When brewer Heineken reported its interim results in August, the group's eponymous brand was singled out for praise. Chairman Jean-Francois van Boxmeer said it had outperformed the company's broader portfolio, which includes Foster's, Strongbow and Kronenbourg, as well as the overall beer market.
Nonetheless, while volume sales of Heineken were up 4.1% worldwide, the beer did not perform so well in the UK, US, Spain and Greece.
Heineken sales soared in Africa, the Middle East and Asia Pacific, but in Western Europe they dipped 0.8% in the six months to 30 June. Unemployment, unfavourable weather and a weak on-trade market were blamed.
The UK on-trade market has been hard hit since the start of the recession as more people shirk pubs for drinking at home (40 pubs are closing every week, according to the British Beer & Pub Association). The brewer also revealed that its off-trade performance was hampered by lengthy price battles with some retailers, which resulted in a 'temporary reduction of features in key promotional activities' and a subsequent fall in sales.
With the economic climate forecast to remain tough, what can Heineken do to boost UK sales and differentiate its brand? We asked Ben Harris, brand development director at Anthem Worldwide, which has worked with Foster's, and Enda McCarthy, chief executive of Publicis Modem, which works on the Pernod Ricard account.
BEN HARRIS, Brand development director, Anthem Worldwide
The clever fridge ad, which parodies a female obsession with walk-in wardrobes, made me smile, but left me wondering whether it is advertising Heineken or lager in general.
That perhaps sums up the problem with the UK beer market at the moment.
Brands are merging into one laddish personality, while throwing off their distinctive brand and product equities.
Beer-drinking is about aspiration - beer that you are happy to have your peers see you drink - but the big brands seem to be sheltering from the storm of declining sales by flocking to occupy the centre ground. Foster's, Carling and Heineken are using humour, while aspirational brands such as Peroni, Beck's Vier and Stella 4% are using distinction, quality and style. I know which approach will win in the long term.
The market is about value not volume, so Heineken needs to refind what makes it distinctive and refresh itself with core charismatic qualities that other beers cannot reach. That will make it worth my shilling more than laughing about an ad down the pub.
- Heineken is well placed to use its portfolio to tap into parts of the market that are under-indexing, and align brands with all drinking profiles and occasions. Premium brands such as Amstel, for example, could appeal to the 35-plus drinker who is cash-rich and growing old disgracefully.
- Bring back some pride. Heineken is feeling like an amorphous European brand, perhaps due to the ubiquity of Champions League sponsorship.
- Reappraise Heineken at the bar or fridge, creating distinction through bottle, can, font structure and design.
This will raise its premium value.
ENDA MCCARTHY, Chief executive, Publicis Modem
Who would be a managing director? Your company delivers profits that are up $483m (£305m) year on year, your share price is up 21% year on year, but instead of highlighting this, people focus on a loss of market share suffered by one of your brands in the UK.
Such is the situation currently facing Stefan Orlowski at Heineken, who has blamed 'bad weather, the worsening employment situation and a weak on-trade' for the dip in sales that has taken place over the past six months.
In actual fact, Heineken (and Stefan) should be congratulated for what it has done. By taking the decision earlier in the year not to slash prices to suit the supermarkets, the brand has stuck its neck out.
However, this was done in a way that makes absolute commercial sense, and should provide pointers to many others in our industry.
A devalued brand can be recovered in some sectors, but a devalued beer brand is no use to anybody, and Heineken, while obviously not a premium brand, is certainly not a binge beer.
Heineken has taken the view that while market share matters, its brand, and the profit that it creates for shareholders, matters more.
- Having made the decision to go down this route, Heineken must now hold its nerve.
- Pricing is intrinsic to a brand's image. To the UK consumer at least, a more expensive beer is, more often than not, a better beer.
- That said, Heineken should continue to demonstrate its take on value with appropriate sampling, promotions and exploitation of its football and event assets.