USA: Heineken’s US business boosted by ‘data and diversity’

Between the largest domestic macro brewers and the biggest of the big craft brewers, there’s a segment of the U.S. beer industry trying to avoid being pinched, MarketWatch reported on August 23.

Data and diversity have helped Heineken escape the trap.

Dutch brewer Heineken sells more than 8.5 million barrels of its various beer brands in the U.S., more than double that of Boston Beer Co., the biggest craft brewer. However, it’s about half of what Constellation Brands (Ballast Point, Corona, Modelo) and less than 10% of what Anheuser-Busch InBev produce or import in a year.

The tide of Big Beer, combined with the continued growth of small craft brewers, has forced Heineken to reconsider its portfolio of brands.

“We discovered that the average American consumer drinks 12 different brands in one year,” says Nuno Teles, chief marketing officer for Heineken USA in White Plains, N.Y. “That was a very important fact that made us think: ‘How can we be competitive in this business context, of multiple brands and consumers not being loyal to one specific brand but to a repertoire of brands?’ ”

In 2014, Heineken took a look at its long-held English cider Strongbow and gave it a complete makeover. The traditional dry Strongbow that’s still sold in Europe was abandoned for sweeter flavors. After doing a massive audience sampling with 5 million cans of Strongbow, Heineken determined that 64% of consumers sampled were new to Strongbow and 94% of them were new to cider. As a result, the sweeter Strongbow that traditionalists hated took the brand from No. 5 in the U.S. cider market in 2014 to No. 2 today.

The folks at Heineken USA predict cider could go from 1% of the U.S. beer market today to 3% to 4% in the near future. Still, U.S. cider sales dropped 9.7% in the first half of 2017, according to data from Chicago-based market research firm IRI.

It’s why Heineken USA has focused much of its efforts on the Heineken brand itself. In 2014, Heineken signed a 10-year, $50 million deal to wrest sponsorship of Major League Soccer away from Anheuser-Busch Inbev. It now partners with nine individual MLS teams, including New York FC and the expansion Los Angeles FC. It also sponsors the International Champions Cup, a tournament of European soccer clubs held in the U.S.

With MLS fans 51% more likely to drink a European beer than the average U.S. consumer, Heineken is making an educated bet on what is currently a niche market. Through the first half of the MLS season, IRI says Heineken sales are up 1.3% from the same period in 2016. The U.S. beer market was flat last year.

“The challenge was: ‘How can we punch above our weight and get that strong association with soccer?’ ” Teles says. “I’m very happy with the results we have achieved so far.”

Heineken USA’s courtship of U.S. soccer fits nicely within its marketing strategy for the Heineken brand that it’s dubbed “Be a man of the world.” Heineken has enlisted actor Benicio del Toro to inform drinkers that it takes 15 years to become a Heineken brewmaster and that Heineken has made its way to 192 countries. It’s convinced James Corden to pitch Heineken on CBS’s “Late Late Show.” It’s made Neil Patrick Harris the pitchman for Heineken Light and has him dropping references to Cascade hops used in the brewing process. It’s counting on a worldly, informed consumer to make the leap from a $20 case of Budweiser or Miller Lite to a $32 case of Heineken that’s closer to craft beer prices.

“Now consumers can talk about the ingredients to the point that, when we had our global brewmaster mention that we brew with three ingredients, we had a consumer ask: ‘Well, what about the yeast?’ ” Teles says. “Then we had the opportunity for our global brewmaster to clarify that yeast is a catalyst and not an ingredient, and consumers loved it.”

Heineken made a more overt play for beer geeks back in 2015, when it bought half of Petaluma, Calif.-based Lagunitas Brewing Co. That craft brewer went on to purchase stakes in Santa Rosa, Calif.-based Moonlight Brewing, Austin, Texas-based Independence Brewing and Charleston, S.C.-based Southend Brewery (which it turned into a Lagunitas taproom). Heineken bought the remaining stake of Lagunitas in May just before scooping up Bellaire, Mich.-based Short’s Brewing.

However, getting into craft meant relinquishing marketing and sales control and letting Lagunitas work the way it has for decades. Where Heineken is focused on hitting 112 million consumers with a media blitz, getting them to try a beer, then getting them to consume it regularly — the “funnel” approach — you just aren’t going to hit 70% of U.S. drinkers with a craft beer that scarcely sells 1 million barrels.

“What we see with our colleagues at Lagunitas in Petaluma is that their funnel is inverted,” Teles says. “They tell a small amount of people about their beer, but allow word of mouth to spread it to their friends. It’s an inverted pyramid that maximizes impact.”

But Heineken’s foray into craft beer doesn’t represent its greatest potential for U.S. growth, or its team’s greatest challenge. The import beer category in the U.S. grew 6.8% last year, according to the Brewers Association. That’s not only bigger than the 6.2% growth of craft beer during the same span, but is less than half of the more than 14% growth of Mexican beer brands in each of the past three years, according to Nielsen.

Heineken’s Dos Equis brand has yielded great success in recent years, not strictly as a Mexican import, but as a lifestyle brand. The “Most Interesting Man in the World” campaign helped make Dos Equis the No. 4 import brand in the U.S. (behind Heineken, Modelo and Corona) and gave it 3% growth in the first six months of 2017. However, Heineken has recently started putting some serious investment behind its Tecate brand, producing ads that mock President Donald Trump’s proposed border wall and support boxer Saul “Canelo” Alvarez (with a little help from Sylvester Stallone).

Yet Heineken aims Dos Equis marketing at a broad audience and considers it a premium product at roughly $31 per case. Tecate, meanwhile, is aimed squarely at bicultural Mexican-Americans and priced far lower at $20 a case.

“Because we are talking about two different brand personalities, we end up in different channels and different price points,” Teles says. “We have a ‘Win With Brands’ framework where we look at what is critical for brand uniqueness, brand relevance and brand presence.”

That three-point marketing plan defines “uniqueness” as positioning (high-end restaurants vs. neighborhood bars), visual identity (minimalist bottles vs. graphic cans) and “breakthrough communications” (broad humor vs. targeted celebrity). Brand “relevance,” meanwhile, means keeping the product fresh and pricing it for the right audience. As for presence, it’s all about maximizing distribution, visibility and promotions for all products.

Granted, Heineken doesn’t always get there. It unloaded the Mexican lager brand Sol to MillerCoors earlier this year when it couldn’t find a decent fit. It also occasionally has to float samples like its Strongbow varieties or its Amstel Xlight — a 90-calorie Amstel Light offshoot aimed at the same physically active drinkers as Michelob Light. In the Amstel Xlight example, that beer is still getting a test run in Arizona, Texas and Boston to see how folks will react, but Heineken is already trying to minimize the trial-and-error portion of its product launches.

Teles says Heineken has put considerable resources behind data-driven marketing that will, ideally, help it identify audiences, pair them with the right products and deliver to them the right ad message through a medium they’ll actually use. Without the resources of their larger U.S. competitors and the local presence and credibility of small craft brewers, Heineken has to dig for every advantage it can find. If big data and a relatively small portfolio can keep the pressure off, it could make Heineken a far larger player in U.S. beer than its mid-sized sales suggest.

“The marketing that we are going to do in five years’ time will have nothing to do with the marketing that we are doing as we speak,” Teles says.

21 August, 2017