Grokking Heineken's New Marketing Direction
A Talk with HUSA's Dolf van den

FILED FEBRUARY 14, 2012

Dear Client:

Heineken USA has had some pains during the Great Recession. Dos Equis was performing, but brand Heineken has taken it in the teeth. After a lot of change in the ranks and a new marketing direction, Heineken USA chief Dolf van den Brink is glad to report that HUSA gained 0.3 share points in January, per Symphony IRI, and brand Heineken's trends have sequentially improved each month.

"Harry, we've had an intense period over the last two years..... We've put a lot of things in place, re-ingivorated leadership teams, and adapted and involved opportunities," Dolf told us on Friday. Part of that is getting the right people in the right places, and part of that is creating a structure that is best fit for reinvigorating the brands. Dolf's ambition is to also position Heineken USA as the go-to supplier for retailers looking to maximize their upscale brands. "We are conscientiously focuson on the upscale portion of beer. That's the part that is growing as we speak," says Dolf. "We wish to be the leading company in upscale, but it's not going to happen overnight. It all starts with the power of our brands ...that's what Freddy Heineken believed. Brand equity is of the upmost importance."

HEINEKEN. On the new Heineken campaign, Dolf says the brand is "responding incredibly." HUSA has also increased the marketing spend behind the brand. "We had not enough in Television..... We launched in April, and very month since we have improved our trend, and the trend has increased consistently. If it had jumped up and down, I wouldn't have been as comfortable." And it hasn't just been about TV, but putting the ads online months before TV broke has helped people understand the ads. "The Date" generated four million views on YouTube before it ever was seen on TV. Because let's face it, these Legends ads are not simple, neither in their making or the viewing, and it's difficult to catch everything in one or two viewings. Interestingly, that's by design. Read on.

KEY INSIGHT ON BEER ADS. Last week while in New York, I ran into a top Diageo marketing exec and we spoke about the high production values of their Capt. Morgan rum ads, which I likened to the new Heineken ads. When I told Dolf this, he said: "Yes that's true. But the production values are just the price of entry -- it's a qualifier. The real insight is that most beer marketing is still sticking to old tested beer codes. Most of the commercials we see are 15 second, easy to get, sophomoric humor. If you watch it once, you get it. I think the insight that our marketing team has executed against, is that Millenial upscale consumers are not interested in being spoofed, or in easy-to-get lowbrow humor. They want to discover messages. They want to see the ad ten times and still pick up on something new. And that is what the Legends ads do. If you've seen those ads ten times -- and God knows how many times I've seen them -- that eleventh time you get a new element. The first time you see those ads, it's confusing. In fact, our research showed us it was confusing. In the old days when testing the ads, we would've said, 'Oh no, we need to re-shoot these ads and get the complexity out.' Now, we say, 'No, that is a good thing. It's part of the appeal.' That's very different from the typical beer ad, but the Millenial upscale consumer is looking for that."

Has it worked? Dolf said "our equity scores and volumes are responding very favorably to this new direction."

DOS EQUIS. "Dos Equis is such a powerful brand," said Dolf, noting that it grew 30% in January in scan data. "Even in mature markets like Texas, the brand is growing." But the campaign is several years old. Is it getting stale? "Consumers have told us they want to hear more. It's not time to change the campaign. We just need to keep it fresh." He said that distribution has accelerated, but that there is "more potential there..... If you calculate the volume per outlet, there is a huge opportunity. If you over distribute too quickly I don't mind to have a little gap there......Distributors have done an outstanding job with Dos Equis, both horizontally and vertically.... Display conversions are also a clear priority."

ON-PREMISE. Regarding on-premise and Heineken draught, Dolf acknowledges that this is a long-term commitment and the ROI isn't there. But this is "where the young adults are." However, he said that their on-premise initiative has responded "far faster than we thought."

CATMAN. Another push for HUSA is category management, as 45% of their volume is with national accounts. "There is a vacuum for somebody to step in and be the category management leader in the upscale beer segment." HUSA wants to fill that vacuum, although I know Crown is angling to be that company as well.

INDIO. Look for HUSA to introduce Indio, a fast growing dark lager from Mexico. They are just now starting shipments in Southern California, San Francisco, metro Texas markets, and Chicago.

FIGHTING SPIRITS. What about spirits taking share from beer, a theme Dolf has invoked often recently? Dolf says: "We violently agree is that spirits are eating our cake. The truth is, we need to keep reinventing beer marketing. We think that the Heineken Legends ads accomplish that. We think that the Dos Equis ads are a great example. Five years ago, when it was first proposed that this old man with a beard who doesn't always drink beer would be selling Dos Equis, most people were going bezerk. 'You can't do that.' That was clearly not inline with what typical beer advertising was doing at the time. So every time when you play around the edges, and stretch the conventional truths of what a typical beer ad is, that's where the magic is."


MADIGAN: DUOPOLY MAKES FRANCHISE LAWS MORE IMPORTANT THAN EVER

Three-tier advocate Mike Madigan writes on Alcohol Law Review that the creation of the "Big Beer Duopoly" also known as A-B and MillerCoors makes the need for franchise laws more acute than ever. Why? The article states that "the economic and political power of these international organizations cannot be underestimated, and their impact on alcohol regulation, small brewers, and public health and safety in the U.S. is significant. Under these circumstances, beer franchise laws, which govern the relationship between brewers and distributors, take on a growing importance."

Three-tier and anti-tied house laws prevent vertical integration. And vertical integration, writes Mike, stifles competition from smaller brewers and emasculates regulators. Because as the Louisiana Appeals Court recently observed, "a vertically integrated enterprise - comprising manufacture, distribution, and retailing - is inevitably a powerful entity managed and controlled from afar by non-residents."

"Never before has the imbalance between supplier and distributor been so great," wrote Mike. "Without beer franchise laws, distributors will be unable to maintain meaningful independence from suppliers and will be unable to fulfill their quasi-regulatory roles as buffer between suppliers and retailers," and preventing vertical integration. Mike goes on to assert that franchise laws are particularly important for craft brewers who "lack the substantial resources required to make a market for a new product." Without franchise laws the dominant suppliers would "all but shut down" the craft segment. What about carve-outs for craft brewers? Mike doesn't get into that. What's your take?


Until tomorrow, Harry

"Too many people miss the silver lining because they're expecting gold." Maurice Seitter

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