There is a paradox that exists in the coffee industry, that leading global brands typically don’t come from countries where coffee is grown. These ‘Goliath’ brands and products are so powerful, they even dominate markets in origin counties. Coffee is grown and sold cheaply, shipped overseas where it undergoes its most value-added process in roasting, and then sold back to the poor countries that grew them. One could make the old joke: it’s a bit like selling ice to Eskimos.
How to overcome this paradox? These brands are so powerful, how can local entrepreneurs thrive? How can these ‘Davids’ – small, but strong and smart – match up to their giant competitors?
This was the situation we faced nine years ago when we introduced a domestic instant coffee brand in Vietnam: G7. With instant coffee around the world largely supplied by a single European-based brand, we could only compare ourselves to David, up against this powerful Goliath. Almost a decade later, we are now the leading instant coffee brand in a country of 87 million people, with Neilson data confirming our 38 per cent market share of the Vietnamese market.
It feels like a miracle, but it was actually a lot of strategic work that led us to this point. I’d like to highlight the four main factors I attribute to our success.
The first important factor is the entrepreneurial spirit. Domestic businesses need to develop a strong ‘winning’ culture. They should choose to challenge the status quo by confronting and setting out smaller objectives that will help them defeat the Goliath. The success of domestic business can’t just be about personal profit, but should be considered a matter of national pride. Strong domestic businesses help grow economies in producing nations, which are inevitably poorer compared to their consuming nation counterparts. This winning spirit needs to be widely communicated throughout the whole organisation, to drive the work and become a source of inspiration.
The second important factor is to differentiate your product compared to overseas competitors. It is impossible to compete – let alone win – in a market with a bad product. A good product should start with quality raw materials and utilise advanced production technology, quality control, and hygienic principles.
In addition to quality, to truly set the product apart it must be unique and advanced compared to the competition, with at least one or two defining characteristics. It must be truly remarkable.
Typically, Goliath start off with a singular formula for success, and apply it across all their markets. ‘Localising’ their product can often come in the form of lowering quality to maximise profits. It’s this exact strategy that Davids can exploit. Domestic companies are best placed to understand their local culture and palates. They can be confident that no multi-national will ever be able to develop that level of understanding. This local knowledge can be used to create a truly extra-ordinary strategy, to develop a product that will be embraced.
In Vietnam, instant coffee was previously dominated with the same product that was sold around the world. In launching G7, we developed our own recipe that catered to Vietnamese tastes. With the global brand a bit sour, our recipe was more bitter, something palatable to the Vietnamese people. We also developed a more appealing aroma, the key to which is our own little secret. When we launched the product in November 2003, we offered a blind taste test to 11,000 people. A full 89 per cent of them chose our product over the 100-year-old global brand. These points of differentiation helped us expand our consumer base to markets with similar palates, including Korea and China.
The third vital factor to success is to trust your gut feeling in marketing efforts. It’s important to have a good connection between the David brand and the consumer. Domestic brands should be cared, loved, supported and protected by consumers. The key here is all about marketing and branding. Sharing a winning product and a winning spirit with customers can bring the public on your side in the market battle. It’s good to communicate that domestic brands contribute to the national spirit and sovereignty of the economy. This should be communicated with consumers and stakeholders, and especially influential people who will choose, protect and support your products, almost as if it were a family member. This is a great advantage of offering a domestic brand. Loyalty can be more genuine and sustainable compared with the manufactured loyalty of multinationals.
The final key to success is wisdom and consistency in execution. Consistency is achieved when every level of an enterprise commits to the competing spirit, product quality, and branding strategy. Wisdom is about applying innovation and creativity in every critical point of the value chain, from raw material input to production, logistics, distribution, trading, marketing and branding.
Marketing needs to be smarter, more unique and efficient than global competitors. Experience has shown that these Goliaths are successful for a reason. They will not stand by idly and watch market share trickle away, but will adopt their strategy as required. After our first successful blind test of G7 instant coffee, the other global brand moved quickly to localise their strategy. They mobilised a team of researchers from their headquarters to research the palates of Vietnamese people. They used these findings to launch a new product line specifically for the Vietnamese market, in both the product formula and marketing tactics.
Davids should be warned to be consistent and smart in their strategy, to maintain their points of differentiation to the public.
Goliaths will undoubtedly continue to dominate the global market, they provide ample employment around the world, and the goal is not to clear them out completely. The point here is that diversity is key to a sustainable industry, and the small victories of Davids like us are important in maintaining that diversity. To have a single brand dominate the market isn’t good for any industry. This is a point I made in the seven initiatives for the global coffee industry that I shared with you in the last edition.
In encourage local brands, we can add more value to coffee products in producing countries, leading to the sustainable development of the international market. A robust industry will benefit everyone, even the Goliaths. Let’s work together to create more favourable conditions for these Davids. Let’s give them more opportunities to emerge and thrive. Diversity is good not only for the 2.5 billion coffee drinkers in the world, but for the millions of coffee farmers and our industry as a whole.
