With still two years left on Vermont Hard Cider's Strongbow importation rights contract with Heineken NV, they were able to negotiate an undisclosed settlement so that Heineken USA could take over the rights on January 1, reports the WSJ. Moving forward, Vermont chief Bret Williams tells us that it's "business as usual". There will be no layoffs, and their new $24 million cidery continues building apace. "With Strongbow going away, that's really one year's growth of Woodchuck. ... We're going to focus everything we have on our proprietary brands, on Woodchuck and Wyder's," says Bret.
As for Heineken USA, chief Dolf van den Brink tells BBD that the decision to bring Strongbow into the fold was an evolutionary one. Says he:
DOLF ON GETTING STRONGBOW. "If you look at Heineken USA five or six years ago, we were basically a single brand company. And since then we have built an upscale portfolio by adding the Mexican brands, Newcastle, Indio, etc. We've kept an eye on cider. Globally we are the market leader on cider, we have 25% of the global cider market. We have about 50% share in the UK. And so we consider ourselves the global experts on cider. It's logical that it's something that we've set our eyes on. In the US, the cider segment in absolute terms is still rather small, but it's been growing double digits over the last decade, and then picking up steam to the high teens and this absolutely exploding to the 40s and more recently in Nielsen into the 80s [percent growth rate].
"The key thing, Harry, is that for the last ten years Heineken has played in the US cider industry, we just chose to do it through Green Mountain as they were called at the time, or Vermont Hard Cider now. I feel that our predecessors made the right choice there. The segment was so small that going through a pure cider player was the right choice.... Vermont Hard Cider did an absolute great job.... We now feel that the moment has arrived to integrate Strongbow into the Heineken USA portfolio. We believe that our skill that our national presence can accelerate the brand in this critical moment in its development...."
DOLF ON STRONGBOW TRANSITION. "More than half of volume sits with Heineken USA distributors. But there's a significant part that isn't. You already have remarked on it this morning, Harry, so let's not beat around the bush. We know that cider is regulated differently than beer. But having said that, cider and this brand have value in the three tier system and we encourage any acquiring distributors to do the right thing. But that is between the two distributors."
DOLF ON HUSA'S FIRST HALF. Dolf pointed out that Heineken USA volumes are up 4.3% so far this year, per Nielsen all channel scans to July 14. With those trends, "this industry starts to feel like fun again," he said, describing the current momentum as making him "cautiously optimistic." Brand Heineken is up 2.7% and is "still the bread and butter of the company."
"The Legends campaign is really working. A big shift we made recently based on a lot of input from distributors, is to focus on our great credentials and stories for the brand.... history, ingredients -- we weren't leveraging them enough. We added a television commercial where we featured Heineken draft, which is the first ever......we believe think the Legends campaign did a great job of turning the brand around last year, and we think the Credentials campaign is continuing to accelerate the brand." When asked whether this momentum meant HUSA had pricing leverage this Fall, Dolf demurred. "No comment."
ON DOS EQUIS. "Dos Equis has been growing double digits for many years, but we're really proud to see the brand accelerating. Year-to-date we're up 30.4% on Lager, and that's without any major innovations or new SKUs. This is solid core growth..... Today's commercials are testing even better than last year."
ON NEWCASTLE. "We have not been happy with the volumes of Newcastle the past few years. The brand has been challenged particularly in the on-premise, particularly with the tsunami of craft beers that have been chipping away at our handles. But off-premise with Nielsen, we are up 7.7% ytd, and Brown Ale is up close to 1%. So we are stabilizing Brown Ale and getting it back to growth, more in the on-premise as we still have our work cut our for us in the on-premise. But the last couple months trends are improving. And the Limited Editions help the franchise be up almost 8% for the year..... the No Bullocks ad campaign really connects with Millenials, and strikes a nerve with how they're fed up with the pretensions of the world."
DOLF ON THE SECOND HALF. Dolf said that while the economy and unemployment may not improve in the second half of the year, HUSA is bringing out many new innovations to the market spearheaded by Lesya, including the Beers of Mexico 12 pack, Indio's continued rollout, Tecate Michelada, the new Heineken bottle testing in NYC and rolling out in 2013, the James Bond tie-in.
Until tomorrow, Harry
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