How Asia challenges beverage supply chains
If you aren’t familiar with Asia, the unique complexities it piles onto your beverage supply chain are hard to see. If you live here, you know that to understand diversity of Asia, one only needs to look at our cuisine. Thai food is not universal. It is very different in the south and the north of Thailand. Served elsewhere in the world, it acquires slight variations suiting the locals, not necessarily the Thai standard from which it originated. A larger country like India amplifies the concept of local taste, varying not only by south and north, but by sub segments in each of the 27 Indian states.
Preferences for different flavors of food translates into diversity of taste for beverages. This is one of the key reasons beverage manufacturers should not see Asia as a single market. Not if they want to successfully build market share for their products. In Asia, rules of the beverage supply chain have to be rewritten. To understand why, look no further than China and compare its beer market to another large country such as the US.
In the US, big beer companies produce just a couple of drinks for a huge number of people. Budweiser leverages uniformity of tastes and sells hundreds of millions of cases all over the country. Its identically tasting twin is brewed and shipped all over Canada. Chinese consumers behave differently. The mass produced beer still finds its buyers, but when it comes to tasting preferences for local brews, people in southern China will not drink beer from the north and people in the north won’t order beer from the south.
Asia is made up of very strong smaller regional markets. And by smaller I don’t mean less populated. As a beverage manufacturer considering growth, you can’t simply expect everyone to buy your single-formula product all over Asia. You may need a product for Northern China, its variant for Southern China, and another variant for Western China. Just think about it. Even though Chinese customers could buy Nestle Ready to Drink Tea all over the country, they expected the tea to be distinguishable by the flavor of the tea they grew up with, not a generic flavor. Vietnamese beer drinkers have a choice of Carlsberg, Heineken or Guinness, but they clearly have a taste for Saigon Beer brewed by Sabeco. Why? Because these beverages represent the flavors they have always known and liked. While a minority might choose non-local drinks as a status symbol, most aren’t going to experiment with strange new flavors.
Now you have the right drink. How do you get it where it has to go?
Reaching consumers in Asia is more complex than just producing a drink they like. You also have to get it to them. Not all beverages like to travel far. For those that don’t, logistics in Asia pose another problem.
Unlike Europe or North America, Asia has very little controlled temperature transport and storage capacity. Expensive to buy, build and maintain, the temperature-controlled distribution chain has to be used economically. Tropical zones expose products to heat, which can affect a drink’s nutritional value or alcohol level. A product travelling hundreds of kilometers across Vietnam or India in an unrefrigerated truck would result in high rates of spoilage. If your product is temperature sensitive, maybe you cannot overproduce to stock because your warehouse has limited capacity and beverage wastage is expensive. As a result, you have to run your operations not only to optimize for demand and production factors, but also for capacity.
To thrive where so many struggle or have failed, you need to know what to do about the challenges I mentioned. And that will be the topic of my next blog.
What are your thoughts on the challenges faced by beverage supply chains? Weigh in below or drop us a tweet @Quintiq.