Diageo, the world’s largest spirit company is scrambling to reinvent itself as its famous Guinness Stout faces opposition in a largely Muslim Indonesia. The government placed a ban on alcohol sales in mini-markets and convenience stores in April. To counter the ban, the company launched a new alcohol-free Guinness made exclusively for Indonesia, Southeast Asia’s largest market.
Recent tide towards conservatism in Indonesia, a majority Muslim country and concerns about underage drinking caused the government to ban sales of alcohol in certain stores.
However, Diageo still sells its regular alcoholic Guinness stout in large supermarkets and restaurants, where they are permitted. However, the company has invested about $1m so far to launch Guinness Zero, the non-alcoholic brand. The drinks company is planning a new 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.”
Diageo has about 15 percent of the Indonesian beer market, which until last year was the world’s fifth-largest market for Guinness with annual sales of around 400,000 hectolitres.
However, since the ban came into effect, sales of Diageo’s other alcoholic brands in the country have fallen by as much as 40 per cent year-on-year, said Mr. Harlow, as the number of outlets across the archipelago carrying the beer has dropped from around 70,000 to 40,000.
The company says the ban is responsible for drop in sales as it reported a 28 per cent decline in net sales in Southeast Asia for the year 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 Stout – for example, men looking for a “masculine “ drink while avoiding alcohol in a largely Muslim culture where drinking alcohol is often frowned on, said Mr. Harlow.
Diageo has sold alcohol-free drinks under other names in other markets, like Kaliber in the UK and Malta Guinness in Nigeria, but its primary objective in Indonesia is to keep the Guinness label prominent in popular mini-markets.
“We wanted it to be Guinness branded and we wanted the product to be distinctively Guinness,” Mr. Harlow said. He added that there are no plans to roll out Guinness Zero beyond Indonesia.
Diageo’s move brings it into line with Indonesia’s other major brewer, Multi Bintang, majorly owned by Heineken – which already sells two popular alcohol-free drinks.
Diageo is hoping to capture 10 percent of the country’s 150,000 hectolitres non-alcoholic beer market in two years, from about 7 per cent now, said Mr. Harlow.
However, the biggest challenge facing the drinks company at the moment is the high production cost of zero-alcohol alternative, which retails for half the price of a can of regular Guinness stout at Rp9,000 ($0.65).
Diageo is currently importing Guinness Zero from Ireland, paying around 10 percent in duties as well as expensive transportation costs, until it is able to complete a new production facility on Indonesia’s Island of Bali in a few months.
The company also has to overcome a strong competitor in Multi Bintang’s Zero, which has a light and lemony flavor and is the country’s favoured zero-alcohol beer.
Twenty-year old Abi Dwi Natadipura, a consumer, says 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.”