>Bionade Economics

>Bionade is the soft drink equivalent of the garage band made good.

Here’s the story.

The Peter Brewery in a 4000 soul town in Bavaria was on the verge of bankruptcy in the late 1980s.

The company’s Master Brewer and family friend, Dieter Leipold, reckoned that if he could make a soft drink that was fermented in exactly the same way that beer is brewed from natural ingredients, there might be a market for it.

Better than rolling over and playing dead, anyway.

So for 8 years, he experimented.

Using a bathtub.

He burned €1.5m of the owner’s money in the process, until he finally isolated a strain of bacteria capable of converting the sugar that normally becomes alcohol into non-alcoholic gluconic acid, which he used to ferment the new drink.

Came onto the market in 1995 in 4 flavours – elderberry, litchi, orange-ginger and herb – and found its niche in health resorts and fitness centres.

A very small niche.

But by 2002, it had got some traction with its healthy image and newly designed retro branding and sold 2 million bottles.

Last year?

250 million.

Imitation being the sincerest form of flattery, every bastard and his brother got on the bandwagon, some of them charging even more than the original.

So what’s the classical response if you want to protect or grow your market share?

Right. Cut your price and ramp up your production.

Wrong.

You increase your price from – get this – 59¢ to 89¢ per bottle.

By 30%.

Dieter Leipold reckons that he has the premium band in his market segment and that it’s currently undervalued.

I have absolutely no idea if this is going to work, but if it does, you’ll be able to read about it in the Harvard Business Review.

Meantime, I’m off to stock up – the price goes up in 2 weeks…..

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