Heineken reported its H1 2014 results yesterday for the six months ending June 30, with revenue down 1.4% to €10.196bn ($13.52bn) but up 4.6% in organic terms. Although net profit fell 1.3% to €631m, it rose 14% to €772m prior to the impact of exceptional items and amortisation.
Discussing the lackluster American performance of brand Heineken yesterday, CEO Jean-Francois Van Boxmeer said this was offset by double-digit growth for the brewer’s Mexican portfolio.
Sales for the Heineken brand have fallen over the last 10 years in the US, its largest single market, but Van Boxmeer said sales appear to be stabilizing here – they also grew 6.6% on a global basis in H1.
US Southern Belt – The Future for big beer?
Van Boxmeer called the States a “beacon market” for Heineken's badge brand, but admits it is under pressure, notably in the Northeast, where it used to be strong.
“Obviously, our ambition remains to one day grow the Heineken business, but we want to do it on its merits, not on price decreases or that kind of thing,” he said.
“So we remain confident on the medium term that Heineken can grow in the US, but it is also a regional deployment you have to consider,” Van Boxmeer added.
“The beer markets and especially the larger beer market is redeploying in the Southern Belt of the United States. So this is also where the Mexican portfolio is growing the strongest…where the future of the market for larger beer lies,” Van Boxmeer said.
“So it’s also a regional redeployment of our business that we’re working on. We are happy with the performance of our Heineken USA business and we are confident that the Heineken brand is still a brand that has growth potential.”
‘Corona really fed them their lunch from the mid 90s’ – Industry source
But one beer industry source told BeverageDaily.com that brand Heineken had probably shrunk about a third in the last 10 years, and he doesn’t see sales picking up anytime soon.
“The Heineken brand had a great run in the 90s, but then it hit its natural level of distribution in the US, and Corona really fed them their lunch as the premier import brand from the mid-90s,” he said.
“Then in 1998 the old InterBrew launched Stella Artois in what were very much Heineken markets – New York, Philadelphia, Boston, Chicago, places like that,” he added.
“So you kind of had a perfect storm against the brand. Heineken missed the pouring ritual around Stella and basically had their lunch fed to them by Interbrew – ABI has continued that up to today.”
The source said he believes Van Boxmeer only insists that brand Heineken can still grow in the States to keep up appearances, and given struggles for Dutch sister brand Amstel, added that the brewer is now wisely investing more behind its Mexican portfolio – “the best story in the Heineken universe”.
He sees real potential for Tecate to hit a sweet spot between Corona and Bud and said Dos Equis is now being marketed more astutely by Heineken; it can also tap the lager margarita craze, while the brewer’s eponymous brand cannot.
Heineken’s Dos-A-Rita drive – Taking the fight to Bud Light
In April Heineken began trialing Dos-A-Rita – a 7.2% ABV lager margarita with a splash of Dos Equis lager, sweetened with agave nectar – in the Southern US (Texas, Arizona, California, Nevada, Colorado, Florida, Georgia, New Mexico, the Carolinas and Alabama).
The brands is targeting 22-34 year-olds with (in the words of Monique Acevedo, VP of innovation at Heineken USA – perhaps with Bud Light Lime-A-Ritas in her sights – “a more premium and authentic lager margarita that leverages the strength and momentum of the Dos Equis brand”.
Conversely, the beer industry source said: “Heineken’s always been a lousy innovation platform. They’re religious about the liquid and the bottle. Over the years they’ve tried packaging innovation, which hasn’t worked that well,” he said.
March 2006 launch Heineken Light enjoyed, “a very brief period of success, followed by a dismal period of failure”, he added, hamstrung by the fact that US consumers had existing light choices (Bud Light, Coors Light, etc.) and preferred their imports to be full-bodied and full-flavored.
“You can’t have a Heineken-A-Rita, Heineken Light was a failure,” he said. “So in the consumer’s mind what you really have is a stodgy, old, tired, dusty European relic. I think he [Van Boxmeer] has to say the Heineken brand has legs, but really that brand cycle has been played out.”