On the End of the American Auto Industry

Blitz Magazine, March 2006

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The other day, I was sitting in a long line of traffic. I was at the top of a hill and could see all the cars below. I noticed that, out of 50 or 60 vehicles, only three were not Japanese or German. The US was represented only by a Hummer, a big lump of a Cadillac and an ancient Buick. All the rest were foreign. As I continued to drive around Vancouver that day, I kept an eye out and saw the same thing on every street, in every parking lot. Japanese, German, some Swedish. Lots of Jaguars. And everywhere, SmartCars. Nary an American vehicle in sight.

Meanwhile, the news on the radio was about how Ford and GM are on the brink, and I’m thinking “Well, duh.”

The mantra for big marketing is all about knowing consumers, knowing what they want, and giving it to them. This is nothing new. But American car-makers—who rank among the largest retailers in the world—have never done this. The American auto industry has always given consumers what it wants them to have. Consumer research may have been conducted, but it was ignored. Ditto all research into what the competition was doing. The message from American auto-makers has always been the same: “Here’s what we’ve built. Buy it.”

If I were the president of, say, General Motors, I would have looked at Great Britain, whose citizens pay some of the highest fuel prices in the world and have never wanted anything but the small and zippy. I would have seen the same thing across Europe and thought ‘Hmmm. Maybe the big car is about to do the way of the dodo.’ I would have listened to trend analysts—not American auto trend analysts, but energy trend analysts. I would have seen what the Japanese saw long ago: a growing need for smaller, more fuel-efficient cars with all of the options and comforts. I would have said to myself: ‘Look at how successful those Japanese manufacturers are. Maybe we should do the same thing.’

Well, that didn’t happen. Instead of giving consumers what they really wanted out of a vehicle—fuel-efficiency, safety, reliability etc., American car-makers said: ‘Oh forget the reality. Let’s look at consumers’ cultural aspirations, create vehicles that fit with their idealized self-images and appeal to their egos, and then market the hell out of them.’

So, at a time when roads are true danger zones, and when most couples wouldn’t dream of having more than two children, American car makers produced SUVs—gas-guzzling vehicles that everyone knows are unsafe. Then they marketed them as family essentials. At a time when drivers are increasingly distracted by cell phones and fast food, American consumers got vehicles with entertainment systems. In an era where commuting time can run up to three hours, Americans produce longer vehicles (longer vehicles increase commuting time for everyone).

Did consumers ever indicate that they wanted this? No. But the marketing worked. Until reality sunk in. Those vehicles are no longer desirable. There are millions of them out there, and no one wants them.

auto1Pick-up trucks are only needed by tradesmen. Yet we’re now seeing massive pick-up trucks driven by executives who happened to respond well to hearing Bob Seeger sing ‘Like a Rock.’ For the under-endowed, there’s the Hummer. Meanwhile, the US government is so desperate to find sources of oil that it has gone to war and is ready to plunder a northern nature preserve for a three-year supply. Chop logic.

If you look at the advertising for German cars, the emphasis is on performance and status. If you look at the advertising for Japanese cars, the emphasis is on reliability, safety, stability, comfort—and fun. If you look at the advertising for American cars, the emphasis is on all the snappy things you can fiddle with inside vans—to create toy bins and space for baby carriages. Please.

And speed—we’re still stuck with those tired old commercials showing cars driving very fast along twisting roads. Meanwhile, public tolerance for speeding is at an all-time low. Fines are way up, California drag-racers are going to jail—a Vancouver man was recently deported as a result of a fatal speed-crazed crash. Speed and recklessness are, like, totally yesterday.

The major shareholders of American auto manufacturers have never done anything to remove board members or CEOs. Now all’s lost. And you have to wait in a very long line to buy a SmartCar or a Prius; and a 2002 Toyota Echo costs $17,000—if you can find one.

Big Auto wasn’t paying attention. The lesson that everyone can learn from that is that communicators have to be smarter and make more of an effort to predict the future. We have to watch, listen and learn. We have to hear the ideas in our own heads, and listen to those of others. And we have to be better communicators.

We are in the Age of the Internet. And the Age of the Entrepreneur. Long-term success now depends on communicating, fulfilling needs, listening, providing great products and services at fair prices, and giving clients and consumers what they want and need. Otherwise, adios.

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For the Love of Lager: Loyalty to an Old Law & Savvy Marketing Make Okanagan Spring Brewery #1

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For natives of Germany, a country where open land and big sky are at a premium, western Canada is the Land of Opportunity. In the early ‘80s, pub owner Jakob Tobler, and real estate developer Buko von Krosigk immigrated to Canada and settled in BC’s Okanagan Valley, specifically Vernon.

Their goal was to address one glaring problem with their new home: the beer was no good. The offerings of Canada’s major breweries fell short of the quality to which they were accustomed. Meanwhile, Jakob’s son Stefan had earned a degree in beer-making at a German university, and that made him one of only two certified brew-masters in western Canada. It was logical to establish a brewery and sell true German beer—but just within the valley, they thought. The partners bought a 10,000 square-foot fruit-packing house, invested in the finest equipment available, put the neighbourhood name together with that of a brewery that had operated in Vernon in the 1800s (the Vernon Spring Brewery), and Okanagan Spring Brewery was born.

There are three types of breweries. A ‘microbrewery’ produces less than 15,000 hectolitres per year (a hectolitre is 1000 litres). Okanagan Spring Brewery (OSB) is an example of a ‘regional brewery’. Then there are the mainstream, or commercial, breweries such as Labatt and Molson.

Almost all microbreweries and regional breweries are ‘craft’ breweries. Craft-brewed beer is made in accordance with the Bavarian Purity Law of 1516. This law, which is still followed by all German breweries and is the core of OSB’s operations, states that there can only be four natural ingredients in beer: hops, malted barley, yeast and purified water. (A non-craft brewery may add adjuncts or preservatives; things like rice, cornmeal, corn syrup and chemicals.)

OSB brings barley from the Canadian prairies and has it malted in the Okanagan. Hops are imported from Germany (the hop is a plant and there are two types: aromatic and bitter). The X Factor is the yeast, which is prepared to OSB’s secret recipe by an outside supplier. The already high-quality Okanagan water is purified, and that’s it.

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There are two processes which craft breweries do not use. In ‘high-gravity brewing’, water is added back to a sort of beer concentrate. It’s more efficient, and more profitable, but it makes beer taste diluted (as in American beer). The other process is pasteurization, which is when beer is heated or boiled to kill germs. Pasteurization extends shelf life, but it makes for common ‘Wonder Bread’ beer. In craft brewing, everything is ‘sterile-brewed’, so pasteurization isn’t necessary, although the shelf life of craft beer is reduced to about three months. After that, the beer is still drinkable, but may have the ‘skunky’ smell that German imports often acquire by the time they reach us.

It should be noted, however, that it is a misconception that a small brewery produces a higher-quality product. The opposite is true. A regional or mainstream brewery has employees devoted to quality control. And if a batch falls short of its standards, it’s thrown out. A microbrewery can’t afford to toss imperfect inventory.

While there are many beer brands, beer (‘baere’ is German for ‘barley’) is broken down into two categories: lager and ale. The beer-drinking population is split in half—half prefers lager, half ale. The English are the ale masters; Germans are best known for lager. So Buko and Jakob started with lager. On December 31, 1985, the first pint of Okanagan Spring Premium Lager was poured.

While Jakob and Stefan managed operations, Buko started traveling through the Okanagan Valley, selling draft beer to pubs and restaurants. Sales took off and, after a little lobbying, he was able to get the lager onto liquor store shelves. Then Expo ’86 came up and the BC government extended sales licenses to smaller provincial beverage manufacturers. Demand surged. Buko moved to Vancouver and started selling on the Lower Mainland and Vancouver Island. Today, Okanagan Spring Brewery is BC’s #1 craft brewery.

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“There are a couple of reasons why Buko did so well,” says Steve Pelkey, OSB’s Director of Marketing. “He promised, and delivered, consistently fantastic products, and he service customers better than the major breweries did. The key to this was having his own distribution network. The beer has always been brewed in the Okanagan, shipped to Vancouver and delivered to customers—all by OSB employees. That allows them to provide great service, including next-day delivery, rush delivery, Saturday delivery—OSB drivers even rotate kegs. Large breweries won’t do any of that.”

And how do you convince a publican to make room for your beer? “We sell premium beer,” continues Pelkey. “So licensees can charge more for it. Also, you say to the owner ‘You have all the mainstream brands. Why not give your patrons a chance to try something different?’”

Pelkey notes that, by the time Buko started selling his lager, astute pub owners already were already seeing the need for an alternative. “In the last 15 years, there has been a dramatic shift in consumer buying behaviour. As people get older, they drink less, but they drink better. Then there’s the fact that British Columbians—Vancouverites in particular, are the most knowledgeable, educated and discerning alcohol consumers in North America. The market was there. Look at Victoria—30% of beer sold there is craft beer.”

Once customers had tried OSB lager, they asked for porter. Stefan responded by creating Okanagan Spring Old English Porter, which quickly earned a loyal following. Also in response to demand, in 1988, Stefan created Extra Special Pale Ale. Now it’s winning gold medals at international beer competitions and is the most successful craft-brewed brand in BC.

Breweries are secretive—they don’t discuss sales or profits. We know that British Columbians buy 25 million cases of beer annually, and that that translates to $425 million. The government takes 60% of that in taxes. A 12-pack of an OSB product is $17.45. Pelkey estimates that the industry average profit on a 12-pack is $1.70. He will also say that, in 1986, OSB sold 3,700 hectolitres, or 20,000 cases. In 1990, it was 25,000 hectolitres and, in 1995, 75,000.

In its first years, Jakob and Buko put all OSB profits back into the company. In 1988, the brewery was revamped to increase production. A few sales people were hired. The brewery was expanded to 50,000 square feet. The focus remained on the three brands, while production increased and the company grew (it now has 150 employees, including a sales force of five retail reps and 11 licensee reps).

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The trade continued to ask for products. In 1995, to meet demand for an easy-to-drink dark ale, OSB released Cottage Nut Brown Ale. In 1997, in response to the success of the ‘honey’ category, which is lighter and more thirst-quenching, Honey Blonde Ale was launched. (There’s a direct correlation between colour, bitterness, weight and low sales, with lighter beers garnering higher sales.) In 1999, after market research showed that there was room for a different style of lager, there came Traditional Pilsner, modeled after the classic Czech Pilsen recipe. There has been just one failure—Autumn Red Ale.

Not surprisingly, after years of increased success, a suitor came calling in the form of Ontario’s Sleeman Brewing & Malting Company. Although you’ll find no mention of it on either company’s website, Sleeman now owns OSB. Buko has retired; Jakob’s two sons still work at the brewery. With that change came a marketing person—Pelkey was hired in 1997. The first thing he did was conduct an agency review and appoint Grey Advertising (Vancouver) as OSB’s Agency of Record. Ipsos-Reid handles market research; point-of-sale and packaging is managed by dossiercreative.

Last year, OSB’s packaging was up-graded, to the tune of $1.5 million, but it’s still notable for its conservative look. Just as the product names are plain and direct, there is a distinctly elegant tone to the packaging. You won’t find any zany graphics or wild colours—its labels are metallic, but that’s it for flash.

(OSB was, however, the first beverage company to use the stamped MettleTab. Now, when anyone opens an OSB can, they are reminded of the Bavarian Purity Law of 1516, and the purity of OSB beers.)

“Our customers are age 25-44,” explains Pelkey. “We’re not going after the teen crowd. So our branding is more refined and traditional.”

The same is true for all OSB point-of-sale materials, which is just as well, given Liquor Control Board restrictions. There are three sales channels for a BC brewery: trade (pubs, bars, restaurants), consumer-direct through LRS (Liquor Retailer Sales; the pub-attached cold beer and wine stores), and the LDB (the government’s Liquor Distribution Branch). A brewery cannot conduct any marketing programs in the LRS trade channel unless the programs have been approved in the LDB channel. At the moment, in-store draws, contests or promotions are verboten. Danglers and shelf-talkers have to fit within strict size restrictions, and the largest allowed size was just reduced to 18” x 24”. OSB reps conduct hundreds of trade promotions every year—mostly instant gratification things like getting to keep your mug. All other promotions have to be in-case.

With in-case promotions, you open your case of beer and find a card offering a chance to win ski passes, a fishing trip, golfing trip etc. OSB consumers are off-the-couch types, so promotions are related to outdoor activities. OSB works with Golf BC and its courses, with the Oak Bay Marine Group and its fishing resorts, and with ski resorts and tour groups. But LDB regulations make for amusing situations. A brewery isn’t allowed to connect any physical activity with beer consumption. So in a recent white-water rafting promotion, the brewery was allowed to show the river, but not a raft, or anyone in a raft.

There’s another wrinkle with the LDB that may surprise some. Since all LDB stores are government stores, you would think that, once an alcohol producer has a license to sell its products in BC, its products would automatically go onto liquor store shelves. ‘Not so. When a new product is launched, it has to be approved by the LDB’s Listing Policy Committee. After that, there’s still no guaranteed distribution. Every liquor store in the province has to be sold individually. OSB’s reps have to sell and service each government liquor store manager, just as if he were a hotelier or restaurateur. And there’s hot competition for that shelf and floor space.

Fortunately, there is ‘beer category management’, which is the same sort of process used by grocery retailers. Liquor stores put premium products in the best locations, mainstream products in the intermediate locations, value products at the back.

“It’s trading people up, which is a good thing for retailers,” says Pelkey. “Putting premium products at the front lets them make more money. Our products sell very well. You multiply the margin by the volume and you get a good profit. That’s what it’s all about, particularly for the cold beer and wine stores, which don’t have to stay with the stated price—they can charge whatever they want, as can the trade establishments.”

And what accounts for high-volume sales? A combination of reputation and marketing.

“Our strategy is always to stay with the core attributes of the brand,” continues Pelkey. “The purity, the quality, the freshness, the BC-ness. The secret is to know your consumer. It sounds simple, but if you offer your consumer a great quality product, communicate the quality and don’t disappoint, that consumer will keep coming back.”

Compared to other craft breweries, OSB conducts a lot of focus-group research. There’s an annual tracking study to gauge what’s going on in the beer industry and new advertising is tested. Pelkey says there’s a lot of emphasis on brand perception.

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“The market’s always changing; consumers’ tastes and perceptions are always changing. We also need bench-marks to see how we’re doing over the long term. And research indicates how tastes will change in the future.”

In BC, 65% of liquor purchases are in the beer category. Beer, wine and spirits, however, do not compete. “We all have share of mouth,” continues Pelkey. “In the premium category, consumers leave the store with a bottle of wine and a case of our beer. At home, they’ll have spirits, wine and beer. The only real competition is with the spirit-based coolers. We haven’t addressed that, as a company or as an industry—we stay focused on communicating our attributes and keeping consumers happy.”

Grey Advertising doesn’t have a huge annual budget to work with—about $700,000. But it has used that money effectively. Most of OSB’s advertising spend is in radio, with print ads running in the summer months (there was some outdoor last year). Although some specific ads are produced for OSB’s two biggest brands—pale ale and lager, the budget doesn’t allow for each beer to be advertised separately, so the focus is always on the core brand attributes.

“We never walk away from the core values of the brand,” says Grey Creative Director Jeff Lewis. “We keep the message consistent. Okanagan Spring Beer is from the Okanagan—a region known for its purity. It’s all-natural, premium beer. More than anything else, when it comes to branding beer, consistency is key. Plus, what we say is true. And that’s one of the big reasons why OSB is so solid. When a consumer pops open a bottle, the quality is there. There’s a lot of crappy beer on the market, but consumers now know that. They’re no longer impressed by image.

“The beer business is a tough business. ‘Very competitive. And you see a lot of breweries whose advertising is extrinsic, rather than intrinsic. Mainstream breweries promote their image outside the bottle. There’s not a lot of talk about the actual liquid—because it’s not that special. Other craft breweries focus on a goofy name, or the brewery’s size. But people want to hear about the liquid—about what they’re drinking. They want to know that it’s a quality product. Okanagan Spring always talks about what’s in the bottle.”

Lewis notes that the OSB strategy has lately become a little more fun. One recent ad (which received angry calls from ex-Torontonians) was ‘Still Not Available in Toronto’, which pointed out that Toronto enjoys black flies and one tower, while BC has towering mountains and bald eagles. Another ad noted that OSB beer is what Okanagan wine-makers drink after work. Lewis used the term for the Bavarian Purity Law—Reinheitsgebot, as an attention-getter in print ads. In radio ads, it is admitted that OSB does, in fact, use a preservative—the cap.

ok6“It is not easy to advertise beer,” continues Lewis. “You have to do work that cuts through all the other beer ads. For a brand with a more conservative stance, the ads with attitude accomplished that.

“One challenge we did have was that, as OSB became increasingly successful, people started to think that it had sold out—that the beer had somehow changed. So the marketing has always made it clear that OSB is the same company it always was. For ’98 and ’99, we used people from the brewery—truck drivers, people who work on the line, Stefan. We need to show that, even though it sells a lot more beer than it used to, Okanagan Spring Brewery is still the same group of people who are passionate about making premium beer. The Still Not Available in Toronto campaign was an interesting way of saying “We Are Not A Mega-Brewery.’

“That part of the strategy remains, along with the core values. It’s pure premium beer from a natural setting. Everything emanates from that. And when people walk into a liquor stores or see the taps at a bar, they see the different brands but they know that every beer is made to the same high standard. Okanagan Spring Brewery has a solid foundation and a very good name. That’s a great thing to work with.”

Blitz Magazine, January 2002

Mloda Polska, the Art of Young Poland

Blitz Magazine, September 2000

Poland!

The land of…uh…er…hmmm…. Borscht! Guys named Wojciech! An extraordinary facility for the use of consonants!

‘You think Canadians have an identity problem? We’ve got nothin’ on the Poles, whose national identity was almost obliterated through years and years of invasions and occupation by the Russians, Germans and Austrians. These forces all tried to erase Poland’s identity—by banning the Polish language from official use and suppressing the teaching of Polish history and literature. Rebellion was met with property seizures, mass expulsions and executions. And this was still the 19th century.

Of the occupying powers, Austria was the most lenient. Cracow was the main city in the Austrian section and became the magnet for artists and writers, bohemians and intellectuals, who met in the salons and cafes to discuss the latest political issues and trends in art practice.

Artists were also able to travel to Paris, where they participated in the salons and exhibitions highlighting new art movements. The resultant influx of artistic ideas from Western Europe, the emergence of the new pleasure-seeking bourgeoisie and the gradual development of organized political parties that contributed to the fight for independence transformed Cracow. By the early 20th century, it had become the hub of artistic development in Eastern Europe.

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In their studios, and at the Cracow School of Fine Arts, the artists of the day merged Impressionism, Art Nouveau and Symbolism to create their own movement called Mloda Polska or ‘Young Poland’. Its members broke with the staid traditions of the art academies to create sensual works that were regarded as exceptionally avant-garde. Perhaps most importantly, the movement became the expression of Poland’s national identity and provided much-needed inspiration to a broad public.

Self-portrait.

Self-portrait. (Photo credit: Wikipedia)

The efforts of the Mloda Polska artists stimulated an incredibly rich period of artistic production between 1890-1914. There was also a resurgence of interest in folk styles which proliferated in paintings, prints, textiles and furniture and which created a tangible link with the peasant class (which the Poles have always respected as the keepers of their identity).

The Mloda Polska works have remained favourites in Poland, matching the popularity of their counterparts in the West. Yet, as very little English literature exists on this subject and it was not until very recently that Western scholars began to study in Poland, viewing Polish art beyond its borders remains a rare opportunity.

Between Two Worlds: The Art of Poland 1890-1914 is a 112-masterwork collection from the National Museum in Cracow. It appears in Canada for the first time and is at the Vancouver Art Gallery to November 12th.