Let me share this fascinating business story I heard in Business School about Cowbell. I believe many entrepreneurs will learn a thing or two.
First of all, which milk do you think has more nutritional value
Both Peak Liquid Milk & Cowbell Milk have same nutritional value
(I still don’t believe it but)
Cowbell Milk wanted to break into a market dominated by WAMCO via a premium brand called Peak. Peak was perceived as high quality by consumers who has very limited spending power.
So SWOT for Peak Milk
1. Premium brand
2. Premium margin
4. Cannot be stored as no power to preserve liquids
5. Backed by cash rich company, extensive market coverage, available in all major supermarkets nationwide
How do you beat them?
SWOT for Cowbell
1. Percieved as cheap
2. percieved as poor quality
3. Evaporated Milk Powder, no need for power to store
4. No market presence
5. No established sales team
6. No logistics
How in hell can they unseat Peak Milk?
What did Cowbell do?
1. They conducted market research to find out why people drink milk.
What do you think was the number one reason for drinking milk in a tough recession like economy?
Well it turns out, Nigeria who were once “oil boom” rich were “sad” they could no longer afford to drink milk as it was too expensive.Cowbell gave the market a way to drink tea again to say “I at least can make my tea white with milk”.
Cowbell first foothold was emotional
There was a very funny true story to back this up.
Cowbell was selling fast in Kano to “Mai Shai”, “Peak Milk” went and told Mai Shai, that “Cowbell” was not nutritious.
Mai shai responded “even if it’s chicken milk, it’s better than no milk”
2. What else did Cowbell do? identified a key weakness in Peak Milk and exploited.
Peak Milk is liquid, once opened must be consumed or it does bad. In a nation with poor power supply this was a headache.
Cowbell introduced powdered milk. Can be opened and left without a fridge So Cowbell has arguably a better product and understood the psychology of the buyer. But that is not enough.
How do you distribute this new wonderful product?
You are a start up, no billions, no logistics, no brand name recognition
The solution was a masterpiece
3. Cowbell built an alternative marketing and distribution network.
• No sales in supermarket
• No credit sales
• No expensive radio and TV
• No company sales force
Kiosk to Kiosk sales bold aggressive marketing
Kiosk to Kiosk sales
At a point, Cowbell used members of a “religious organization” that visit homes to carry “cowbell banners and sell milk directly to small shops in area.
They were thus able to sell in cash, push inventory at a fraction of costs of competition
4. What else did Cowbell do?
Use Strategic pricing.
Cowbell was N5…period
Even if Peak could sell at below cost, they could not destroy their premium brand and sell it for N5.
At the small shops, you bought a sachet of milk only when you needed to.
All these moves are great but they would have been in vain if Peak Milk had responded.
WAMCO owners of Peak brand were aghast that consumers were even comparing then to a sachet brand.
They refused to consider Cowbell competition reasoning Cowbell was “D” brand.
Cowbell simply built up their brand recognition and extended the brand.
They slowly become acceptable to the middle class. They introduced coffee and to kill the Peak advantage of “quality” began to market Cowbell also has nutritional value.
They gained market share.
Eventually Cowbell became a recognized brand in Nigeria.
“blue chip” status.
This status helped their brand…
They had beaten Goliath…
WAMCO was forced to respond
They “sacheterized” Peak imitation they say is the best compliment.
In effect, they were now responding to Cowbell, not dictating the pace..
However a sachet Peak did not solve the Cowbell N5 problem i.e. Cowbell was affordable.
So in another nod to cowbell WAMCO introduced Three Crowns to compete price to price with Cowbell.
The damage had been done, Cowbell was in
There are so many lessons from this story.
We have seen how an upstart brand dethroned a premium brand.
A bigger question is why WAMCO failed to see the threat?
Arrogance? Hubris? Managerial RIP Van Winkle?
How did First Bank, a bank older than Nigeria allow “upstart” banks like Zenith and Access Bank get even close to them?
Why do companies believe the most of money, brand name and experience can protect them from a determined competitor?
So if you read this trend and your at the top….keep rising because the competition is rising
If your at the bottom, keep rising, the big boy could be asleep.