Success in business almost always depends upon fulfilling your current and future customers’ demands and desires. But as America’s biggest brewer, Anheuser-Busch, discovered, that’s more easily said than done.
Anheuser-Busch had historically built its business via the introduction of valuable and innovative new products. However, as Anheuser-Busch discovered several years ago, while the company’s existing lines had prospered, it had been a long time since Anheuser-Busch had enjoyed a new blockbuster product.
To address this, they first set to develop an understanding of the demand for beer in America. Specifically, they worked to understand the key drivers shaping demand in its three forms: current, latent and emerging demand.
Anheuser-Busch identified what turned out to be several critical new Forces and Factors driving demand. The most important was that by looking at the adjacent alcohol beverage category, they found that the majority of growth was being driven by sweeter products, including flavored vodkas. This went against the industry’s long-term view that beer had to be pleasantly bitter. However, the success of these sweeter vodkas, plus Anheuser-Busch’s own success with some slightly sweeter beers, led to the hypothesis that there might now be a much larger unsatisfied demand for beer with a sweeter taste than had been previously imagined. If this proved to be true, Anheuser-Busch could preemptively make a major new product introduction which would have important strategic implications.
- They had the potential for increasing consumption amongst light beer drinkers who were consuming sweeter flavored vodkas;
- They could attract new users to the beer category with a new palate which would align with their unsatisfied demand
- If the opportunity was as large as some within Anheuser-Busch thought it to be, there was the possibility that Pricing Power could be achieved.
The team conducted a rigorous piece of research in order to validate the specific consumers who seemed to have an unsatisfied demand for sweeter beer. This was the work that would confirm or deny the critical strategic objectives … would the new product increase beer consumption amongst light users, would the new product attract new users to the beer category, and could Pricing Power be established?
Within a few short weeks the answers came back and they were everything Anheuser-Busch had hoped for, and more. The team now had a quantitative and economic fact base that showed there were, indeed, high levels of unsatisfied demand for exactly the product the Anheuser-Busch Innovation team and the brew masters had in mind.
A multi-phased effort began to unfold. The brew masters created 26 different product samples. While many of the products passed every taste hurdle, one emerged as virtually the perfect new tasting beer that Anheuser-Busch had been searching for.
A separate team designed a new package that turned out to fully capture both the new beer palate as well as its intended outdoor usage occasion.
Still another team worked with internal leaders as well as with a large group of beer wholesalers in order to talk about the new concept but also to conduct taste tests with a large group of beer wholesalers.
Everything came together. The enthusiasm was growing for a new and potentially very important market innovation.
As Dave Peacock, currently the CEO of Anheuser-Busch explains, “As a company, we experienced what it’s like to find unsatisfied demand and fulfill it in more ways than one. Not only did Bud Light Lime create a unique product for a new pool of demand–as well as broaden the perception of the brand–it also proved to be a bigger financial success than we ever imagined. The power of finding unsatisfied demand and fulfilling it also showed us that if a level of demand is high enough, you can also gain pricing power at the same time.”
Bud Light Lime proved to be the hottest new consumer good launch in 2008, and recently Anheuser-Busch announced they have gained $250 million in margin since the introduction of Bud Light Lime.
And it was all just a matter of taste.
Rick Kash is the Founder and CEO of The Cambridge Group and co-author of How Companies Win: Profiting from Demand-Driven Business Models No Matter What Business You’re In (HarperBusiness).