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Bionade´s Internationalization Process Challenges

Internationalization of one entrepreneurial venture from a small-town level could be daunting and quite far-fetched when one family only aimed at maintaining a business that will sustain income generation. But this became a reality for one family-run enterprise after making a hit with the local market at a national level.

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Bionade is a refreshing drink that adopted organic process of fermentation in fruity flavours using the purity process of beer. Bionade Corporation based in Ostheim Germany is a sister company of Rhoener Bier. It was established in 1995 when it launched the first non-alcoholic and organically produced refreshment drink. According to the Company, it borrowed age-old brewing techniques and fully organic fermentation process of beer. Brewer Dieter Leipold invented the product with his biotechnical knowledge. Bionade is currently in German market and distributed in wholesale and retail supermarkets, restaurants and hotels. Its product portfolio is Bionade Elderberry, Lychee, Herbs, Ginger-Orange, and Bionade Aktiv which is a mineral drink. Today, Bionade is distributed in South Europe, West Europe, North Europe, USA and Japan. It produced 200 million bottles in 2007.

Current Marketing

Bionade is acknowledged to have taken Germany by storm as its annual production rose to 300% since 2003. It went unnoticed in shelves circa 1995. Its marketing expert Wolfgang Blum started its packaging makeover in 2000 “transforming the drink into a must-have with its retro enviro-friendly appeal. The flavours […] likewise have a cool, “you’re drinking what?” sensibility. And the broadly-striped label, bulls-eye cap and 1920s-style font exude sophistication,” (Smith, 2007 – web). In its re-launch, the drink instantly appealed to health-conscious consumers who started to appreciate the merits of organic foods and drinks as Bionade become a regular fixture in bars and trendy spots targeting a certain lifestyle. Without budget for television or print advertising, Blum relied on media and everybody else to spread the word. Bionade started sponsoring sporting, cultural, and children’s events so that through word of mouth and German news reports, sales started soaring. Currently, main target markets are Japan and the USA.

According to Gary Hemphill, managing director of Beverage Marketing Corp. in New York City, “The odds are stacked against any new product. If it is something that is foreign to people, then the company has to be able to communicate what the benefits are,” (quoted by Treumann Ostheim, 2007 – web). Already, it was reported that Bionade will introduce new flavours such as cranberry, with the bigger challenge to tie up with major distributors such as Anheuser-Busch, multinationals that earlier threatened the family business. Treumann Ostheim (2007 – web) further noted Kellogg School of Management’s Timothy Calkins that the main challenge for Bionade will be to maintain its brand image, to which Kowalsky replied, “The most important thing, I think, is that we know where we came from and where we’re going. This we can’t forget,” (quoted by Treumann Ostheim, 2007 – web).

Potential Challenges and Opportunities

It is important to point out the potential challenges and opportunities to Bionade’s internationalization in order for the company to understand and prepare in dealing to the organisational processes. The main three of these include adoption of global distribution system, marketing strategies that fit its overseas markets, and establishing a global branding.

In addressing these challenges, Bionade will seek and turn these into opportunities that will help the company in establishing operational procedures, distribution system, marketing, and eventual continued growth.

Distribution

Bionade GmbH has expressed to distribute and promote in the United States using the same strategy as the one Bionade GmbH employed in Germany (GlobalMalt, 2007 – web) and are already linked with various players in the US market (Young Germany, 2007). No formal agreement yet has been signed between Bionade GmbH and other companies (Rath, 2008 – interview). Bionade GmbH expressed to cooperate with a noodle company from the Western part of South Germany, called Alb-Gold Teigwaren GmbH (Focus, 2008 – web). Both Kowalsky and Freidler agreed to work with an old German Pietistic community in the United States — the Amana colonies in East-Central Iowa — to ensure authentic production. Geographic element also influenced the decision that due to the central location, they could reach one third of the United States within 24 hours. A financial assistance package for the project from the State of Iowa, Iowa Country and the Amana Society (Priorities, 2007; Woltersdorf, 2008 – web) has also been proposed.

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The Bionade GmbH, Alb-Gold Teigwaren and the Amana colonies agreed on building 121,500 square-foot modern production facilities with an ecological restaurant and a visitor centre for US$ 50 million that would aid not only in promoting but also attracting distribution partners for the drinks.

Brand Positioning

In brand positioning, positive brand attitudes add value to consumer perception in the marketplace. Brand attributes are performance-related (product) and values related (non-product). Non-product or values related brand attitude involves social or ethical issues (Dawar and Pillutla, 2000, p 218) such as ecological production process. This is employed by Bionade with its partner. Peter Kowalsky and Klaus Freidler (CEO of Alb-Gold) share the philosophy in producing with ecological concerns about their product ingredients and securing thorough quality checks (Woltersdorf, 2008 – web). By going beyond the production process in ensuring that what is being used as raw materials conform to organic standards that are now sought by consumers who are already exposed to the positive effect of organic farming and organic food production, Bionade establishes an identity beyond the drinks’ function to refresh. Additional positioning strategy is use of a seemingly stagnant community through provision of meaningful jobs. It has been suggested that positioning a brand on aspects of corporate community involvement and concern on the environment positively affect perceived quality (Keller, 1993, pp 10) adding to the values-based positioning in brand evaluations.

Marketing Strategy

As mentioned earlier, Bionade GmbH will adopt its viral marketing system that will let people “discover” its potential as a refreshing, ecological or organic drink that sits well with “green marketing”. Green marketing has been observed as an effect of the growing environmental concerns with problems about acid rain, green house effect, land degradation, ozone layer depletion as well as the growing health problems that besought humans due to the use and consumption of man-made or synthetic foods and products. In fact consumers have started demanding not only eco-friendly products but shown an increase in consumption and demand for green products resulting to many firm adopting green marketing strategies (Doyle, 1992, p 85). Polonsky (1994) defined green marketing, environmental marketing, or sustainable marketing as the effort of firms to design, promote, price and distribute products that are safe and beneficial to the environment and its peoples. Technically, Polonsky (1994 – web) offered green marketing as, “all activities designed to generate and facilitate any exchanges intended to satisfy human needs or wants, such that satisfaction of these needs and wants occurs, with minimal detrimental impact on the natural environment.” Bionade has established itself as a “green” company by employing organic farming and food production that endeared it to the consumers of Germany and the European Community, aside from the hip drink good for the health of those who are trying to reduce sugar intake.

Through viral marketing, Bionade targets tie-up with schools, events that support green or environment issues and use of multi-media to spread the word about the health drink. Through market demand, entry will follow as interest of consumers increase. Mainly, Kowalsky said that Bionade is concentrated and already available at major cities Los Angeles, and San Francisco. It will try to target established markets of Coca Cola and Pepsi. Viral marketing is especially useful for organisations like Bionade which have small budget for advertising and promotions. In an age where internet reaches the most remote of consumers, strategic placement of information though high-traffic news sites as well as sponsorship of school events with captured audience bring Bionade drinks closer to the consumers, from Germany, the US and even beyond.

Relevance of the Issues

It is very important that Bionade GmbH consider Distribution, Brand Positioning, and Marketing Strategy as the three challenges or opportunities for its global expansion in order to succeed in its current plan to at least produce 20-30% for the US market and other markets outside Germany and the EU.

US is deemed one of the biggest consumer markets today but there are adoptive measures that Bionade GmbH need to consider. New product screening, certification and registration are at hand. Aside from legal processes, the logistics of construction of facilities, as well as the subsequent distribution are big considerations for Bionade. It was suggested that one of the most difficult portion of international business negotiation is the actual meeting with people who are involved in all the business process (Graham and Requejo, 2009, p 2). Bionade GmbH however, has carefully addressed this problem through partnership with Alb-Gold and the Amana colonies in Iowa. As noted, trust and connections make a big difference but not so much in the United States. However, use of intermediaries is also practical. The intermediary in this instance may be Iowa State and the Amana colonies.

Aside from the US serving as a potential biggest market, the US operations of Bionade GmbH will also serve as a gateway to other markets beyond the western sphere. The US influence on consumption has been unquestionable due to its media and hype clout through use of multimedia, information and communication technologies.

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Brand positioning is another challenge or opportunity for Bionade to carefully study. The US or the global market is considered risky as there are always challenges for tight competition. Already, home imitations Bionaris, Oekonade and Maltonade were identified (Tischner, 2007, p 160). Possible and prospective Bionade consumers will not be exposed to high-profile advertising and marketing strategies that require big amounts to launch. Bionade will rely on its integrity as an “eco-drink” or “organic drink” which is slowly creeping to the consciousness of many consumers.

Brand -positioning according to Daye and VanAuken (2009 – web), happens in the mind of the target market that is the perception of the market about a particular product with certain comparison of competitors with the same category. Bionade can positively influence its prospective consumers by creating, or in this instance maintaining and promoting the image or identity in the minds of their target market. Branding encompasses the company or organization image, the product and all processes and activities involved (Daye and VanAuken, 2009 – web) about Bionade. This includes the slick retro blue, white and red logo as a hip lifestyle drink. In the process of brand positioning, Bionade will need to:

  • Define the market it will compete against by knowing who its prospective consumers are
  • Identify attributes or dimensions about the product space,
  • Collect information from several consumers about their perception of the product or its important attributes
  • Determine Bionade’s current location in the product space
  • Determine the current market’s preferred attributes for the ideal organic refreshing drink
  • Evaluate the position of Bionade against the ideal product; and lastly,
  • Position (Daye and VanAuken, 2009 – web).

The use of the word “organic” is also another challenge for Bionade drinks. The US as much as the EU require specific processes and certifications prior to using labels such as “certified” or “organic” which pass through accredited agencies or bodies. All these are considerations for a smoother operation of Bionade GmbH in the US.

Marketing strategy for Bionade has been in place. European Union regulations promoting organic farming influenced the European acceptance of the drink. Tranter et al (2009, p 1) observed that UK, Portugal, Denmark, Ireland and Italy are willing to pay premium for conversion-grade food produce of around half the premium for organic foods such as vegetables. The study, however, noted that there are barriers to marketing organic products at retailers’ end. Lynch (2006, p 605) also found from 1985 to 2001, global food and drinks firms grew through organic international growth focused on product portfolio of the company. There is a broad company purpose of delivering successful organic growth.

Sustainable marketing is further defined as meeting the needs of a present generation without sacrificing the ability of the future generations to meet theirs (WCED, 1987, 16). Sustainability and green marketing’s implications are found in their modifications and contradictions that become obvious after considering the consequences of producing, marketing and consuming a product. This means that sustainability will be seen in an elaborated framework of marketing theory. Ecological marketing and green marketing necessitates combination of profit-making for companies with sustainable environmental quality for society. It further evolved to require producers, marketers, and consumers to understand ecological crisis and a willingness, or even commitment to assume responsibility about the matter.

Detailed Action Plan

Bionade GmbH is recommended to the take the following action plan in order to ascertain its US and global expansion programme, distribution, and marketing:

  • Secure its negotiation with the Iowa State and Amana colonies,
  • Form its core production, management, distribution and marketing teams through careful screening and employing of local management and staff
  • Develop branding with schools, bar owners, and adjust packaging if necessary
  • Maximise “green” image of Bionade through viral and green marketing approach that already worked in Germany
  • Identify the target consumers and determine whether green marketing will fit
  • Establish a solid stance on “green”, “eco” and “organic” image I order to sustain and strengthen brand image
  • Establish ties with organisations and groups that are in line with the organic and green campaigns in a national level in order to minimise promotional and marketing costs.

Conclusion

Bionade, considering its advantages as a health drink with low calories, is a timely alternative to soft drinks or soda like the established Pepsi and Coca Cola. As it targets the same market, it is already well-placed on its aim to enter US market. While viral marketing worked with the German and EU consumers, it may not necessarily so with the US as the US market is more aggressive and more competitive.

Green marketing may not be as effective in the US as it is with the European market but the consciousness of consumers on their diet as well as health can lead them to alternative and easily accessible drink like Bionade. The problem with Bionade will most probably be being at the shelves when consumers are thirsty and come looking. While it needs to concentrate on a systematic mass distribution, it must also double its effort in informing and convincing the young US market.

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Another advantage of Bionade GmbH already at hand in their expansion and marketing strategy is their careful community consideration. Corporate social responsibility is becoming a major strategy amongst many organisations so that their inclusion of a secluded community like Amana and incorporating organic farming and food production are sensitive issues that informed consumers value in their purchase decisions. The threats to health, environment and communities are strong factors that will help drive Bionade BmbH campaign to penetrate the US market and beyond as consumers will be the one to seek for the ideal drink, for the good of all.

Reference

Dawar, Niraj and Madan M. Pillutla (2000). “Impact of Product-Harm Crises on Brand Equity: The Moderating Role of Consumer Expectations.” Journal of Marketing Research 38 (may), pp 215-226.

Daye, Derrick and Brad VanAuken (2009). “Brand Positioning.” Branding Strategy Insider, Web.

Doyle, J. (1992). “Hold the Applause: A Case Study of Corporate Environmentalism.” The Ecologist, 22 (3): 84-90.

Focus (2008). “Bionade: Produktion auch in den USA”, Focus Money – Finanzen, Web.

GlobalMalt (2007) “BIONADE: Riding the Wave of Success”, Web.

Graham, John and William Hernandez Requejo (2009).Managing Face-to-Face International Negotiations.” Organizational Dynamics 30, pp 1-11

Iowa Industry Review (2007). “TPI Composites to Locate in Newton”, Iowa Workforce Development, Quarterly Industry Review, 4th Quarter 2007, page 4, Web.

Keller, Kevin Lane (1993). “Conceptualizing, measuring, and Managing Customer-Based Brand Equity.” Journal of Marketing 57, January, 1-22.

Lynch, Richard (2006). “International Acquisition and Other Growth Strategies: Some Lessons from the Food and Drink Industry.” Thunderbird International Business Review 48 (5) 605-622.

Polonsky, Michael Jay. (1994). ‘An Introduction to Green Marketing,” Electronic Green Journal, 1(2), Web.

Priorities (2007). “ALB-GOLD and BIONADE announce joint project in Amanas”, Cedar Rapids Area Chamber of Commerce, Web.

Rath, Christian (2008). Bionade GmbH, Germany, product manager.

Smith, David Gordon (2007). “Organic Soda ‘Made in Germany’ Takes on the World.” Spiegel, Web.

Tischner U. 2007, “An innovative healthy lemonade without chemicals and Germany’s fastest growing bio-product”, Sustainable Consumption Research Exchange, page 155 – 166, Web.

Tranter, R.B., R.M. Bennett, L. Costa C. Cowan, G.C. Holt, P.J. Jones, M. Miele, M. Sottomayor, J. Vestergaard (2009). “Consumers’ willingness-to-pay for organic conversion-grade food: Evidence from five EU countries.” Food Policy, Accepted 3 March 2009, Elsevier. Pp 1-8.

Treumann Ostheim, Julie (2007). “A Brand-New Brew.” Time World, Web.

WCED (1987). Our Common Future. Oxford University Press.

Woltersdorf, A. (2008). “Angriff der Öko-Brause”, TAZ, Web.

Young Germany (2007). “Bionade refreshment drink bound for the US market”, Web.

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