Heineken’s worries won’t go away soon
In Amsterdam, Heineken’s executives may cheer Interbrand’s 2011 Best Global Brands Report which shows that the value of the Heineken beer brand has increased in 2010. According to the survey, the brand’s value increased 8 percent in 2010 and 60 percent since 2005. Interbrand says the Heineken brand ended on a 91st position up from 93rd in 2010. Needless to say that the Coca-Cola brand kept its first position.
However, the same executives cannot be too pleased with their brand’s performance in the U.S., where it has been losing volume and market share for years. With declines in July 2011, the U.S. market now equals revenues generated by Heineken in France, it was reported.
Beer Marketer’s Insights says that volumes of the Heineken brand in the U.S. have dropped 20 percent to 4.9 million hl (2010) since 2007, causing many U.S. executives to take their hats. The usual explanation given is that a premium brand like Heineken suffers most in times of weakening consumer confidence.
Alas, Heineken’s U.S. woes seem to have a long history. Try googling Heineken +U.S.+problems and hits take you back to the early years of the past decade.
Small wonder that Heineken’s top brass at recent investor conferences (September 2011) hardly mentioned the U.S. market and their performance there. The presentations revolved all around the brewer’s successes in emerging markets.
In an October 2011 interview with the Dutch publication Het Financieele Dagblad Heineken’s U.S. CEO Dolf van den Brink admitted to Heineken’s problems and warned that it is too early to say that Heineken is on the way up again.
Analysing the American beer market, Mr van den Brink said that Heineken got more competition in the high-priced beers category from AB-InBev and the joint venture MillerCoors, as well as from microbreweries.
Mr van den Brink argued that Heineken’s USD 60 million (estimates) marketing campaign in the U.S. has been inconsistent before. Indeed. In the past nine years, six agencies have worked on the Heineken’s U.S. business: Lowe, D’Arcy Masius Benton & Bowles, Publicis, Berlin Cameron United, Wieden + Kennedy and Euro RSCG, the trade publication Adweek reported in April this year.
What’s driving the agency turnover? Evidence points to the turnover in the leadership ranks of Heineken USA in recent years (four CEOs and four CMOs since 2005) and pressure from Heineken’s executives in Holland.
Of course, marketers pay agencies to drive sales and when sales slide, agencies become expendable.
When Heineken decided to run the brand’s worldwide campaign in the U.S. this was an admission of exasperation („perhaps this will work“) and the natural outcome of Heineken’s relentless cost cutting. Whether it will help to turn around the sale of Heineken remains to be seen.
Heineken said earlier this year that it is increasing its marketing budgets. Marketing costs increased from 13.0 percent of revenues to 13.7 percent which mirrors increases by AB-InBev. While seemingly a small percentage increase, it represents an additional USD 250 million in annual advertising expenditures.
Hopefully some of this extra money can be put to good use in the U.S.
