FT Business School Case Study: Cains Beer
By Adam Jones

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Published: May 27 2008 17:13 | Last updated: May 27 2008 17:13

Sudarghara and Ajmail Dusanj are unlikely beer barons. When they bought Cains, a loss-making brewer Liverpudlian brewery, in 2002, the Kent-born brothers had no experience of making Britain’s favourite alcoholic drink. Their entrepreneurial background included fish and chip shops, property development and drinks distribution. Brewing itself was something entirely new.

Cains, on the other hand, had been making beer in Liverpool under one name or another since the age of Queen Victoria. But the industry had changed beyond recognition since the 1850s, when Robert Cain started brewing in the city. A wave of 20th century mergers and takeovers had created giant beer companies that needed fewer production sites. Its terracotta-clad brewery on Stanhope Street in the gritty Toxteth district of the city had already survived a temporary closure in the early 1990s.

The Dusanjs went about stabilising Cains’ finances. The business picked up more canning contracts from other brewers and supermarket chains. But shoring up the brewery is only a small part of the brothers’ ambition. Their aim is to create “Britain’s favourite beer company” by using the cash from the low-margin canning activities to expand the sales of its range of Cains-branded beer, which is more profitable.

In particular, the company wants to turn its flagship lager – Cains Finest - into a national brand. Finest, created in 2004, was something of a heretical move for a local brewer. Normally, a company like Cains would focus on traditional ales – a beer category that has declined markedly in popularity since the late 1960s because of British drinkers switching to lager.

Lagers drunk in Britain tend to be made at British brewing facilities and then sold under foreign names. The Dusanj brothers were betting that there would be demand for a lager that was both British-brewed and British-branded. They also felt that making Cains Finest a fuller-flavoured beer – it is matured longer, in the style of German and Czech lagers – would help it to find a niche.

Finally, by extending their ale-dominated family of beers to include lager, they hoped that they could emulate US craft-brewers such as Samuel Adams and Sierra Nevada, whose product ranges are less tied to tradition than those typically produced by British regional brewers.

The marketing strategy

“It is very much a chicken and egg situation,” says Ajmail Dusanj. He is referring to the fact that it is hard to justify spending large sums of money on marketing Cains Finest nationally before the product has achieved broad national distribution. Yet it could also be argued that that spending more on marketing would make it easier to pick up those vital contracts with UK-wide supermarket chains and pub groups.

Conventional advertising has so far been on a very small scale. “The only billboard is the one outside the brewery,” says Sudarghara, adding that they “could never compete” with the multinational brewers’ colossal advertising budgets.

The marketing strategy currently consists of promoting the beers within Cains’ pub estate (Cains in 2007 carried out a reverse takeover of Honeycombe Leisure, a struggling listed pub company, giving it ownership of 106 pubs, mainly in the north-west of England).

It also advertises in magazines aimed at people working in the beer and pub industries. Adverts in consumer-oriented lifestyle magazines such as GQ – which once declared Cains Finest to be the second-best thing in the world - are not yet a priority.

Sudarghara – who occupies the post of chief executive while his younger brother takes the role of chief operating officer - says that the gradual approach to marketing “is working but it is slow”.

The company’s profile got an unlooked-for boost in 2007 when Quentin Tarantino, the movie director, praised its beer at a press conference held in Liverpool. It turned out that Samuel L Jackson, the actor, had recommended it after sampling a pint or two when filming in the city. Mr Tarantino, who was promoting his film Death Proof, held a bottle aloft and pronounced it “awesome” – providing the sort of celebrity endorsement that could never have been bought by Cains.

The 2008 European Capital of Culture celebrations were an opportunity for Cains to boost its profile further. Liverpool beat several other UK cities to the prize of being named one of the two hosts of this annual festival. Through a sponsorship deal, Cains makes the official beer of the celebrations. Until 2012, it also has a sponsorship and distribution arrangement with the Tate museum network, which has an outpost in Liverpool.

The year-long Capital of Culture festival has been a time to reflect on what makes the city tick. Liverpool has a very strong identity. Its inhabitants are lauded for their creativity, sense of humour, solidarity and lack of pretension. But “Scousers” have also been caricatured as querulous and prone to whingeing and petty crime. Asked to define Liverpool’s defining characteristic, Sudarghara singles out its tendency to “march to a different beat” to the rest of the country, a trait he believes is shared by Cains.

The company has not as yet used much Liverpudlian imagery in its marketing, although its packaging does evoke the city’s Victorian heyday. All of its bottles, cans and beer mats were redesigned by Jones Knowles Ritchie, a packaging design agency.

Cains initially argued that it could not afford a full rebranding. But JKR was persistent, offering to redesign one bottle as an experiment. The Dusanj brothers gave the agency its raisin beer as a trial. They liked the result so much that they were persuaded to go for the full redesign.

As a consequence, there is a common “umbrella” look to Cains’ products – dominated by a swirling, leafy pattern. This look is now being extended to pubs bought in the Honeycombe Leisure deal.

The chicken-and-egg marketing dilemma cited by Ajmail Dusanj may be easing a little. Cains Finest recently picked up a nationwide distribution deal with Morrisons, the UK supermarket chain. The Honeycombe Leisure deal also means that Cains has a much stronger route to market locally. But turning around the newly-acquired pub business is also a major operational task. Including Honeycombe, Cains made a ₤2.8m pre-tax loss in its last financial year.

The bid to make Cains Finest into a national brand must also take place against the backdrop of a weakening British economy, while the recent smoking ban has also had an effect on pub trade.

Some questions to consider

Should Cains be advertising its flagship lager more aggressively as a way to win new distribution contracts? Or is it folly to spend on national marketing when distribution is still primarily local and customers can’t always find the product? How could this chicken-and-egg situation be resolved?

When it reaches a position where it feels it can justify spending more on marketing Cains Finest nationally, how should it go about raising awareness of the brand? What forms of marketing should it focus on? What slogans might it use?

How should the company be using the internet as part of its marketing strategy? Bearing in mind that under-18s are not allowed to drink in the UK, how could it use social networking sites to build word of mouth?

What lessons can be learned from the US craft brewers that are so admired by the Dusanj brothers?

When the European Capital of Culture celebrations draw to a close, what sort of events should Cains sponsor?

Should Cains attempt to undermine the appeal of major lager brands by claiming that they are bland? Should it suggest that lagers brewed in the UK under licence to a foreign brand are phoney ? Or does that kind of negative marketing backfire on the entire category?

Is there a way of making Liverpool more central to Cains’ marketing strategy – or does the city’s mixed reputation make it as much of a hindrance as it is a help?

Copyright The Financial Times Limited 2008