Heineken aims for a less beery, blokey look

The world’s second largest brewer wants to look beyond its traditional male-dominated audience, and beyond beer.

Dolf van den Brink, the new chief executive of Heineken, said the company will throw more marketing muscle behind low and no-alcohol beers, cider and “hard seltzers” — flavoured alcoholic sparkling water — to bring in female and younger customers.

The company, which also makes brands such as Tiger, Amstel and Moretti, already devotes a quarter of its Heineken beer marketing budget to the 0.0 alcohol-free brand, although it makes up much less than a quarter of sales.

Van den Brink believes the brand could make up five per cent of the entire global beer market in five to six years’ time. “We are only in the very early stages of 0.0. We believe that can be a major driver of growth for the future,” he said.

He also wants the group to broaden its appeal. “Our vision is that consumers want choice,” he told the FT in an interview. “On Friday nights in a bar you might like to have a full alcohol Heineken, then in the week you might want something slightly lower alcohol and more refreshing, and then for a work lunch, Heineken 0.0.”

Since its launch in 2017, Heineken 0.0 has become the most prominent global alcohol-free beer brand, but the company has been slower to keep pace elsewhere. Van den Brink admitted it was “relatively late” to hard seltzers, which have taken the US by storm; since September it has launched the Pure Piraña and Amstel Ultra Seltzer brands.

Dolf Van den Brink, a 47-year-old who joined as a trainee, has replaced seven out of 10 of the company’s executive committee © Handout

Beer drinking, meanwhile, is “under-developed” among female and younger consumers, he said, but Heineken could win them over “by being creative and innovative”.

Such a shift is needed, according to Trevor Stirling, analyst at Bernstein. “The beer industry has for decades ignored the fact that half the population didn’t really like drinking beer.”

While global beer consumption was rising before the pandemic, it varied between markets. Volumes were falling in the US, stagnant in China but rising in Mexico and Vietnam. Values rose faster than volumes, reflecting a taste for more expensive drinks that has benefited Heineken. Then coronavirus hit, reducing global beer drinking by 10 per cent in 2020, according to Euromonitor.

Heineken has launched lower-alcohol versions of major brands, such as Heineken Silver and Tiger Crystal, and promoted cider in new markets like Vietnam and Mexico.

It is also seeking inspiration from distillers, which have gained from the popularity of home cocktail-making during the pandemic. “Spirits . . . have done a better job at meeting consumer occasions and reaching out to specific [groups], like female consumers,” van den Brink said.

Bar chart of By country (bn litres) showing The pandemic reduced global beer consumption by a tenth

But the chief executive, who took over in June, must balance these aspirations with slimmed-down resources in the face of the pandemic. This week, the brewer announced a cost-cutting and productivity drive that will involve 8,000 job losses, to try to restore margins to pre-pandemic levels.

Van den Brink, a 47-year-old who joined as a trainee, has been placing his stamp on the 157-year-old company in other ways: last year he replaced seven out of 10 of the company’s executive committee. He will not criticise his predecessor, Jean-François van Boxmeer, who built Heineken into a global group with €30bn of deals: “I didn’t inherit a broken company, it’s a very intrinsically healthy company,” he said.

But he suggests Heineken had become inward-looking. “When organisations have long-term success, at some point they become a bit fixed in their mindset . . . you become internally focused, you’re passionate about your products or your brands and you lose touch a little bit with the world outside. We want to boost that kind of external orientation.”

Analysts say Heineken was due a cost-cutting exercise like that carried out at rival Carlsberg in recent years. Costs had “drifted,” said Stirling. “They’ve known for some time that they needed to do this, and in a way the Covid crisis has helped them by giving a clear justification.”

Heineken is “a funny mixture of decentralised but also a consensus culture in that things get discussed a bit too much,” he added. “It needs more of a bias to action.”

Operating margin at the group sank 4.5 percentage points to 12.3 per cent last year, on high fixed costs in Europe. For Carlsberg, margin rose slightly to 16.6 per cent, and while it did shrink at the world’s largest brewer Anheuser-Busch InBev, the figure remained much higher at 26 per cent in the first nine months of the year.

As part of his rationalisation plans, Van den Brink wants to streamline advertising spending, without reducing sports sponsorships, which include Formula One and the Champions League. He also wants to make the supply chain more efficient and improve communication between Heineken’s 80 operating companies.

He must do all this as many of the restaurants and bars that are key to alcohol sales face intense financial pressure. “So many of our customers are in pain. It’s an existential crisis for them . . . about 10 to 15 per cent of all the on-trade [pubs, bars and restaurants] outlets in Europe won’t 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 we can sustain those growth rates into the future.”

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