Little white rabbits – the logic of multiple brands

Western Australian craft/micro brewer Little World Beverages (LWB) has announced that its adding another line of beers to its stable. The listed firm, which currently brews several beers under the Little Creatures label, is opening a new brewery just outside Melbourne, and the beers out of this new location will be called White Rabbit. This raises a few strategic management questions:

white-rabbit-beer1Scale: Is there a maximum efficient scale for microbrew brands? To clarify, Little Creatures is a very successful boutique beer, priced above the mainstream Aussie faves and around the same as imports. It gets reasonable shelf (or tap) space in most decent pubs and bottle shops. There are currently a few different variations in the Little Creatures range (Pale Ale, Pilsner, Bright Ale and lower alcohol Rogers), all of which maintain consistent branding, with the usual shifts in label colours.

It appears White Rabbit will be run as a distinct brand (hopefully looking much niftier than my effort to the left). Presumably this an attempt by LWB to achieve more shelf (or tap) space, i.e. they can have two pale ales on the shelf (for example), thus doubling their chance of grabbing consumer attention. Had the firm hit diminishing returns from the Little Creatures marque?

Segments: Traditionally craft or micro-brewing has been seen as a bit of an “us against them” situation. The bad guys were the big brewers (i.e. Fosters and Lion Nathan), and beer aficionados have often bemoaned the instrusions into the craft segment by pseudo-brands such as James Squire (a Lion Nathan effort), Matilda Bay and Redback (both from Fosters’).

The legitimacy of such brands is questioned, in particular if they are seen as simply copy-cat or as shutting out more honourable or real microbrewers. The strategic question is has this segment matured (or segmented further) such that this effort by Little Creatures is not seen as selling out? Or alternatively, is the choice to run multiple brands a deliberate attempt to dodge such a bullet (i.e. stay legitimate in this fussy segment)?

avlxyz

Photo by: avlxyz

The Value Chain: This aspect is a bit more complex. LWB has traditionally shipped beer in bottles and kegs over 3000 kilometres from Perth to Melbourne (and beyond). It appears they are going to continue to do so, while scaling up the White Rabbit operations over time.

It is unclear how any economies of scope advantage can be developed here, as the firm presumably will need to bottle, label, package etc on site in Victoria (i.e. away from the Perth operations). Any gains in terms of delivery costs would seem pretty marginal as it may necessitate more movement to end up with centralised warehousing… but then the current delivery truck (see photo above) doesn’t seem overly cutting edge either 🙂

All in all, it is a very interesting move. Taking my strategic management hat off, I am, of course, excited by some more beer choices and wish White Rabbit many happy years to come…

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2 Responses to “Little white rabbits – the logic of multiple brands”

  1. Steve Sammartino Says:

    Can;t help but think they are getting ahead of themselves. It seems almost inevitable behaviour by an upstart for the temptation of line extensions and flanking brands to overtake strategic reality. This is not a new phenomenon and Reis and Trout wrote about it some 30 years ago in the ’22 laws of marketing’ which states that ‘line extensions’ ultimately lead to division of effort, over extension of internal & marketing resources and in the long run. Which in turn results in similar or lower total revenue across multiple brands. Also the ability to generate extra retail exposure on taps or shelf will be much harder.

    I’d be surprised if this brand extension isn’t the start of the rot setting in.

  2. John Diver Says:

    It always surprises me that more people don’t know that LWB is 40% (+) owned by the “bad guys” – in this case, Lion Nathan.

    And that figure will only rise….

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