The proposed path to success is a familiar one: reduce local brands in favour of global and/or master brands. Driving down costs and increasing margins through streamlining R&D, concentrating marketing efforts, increasing leverage with suppliers and reducing manufacturing complexity. Excess capacity is then used to explore new growth areas, access further cost savings, or both.
For Heineken, growth seems to be the priority, focussing on low/no variants, hard seltzers, women and younger audiences, and diversifying from ‘on-trade’. It’s a logical path followed by most of the global corporates.

Be ‘something-to-everyone’

Looking deeper and below the logic there is an often unconfronted irony that simultaneously asks heavyweight, long-established brands to be something-to-everyone, whilst at the same time evangelising a consumer-centric approach to innovation

We know first-hand that executing against this conflict is difficult. Brand owners are faced with a global regulatory landscape that is far from harmonised, constantly evolving (diverging not converging) and through diluted ownership of product innovation, risks missing the mark with consumers in each market.

Global product, local regulations

Whilst the branding may be global, the underlying product, claims and labelling inevitability must vary to meet market-specific product specifications and regulation. To continue with Heineken as an example, although already a burgeoning market in the US, the worldwide regulatory (and tax) landscape concerning hard seltzers is still emerging; it’s playing catch-up with innovation. The result is that there are many areas of ambiguity and this creates both opportunity and challenge for manufacturers. A single decision regarding a product’s manufacturing process, claims or labelling can be significant regarding its tax treatment and general compliance.

COVID-19 and the resurgence of heritage brands

Likewise, the consumer appetite for the master brand and positioning, and their relevance to the occasion, time and place of consumption should be considered. All bets are off post-COVID, but undoubtedly there are cultural nuances that will continue to impact whether global brands really can deliver growth within a particular market and/or consumer category.

For the UK in 2020, these cultural nuances meant that contrary to momentum, challenger brands were shunned in preference for trusted ‘comfort’ or ‘heritage brands’, but as we emerge from the pandemic with an increased appreciation for our liberty, health, environment and localism, the same may not be true for 2021. 

As for the brewing sector, Heineken’s CEO has suggested that 10-15% of Europe’s on-trade businesses won’t survive; whilst Carlsberg is suggesting a potential surge in demand assuming vaccination programmes are successful. One thing is for sure, we’ve all earned a drink, alcoholic or otherwise.

• Mark Butcher, Commercial Director, Leatherhead Food Research

Sources:

Judith Evans (2021). ‘Heineken to cut 8,000 jobs as pandemic hits brewer’, Financial Times, London, 10 February 2021. Available at: https://www.ft.com/content/7f060d32-f93c-4702-a0bc-9228ff2a3912 (Accessed: 16 February 2021)

Judith Evans (2021). ‘Heineken aims for a less beery, blokey look’, Financial Times, London, 14 February 2021. Available at: https://www.ft.com/content/aa04164b-c277-4874-878f-7ecc5ba9e5e1 (Accessed: 16 February 2021)