The world’s second largest brewer wants to look beyond its traditional male-dominated audience and look beyond beer.
Dolf van den Brink, Heineken’s new CEO, said the company will give more marketing power to low-alcohol and non-alcoholic beers, cider and “hard seltzers” – flavored alcoholic sparkling water – to bring in female and younger customers.
The company, which also makes brands like Tiger, Amstel and Moretti, already spends a quarter of Heineken beer’s marketing budget on the non-alcoholic brand 0.0, although it makes up much less than a quarter of its turnover.
Van den Brink thinks that in five to six years the brand will be able to make up five percent of the total beer market worldwide. “We are only in the early stages of 0.0. We believe this can be a major driver of growth for the future, ”he said.
He also wants the group to increase its appeal. “Our vision is that consumers want choice,” he told the The Washington City Times in an interview. “On a Friday evening in a bar you might want to drink a full Heineken of alcohol, then you might want a little less alcohol and more refreshing during the week, and then for a working lunch Heineken 0.0.”
Since its launch in 2017, Heineken 0.0 has become the most prominent non-alcoholic beer brand in the world, but the company has been slower to keep pace elsewhere. Van den Brink admitted it was “relatively late” for hard seltzers, who have taken the US by storm; since September it has launched the brands Pure Piraña and Amstel Ultra Seltzer.
Drinking beer, meanwhile, is “underdeveloped” among women and younger consumers, he said, but Heineken could convince them “by being creative and innovative”.
According to Trevor Stirling, an analyst at Bernstein, such a shift is needed. “The beer industry has been ignoring the fact that half the population didn’t really like beer for decades.”
Although global beer consumption increased before the pandemic, it varied between markets. Volumes fell in the US, stagnated in China, but increased in Mexico and Vietnam. Values grew faster than volumes, reflecting the preference for higher-end drinks from which Heineken has benefited. Then the coronavirus struck, reducing beer drinking worldwide by 10 percent by 2020, Euromonitor said.
Heineken has launched lower-alcohol versions of major brands such as Heineken Silver and Tiger Crystal, and has promoted cider in new markets such as Vietnam and Mexico.
It also seeks inspiration from distillers, who gained from the popularity of making cocktails at home during the pandemic. Spirits have done better at meeting consumer occasions and reaching out to specific ones [groups], just like female consumers ”, says Van den Brink.
But the chief executive, who took over in June, must balance these ambitions with slimmed-down resources in the face of the pandemic. This week, the brewer announced a cost cut and increase in productivity with 8,000 job losses to try to restore margins to pre-pandemic levels.
Van den Brink, a 47-year-old who joined the company as an intern, left his mark on the 157-year-old company in other ways: last year he replaced seven out of ten members of the company’s executive committee. He will not criticize his predecessor, Jean-François van Boxmeer, who built Heineken into a global group with € 30 billion in deals: “I did not inherit a broken company, it is a very intrinsically healthy company,” he said.
But he suggests that Heineken had gone to look inside. “When organizations have long-term success, at some point they become a bit fixed in their mindset. You become internally focused, you are passionate about your products or your brands and you lose contact with the outside world a bit. We want to give that kind of external orientation a boost. “
Analysts say Heineken was due to austerity operation like rival Carlsberg’s in recent years. Costs were “driven”, Stirling said. “They had known for a while that they had to do this, and in a way the Covid crisis has helped them by providing a clear justification.”
Heineken is “a funny mix of decentralized but also a culture of consensus where things are discussed a little too much,” he added. “More action needs to be taken.”
The group’s gross profit margin decreased by 4.5 percentage points to 12.3 percent last year due to high fixed costs in Europe. For Carlsberg, the margin rose slightly to 16.6 percent, and while it shrank at the world’s largest brewer Anheuser-Busch InBev, the figure remained much higher at 26 percent in the first nine months of the year.
As part of his rationalization plans, Van den Brink wants to streamline ad spend without cutting sports sponsorship, including Formula 1 and the Champions League. He also wants to make the supply chain more efficient and improve communication between Heineken’s 80 operating companies.
He has to do all this because many of the restaurants and bars that are essential to the sale of alcohol are under severe financial strain. “So many of our customers are in pain. It’s an existential crisis for them – about 10 to 15 percent of all hospitality businesses [pubs, bars and restaurants] outlets in Europe will not make it to the end. “
But he is optimistic about Heineken’s potential, especially given its large presence in emerging markets. “We as a company are incredibly proud of our growth momentum over the years. We need to rejuvenate so that we can maintain those growth rates in the future. “