Heineken is United
Kingdom’s leading beer and cider producer which has been existing for over 150
years. It’s the name behind iconic drink brands like Foster's, Desperados,
Strongbow, Kronenbourg 1664, Heineken and Bulmers, among other full range
specialty brands. ("Heineken UK"). Heineken boasts of over 250 local,
regional, international premium and specialty beers and ciders in their
portfolio. Being the world’s most international brewer and having operations
spanning over 70 countries and operating companies globally, Heineken has
millions of customers to consume its products. The company has been
experiencing a good global beer market growth percentage over the years. The
consumption volume development has also been increasing worldwide with North
America leading followed closely by western Europe and central and Eastern
expenditure related to plant, equipment, and property is estimated to be around
€1.6 billion. Early last year, Heineken tweeted that it had saved $83.8 million
(which translates to 75 million Euros) within a span of six years by using less
energy and water in its breweries. This intriguing strategy implies that the
company cut its cost of production to save millions of dollars from its 160
breweries situated in 70 distinct countries (Amirtha). Although Sol, Dos Equis,
and Strongbow could potentially become global brands, the company has over the
past few years been increasing resource allocation and investment into its
Heineken beer brand. Many analysts attribute this to safeguarding the brewer
against potential market weakening as a result of austerity measures witnessed
in Western Europe (Hall).
As of 2012, Heineken
was the third largest beer producer in the industry producing 171.7 million
hectoliters of beer behind SABMiller and Anheuser-Busch InBev which produced
173.4 and 356.2 million hectoliters consecutively. As of the same year,
Heineken claimed a 9% market share thus being the third in the top 4 key
players in the industry. In the global cider category, Heineken leads with a
20% market share. In 2012, the global cider market grossed 19.9 million
hectoliters. Last year, Heineken produced 18.1 billion liters of beer which
translates to (4.7 billion gallons) which grossed €19.2 billion in sales.
The Heineken company
strengths include; a strong brand name, a strong distribution network, digital
marketing strategy, and expertise in quality beer production. Weaknesses
include a low-profit margin as a result of hiked prices for petrol and raw
materials worldwide, overdependence on the American market and high customer
concentration. On the other hand, they have a lot of opportunities such as
Bringing special beers on the market for women, diversification into more
flavors and fewer calorie beers and capitalizing on the Middle East and the
growing Asian market. Threats include intense competition i.e. competitors
doing bigger M&A deals, declining demand for beer in the United States, and
constant fluctuations in the prices of raw materials.
produces beer. Beer is considered as the leading alcoholic drink globally as it
accounts for 74.58% of the market share of global alcoholic drinks. Brazil,
Germany, China, India, Russia, Mexico and the USA are among the leading markets
in the world. The beer industry has been experiencing an upward trend
worldwide. Most brands are currently exploiting niche segments such as
non-alcoholic beers, ice beers, and malt liquors for the sake of increasing
health consciousness among drinkers. Last year, the world beer market was
valued at $520 billion, an amount that is expected to reach $736 billion by
2021 with a 6 % CAGR for the forecast period between 2016 and 2021
("Global Beer Market |Size, Share, Value, Trends, Analysis, Growth,
Forecast| Beer Market Europe, North America, Asia-Pacific, South America,
The entire beer
industry can be segmented into four primary segments; by packaging, category,
geography, and product type. The global beer market competition is high mostly
in developed countries like Europe and North America whose markets are at
saturation level with steady demand and a slow growth rate. However, total beer
consumption in the North American region is said to be declining. Innovative
product packaging, multiple product launches, mergers and acquisition with
small; level players, flavored and crafted beers, and huge promotional or
marketing activities have remained the strongest business strategies for market
growth in the North American region.
The beer industry is
also influenced by Political, legal, social, technological, demographic and
economic factors both positively and negatively. It is also affected by the
bargaining power of buyers and suppliers as well as threatened by potential
entrants and substitutes. Finally, the average cost of beer decreases with output
hence economies of scale which can also be achieved with mass production. Mass
customization might also bring a competitive advantage although the latter
differs from mass production in suitability, product nature, and customer
is indeed a giant in the beer industry with an experience spanning over 150
years. Despite this, the company is faced with a huge privilege to plan
strategically, be dynamic and ever changing so as to remain relevant in the
global market and thrive amidst stiff competition. Strategic planning refers to
a process that an organization undertakes to develop a plan for achievement of
its overall organizational goals. Strategic planning steps include; analyzing
the current state, defining the future state, determining the strategies and objectives
and implementation, evaluation and review(Grimsley).
Heineken has been on the forefront of setting
bold plans for the future in the contemporary world. According to its
International Chief Executive Officer Jean-François van Boxmeer in the 2014
Heineken USA National Distributors Conference, the company was determined and
looking forward to a journey of another 150 years. After this, almost a dozen
Heineken brand managers and executives took the stage at New Orlean’s ornate
Saenger Theatre to outline the strategy of the company for Heineken’s key
brands and the near future. The brewer promised a new focus on the
convenience-store channel as well. Following a year (second half of 2014) when
the Heineken beer brand experienced prosperity with healthy sales growth after
humongous challenges, Mr. Dolf van den Brink, Heineken USA CEO presented the
company’s strategy for consistent growth through focusing on; One unique
premise channel, two major channels, three customers and four brands
premise would include underscoring the growth of Brewlock and Mexican imports.
The brand’s draught innovation would become major plays in bars and
restaurants. The senior vice president commercial, Dirk De Vos said the company
strategy was not changing much, but there would be more channel focus on
convenience, Walmart, grocery, and on-premise. Van den Brink concluded that the
organization’s aim is to become the leader in upscale beer while noting volume
goals for all Heineken brands. The two channels strategy includes Heineken
working on best practices for the rest of the c-store channels and the grocery
as part of its work with 7-Eleven and Kroger. Heineken wins in the grocery
channel and c-stores tend to be a humongous opportunity for Heineken USA
network. On the fair share of the market, Heineken lags behind regarding its fair
share of the market. The company hopes to change this situation through few,
bigger and better promotions, packaging assortment including slim cans and
customers strategy involves Heineken focusing on three major retailers in its
endeavor to grow its share of the beer market. Walmart and Heineken have
partnered in its 5-year effort to double up its beer sales. According to
Heineken USA chief sales officer Ray Faust, the results have been positive so
far. A significant portion of this strategy includes getting more products on
the store floor. The other two clienteles getting attention through extended
partnerships are Kroger (the largest chain in groceries) and 7-Eleven (the
largest chain in convenience stores) (Holtz).
the four brands strategy aims to capitalize on the company’s four biggest
brands: (Strongbow Apple Ciders, Dos Equis, Heineken, and Tecate) out of the
seven major brands it owns in the United States. All of these brands would get
a substantial increase in their marketing budgets as from the 2015-2016
financial year in the United States. Andrew Katz, Dos Equis’s new marketing
vice president, is determined to continue an over 15 percent beer brand growth
through improving in-store displays and growing placement in on-premise
accounts. Katz is committed to making Dos Equis a true national brand and one
of the ways he did this in 2015 was through introducing the newly launched Dos
Equis Dos-A-Rita to 12 new states. The main steps the brand should consider
undertaking when assessing risks and opportunities of a new market include;
defining the market, performing market analysis, assessing internal
capabilities, prioritizing and selecting markets and developing market entry
options (Stark and Stewart).
doubles down on soccer and utilizing the growing sport as a platform to drive
more sales. The brand is the UEFA Champions League sponsor and the “official
beer of Major League Soccer.” The beer will continue a city marketing plan
aimed to establish Heineken as one for urban settings and celebrations. In
fact, 60% of Heineken’s business is in the top 12 cities in the United States.
Tecate brand plans involve the growing awareness of Tecate Light that includes
“Born Bold” campaign to make Tecate Black Eagle the best for a party. According
to its marketing manager, Max Skowron last year, his plan was to grow the
Tecate franchise by 10 percent. He further suggested the increase of Tecate
Light by 55% and the decline of Tecate Red.
Strongbow remains the readiest brand to
explode according to Charles vans Es, the senior brand director. The cider
brand would be supported by a new campaign. Also, as part of a variety pack to
encourage sampling, two new flavors would be introduced. The smaller, regional
brands of Heineken including; Newcastle, Desperados, and Amstel Light will also
see increased spending as part of the strategy. However, it’s paramount to
conduct a cost-benefit analysis to ascertain whether the benefits outweigh the
costs and by how much. The main steps in this process include; understanding
the cost of status quo, identifying costs, identification of benefits,
determining cost savings, creating a timeline for expected revenue and costs
and evaluating non-quantifiable costs and benefits. A Newcastle will
significantly introduce a spring variety pack with two new flavors; Newcastle
Summer Session IPA and Newcastle British Pale Ale.
has implemented the three levels of company strategy: functional, corporate,
and business. Despite focusing on the type of businesses the company should be
in, corporate strategy gives Heineken an advantage of focusing and rapidly
responding to problems in the industry that it can be vulnerable to. Therefore,
corporate strategy helps it demonstrate and exploit the benefits of remaining
active in one industry as they evaluate business opportunities in areas having
complementary activities. Corporate strategy compares the return of the brand’s
continuing investment with the acquisition of complementary businesses with a
goal of optimizing the company’s operations, growth and profitability. The
business strategy part supports the corporate strategic initiatives. It sets
goals for performance and specifies actions the organization will take to
maintain and improve its competitive advantages after evaluating the actions of
competitors. Typical strategies include; becoming a low price leader, focusing
on promotion or achieving differentiation in quality and other desirable
marketing functional strategy, on the other hand, does influence the other
functions and their strategies. A common marketing strategy is to determine
customer needs in an area where the brand has a natural competitive advantage.
Such advantages are in the following areas: facilities, staffing, location or
reputation. As soon as the marketing strategy identifies the type of products
customers need, it relays the information to operations to design and produce
those products at the required cost. The advertising department ought to
develop a promotional strategy, the customer service must support it, and the
sales must sell it. The marketing strategy typically forms a basis for strategies
of other departments (Markgraf). A good strategic
plan makes thoughtful decisions about the future of the organization to ensure
its success amidst competition.
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