Heineken on building the beer portfolio of the future: ‘We need to be open-minded and not caught in a fixed model'

02-Sep-2020 - Last updated on 04-Sep-2020 at 15:51 GMT

Pic:getty/stsmhn

Where is the beer category going next? A brewer who wants to win in tomorrow’s markets needs to be open-minded, responsive to change, and listen to its consumers - rather than being staunchly set and inwardly focused on its existing portfolio, says Heineken’s CEO.

Listening to consumers has always been important in any F&B business - but this needs to be much more deliberate and fine-tuned for the future, says Heineken CEO Dolf van den Brink, who took over the position in June.

“We really want to make sure that first and foremost the beer category stays relevant, becomes more relevant and drives consumer penetration with all the relevant consumer targets.”

Coronavirus: navigating the future

Brewers has been navigating tricky ground over the last few years - seeing overall beer volumes struggle while facing an increase in competition from trendy new drinks such as hard seltzers.

And now, the coronavirus pandemic has also forced every business to take stock and re-focus its priorities.

Heineken's first six months of 2020 were materially impacted by the coronavirus pandemic. It identifies April as the low point, with week-by-week improvements across the majority of its markets since then - although it warns this is a slow recovery.

So where is Heineken doing well - and where does it need to step-up?

Asked the question during the company’s H1 earnings call last month, van den Brink identified two key strengths in the company. Firstly, he champions the people who work for the organisation - and how they’ve adapted throughout the coronavirus crisis. Secondly, he points to the power of brand Heineken - a brand which saw double-digit growth in 14 markets and only declined by 2.5% overall during the last six months, despite the impact of the pandemic.

As to where the company needs to step up, listening to consumers - and being agile in responding - becomes even more important in a coronavirus era, says van den Brink.

“Going into the crisis the company had a lot of momentum," he said. "I feel the fundamentals were and are very strong. Our global footprint, our exposure to fast growth markets, our much more diversified portfolio than it was ten years ago.

“Having said that, as we have shown over our 155-year history, it is a process of continuous renewal, of continuous revitalisation and we are living in such a period once again.

"In terms of our culture, I really like the passion, the engagement, how people take responsibility - but at the same time I feel at times we can move faster. We can be more agile and be more deliberate about learning from each other.

“It is all about meeting unmet consumer needs and being very creative and entrepreneurial in this regard. I would love to continuously renew and revitalise this muscle in the company, as consumer habits and behaviours are changing very rapidly at this moment.”

As for any company, controlling costs will be all the more important moving forward as Heineken navigates the new normal, adds van den Brink.

'The beer category must stay relevant. That may mean that it looks and smells like beer today. It may look different.'

In an era where trends and priorities are quickly shifting, listening to consumers becomes even more important. And it’s this that will help Heineken identify what the beer category will look like in the future - and make it ready to react and respond.

And this means looking at both the short and long term. "It is essential that we do not get lost in just managing the crisis and make sure we also build the future and sustain our growth in a fast changing world going forward," said van den Brink. "We are not underestimating the pandemic’s impacts and are mindful of the material effect it is having on our business. No one knows how long this pandemic will last, nor how large the impact will be."

But there’s also a number of over-arching trends, challenges, and unmet needs that have existed in the beer category for years, which still offer opportunities for brewers. Questions such as whether the brewer makes big moves with new products outside its existing portfolio - or even beyond beer - will be answered by looking at consumer trends, says van den Brink.

“Why is beer still so unrepresented with female consumers?” he asks. “What has happening with consumer penetration with the younger generation? That is something that is very top of mind. We really want to take responsibility and make sure that first and foremost the beer category stays relevant, becomes more relevant and drives consumer penetration with all these relevant consumer targets. That may mean that it looks and smells like beer today. It may look different.”

Heineken 0.0 and Heineken Silver

Heineken is already responding to emerging trends, says van den Brink, giving the two examples of Heineken 0.0 and Heineken Silver.

Heineken 0.0 launched in 2017 (the alcohol-free drink has now launched in multiple markets around the globe with double-digit growth over the last six months) and last year the company debuted Heineken Silver, a 4% ABV ‘more sessionable’ beer, in Vietnam (which has performed above Heineken’s expectations and is now rolling out in China).

“I think we are already tapping into certain trends whether it is 0.0 beer, whether it is much more sessionable beers that we are seeing in some markets or much less sessionable beers more on the craft spectrum in others,” said van den Brink.

“For me it is to be much more open minded and not be caught in a fixed mental model or to be too inward focused on the portfolio as we have it. However, really deeply understand what is going on with our consumers and make sure we satisfy their current and future needs.”