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Heineken aims for a less beer and blokey look

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

Heineken’s new CEO Dolf van den Brink said the company would put more marketing power behind low-alcohol, non-alcoholic beers, cider and “hard seltzers” – flavored alcoholic sparkling water – to attract customers. female and younger clients.

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

Van den Brink believes the brand could account for five percent of the entire global beer market within five to six years. “We’re in the very 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 broaden its attractiveness. “Our vision is that consumers want a choice,” he told the FT in an interview. “On Friday night in a bar you might want to have a Heineken full of booze, then during the week you might want something a little less booze and more refreshing then for lunch?” working, Heineken 0.0. “

Since launching in 2017, Heineken 0.0 has grown into the world’s largest non-alcoholic beer brand, but the company has been slower to keep pace elsewhere. Van den Brink admitted that it was “relatively late” for the hard seltzer, which stormed the United States; since September, it has launched the Pure Piraña and Amstel Ultra Seltzer brands.

Dolf Van den Brink, 47, who joined as an intern, replaced seven out of ten members of the company’s executive committee © Handout

Beer consumption, meanwhile, is “underdeveloped” among women and young consumers, he said, but Heineken could convince them “by being creative and innovative.”

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

While global beer consumption increased before the pandemic, it varied from market to market. Volumes were falling in the United States, stagnating in China, but increasing in Mexico and Vietnam. Values ​​grew faster than volumes, reflecting a taste for more expensive drinks which benefited Heineken. Then the coronavirus struck, reducing global beer consumption by 10% in 2020, according to Euromonitor.

Heineken has launched low-alcohol versions of top brands, such as Heineken Silver and Tiger Crystal, and is promoting the cider in new markets like Vietnam and Mexico.

He also seeks inspiration from distillers, who profited from the popularity of homemade cocktail making during the pandemic. “Spirits. . . have done a better job of responding to consumption opportunities and achieving [groups], like consumers, ”said van den Brink.

Bar chart of By country (in billion liters) showing The pandemic reduced global beer consumption by one tenth

But the general manager, who resumed in June, must balance these aspirations with a reduction in resources in the face of the pandemic. This week, the brewer announced a cost reduction and productivity effort that will involve 8,000 jobs lost, to try to restore margins to pre-pandemic levels.

Van den Brink, a 47-year-old man who joined as an intern, put his mark on the 157-year-old company in other ways: last year he replaced seven out of ten of the executive committee of the society. He will not criticize his predecessor, Jean-François van Boxmeer, who made Heineken a global group with 30 billion euros in transactions: “I did not inherit a broken company, it is an intrinsically healthy company. “, did he declare.

But he suggests that Heineken had become inward-looking. “When organizations are successful over the long term, at some point they get a bit frozen in their mindset. . . you focus internally, you are passionate about your products or brands and you lose touch with the outside world a bit. We want to strengthen this type of external orientation. “

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

Heineken is “a funny mix of decentralized culture but also consensus in the sense that things are a little too much discussed,” he added. “It takes more than one bias for action.”

The group’s operating margin fell 4.5 percentage points to 12.3% last year, due to high fixed costs in Europe. For Carlsberg, the margin edged up to 16.6 percent, and although it declined 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 advertising spending, without cutting back on sports sponsorships, which include Formula 1 and the Champions League. He also wants to make the supply chain more efficient and improve communication between the 80 Heineken operating companies.

He has to do all of this because many restaurants and bars that are essential to selling alcohol face intense financial pressure. “A lot of our customers are suffering. It’s an existential crisis for them. . . about 10 to 15 percent of all trade [pubs, bars and restaurants] points of sale in Europe will not arrive at the end. “

But he is optimistic about Heineken’s potential, especially given its strong presence in emerging markets. “As a company, we are extremely proud of our growth momentum over the years. We need to rejuvenate so that we can sustain these growth rates in the future. “

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