a business offshore rather than a bunch of people who had a bit of fun creating a local vodka company, so it’s important that we string together a few success stories.”
Long term vision
While Moa might be in its infancy as a soon to be listed company there’s a definite long term vision for the brand that suggests it’s destined to remain a long term NZ based company.
“Every country has an iconic beer brand and we want Moa to occupy that space in the future. Right now there’s clearly a gap in the market for a beer like ours and we believe the combination our branding and our brewing technique to create a high quality product with a long shelf life are what sets us apart. So we think we have all the founding principles to create a really iconic international beer brand right here in NZ.
“While Steinlarger has achieved some good success previously, there’s always been the problem with the German name and their primary focus has been principally on the domestic and Australian markets. For us it’s the reverse. We see the US & UK as our primary markets because that’s where the growth will come from while simultaneously retaining a strong focus on our domestic market here.”
“While we do want broad consumer recognition domestically I would prefer to achieve the sort of success and positioning that Cloudy Bay has gained for itself where around 80% of its product is exported but it is also highly regarded domestically. So in an ideal world we want Moa to become the Cloudy Bay of craft beer.”
So while Steinlarger may have once conceived that catchy positioning line “... they’re drinking our beer here” the phrase might be more appropriately attributed to Moa in the future if those backing its high profile listing have their way.
|Sector:||Brewers / FMCG|
|Turnover:||$4.5 million (estimate y/e March 2013)|
|Annual growth rate:||100%|
|Fastest growing market:||USA|
|Domestic : export:||80% : 20%|
|Ownership:||Public from mid-Nov following listing on NZX|
|Other:||Prospectus issued October|