Heart of Green

It’s the early stages of a turnaround strategy for Heineken USA (HUSA) and the atmosphere in the company’s recently renovated headquarters in White Plains, N.Y. is upbeat. Dolf van den Brink, HUSA’s president and CEO, who assumed his position in October of 2009, doesn’t fit the corporate bill by appearances—he’s dressed business casual. No jacket. No tie. His office is floor-to-ceiling glass as are the other offices centered in the middle of the renovated space, surrounded by low-walled cubicles, centralized areas for impromptu meetings complete with white boards. There’s plenty of sunlight. The office upgrade, completed last fall, was much needed, notes van den Brink.

“We need to create a new dynamic, which is about collaboration, interaction, energy and creativity,” he says of the new space, “and we did that here.”

Van den Brink hasn’t done away with all of the old, though. While his office has a Heineken branded surfboard, golf bag and some other trinkets, two books sit on the console underneath a flat screen television, both on the company and its history. In fact, he references the beginnings of success for brand Heineken in the U.S. in the 1950s with the support of importer van Munching and Co. and the Munchings efforts to grow the brand in upscale, on-premise accounts.  

“I think what we are doing,” he says of the turnaround strategy, “is we want to be less corporate and unleash those entrepreneurial spirits that are still there, but we forgot about for a while. This company shouldn’t feel like some fancy, big corporation. We need to be a nimble, humble, agile and an entrepreneurial company again.”

Van den Brink has joined HUSA during a tough time—much different from the beer industry in the ’50s, let alone 10 years ago. With a challenging economic atmosphere where imports are relatively flat (but recovering), overall U.S. beer volume is down about 1.5 percent and consolidation within the industry at the supplier level as well as the distributor level is accelerating, there are quite a few hurdles to overcome. And that’s not even taking into account a consumer who increasingly is migrating toward more flavorful brews on the high end.  

Internally, the Heineken portfolio has been suffering in the U.S. with declining sales, with the exception of Dos Equis and Newcastle. Heineken lager was down 2.7 percent according to a recent Nielsen Consumption Report year ending Dec. 3, 2011.

“[HUSA] took their eye off of brand Heineken when it launched Heineken Light,” says Brian Sudano, managing partner, Beverage Marketing Corporation (BMC). “When [Heineken Light] became the focus, [HUSA] took its eye off of Amstel, Amstel starts to decline rapidly, Heineken starts to struggle and they aren’t able to turn around Heineken Light. Now you are struggling with a portfolio of brands that are all having their own issues… As the company goes forward, when you look at solidifying the business, it’s more about finding the essence of Heineken again. Heineken is still the biggest brand by far [in the HUSA portfolio]. You have to stop the bleeding at Heineken.”

Turnover within HUSA has been another factor in the company’s struggle to stabilize its performance. Van den Brink, formerly the commercial director and deputy general manager of Bralima, Heineken’s operating company in the Democratic Republic of Congo, replaced Don Blaustein who served as president and CEO for about two years before an abrupt leave following a similar situation with Andy Thomas two years prior to that.

Van den Brink is well aware of the task at hand, and doesn’t shy away from the work that needs to be done. “All of these things happening around the same timeframe are having a profound impact on Heineken USA,” he says. “First of all, we’d better change. That’s a given; that’s a constant in business.”

Those changes include a refocus on brand Heineken, an overhaul with regard to marketing, creating a renewed company culture and, most importantly, innovation across the board.

Part of that strategy is putting emphasis on positioning the company as a key player in the upscale beer segment in the U.S. “Traditionally we have played a big role in the upscale segment,” says van den Brink. “Twenty to 25 years ago, we were one of the first brands to bring upscale beer to life and we realized that is still an extremely attractive segment in the beer market that we want to be a part of going forward.”

Helping the company compete in that segment and appeal to the millennial consumer who is looking for variety and diversity is its priority, notes van den Brink. In 2008, Heineken NV and Carlsberg jointly acquired Scottish & Newcastle, bringing Newcastle Brown Ale into HUSA’s portfolio. Last year, the company began releasing a Limited Edition series for Newcastle including Newcastle Summer Ale, Newcastle Warewolf, Newcastle Winter IPA and Newcastle Founder’s Ale, which will hit shelves this spring. In 2010, Heineken NV acquired FEMSA Cerveza, allowing HUSA to strengthen its position with Mexican beers Dos Equis (which continues to grow at double digits in the U.S.), Tecate and Bohemia. Adding to its Mexican beer brands will be the introduction of Indio, a dark beer, positioned against Victoria.

BMC’s Sudano notes that the high-end segment of the beer market is in fact performing well and when extracting the performance of MillerCoors and Anheuser-Busch InBev in the U.S. from the overall beer market, he estimates the category has grown about 1 percent in 2011. “The place to be is actually in the high end because that’s the part of the market which is growing and has been growing for the last couple of years,” he says. However, “Heineken imports are not growing, they are starting to perform better, but they are not growing in an environment where the higher end is growing.”   
It’s that glimmer of progress that has HUSA believing that a turnaround is underway and that the extensive investments the company has made over the past two years—van den Brink calls 2011 a “transition year”—will produce results in 2012, a “delivery year.” Van den Brink simply says: “If we want to reinvent ourselves, if we want to turn around this business, it starts with people and by appointing very strong people as leaders in our organization.”

At the end of 2011, HUSA had roughly 500 employees, one-third of whom were in a new position and one-fifth of whom joined the company from the outside. Among the key appointments were Scott Blazek, SVP of sales, Maggie Timoney, SVP of the people department and Lesya Lysyj, chief marketing officer. In addition to restructuring the management team, for the first time HUSA had put forth a multi-million-dollar education program, Passion for Beer, to not only educate its employees on what Blazek calls “Beer 101,” but on-premise accounts and distributors. “It’s a huge investment of time and resources that we’ve made this past year,” he says. The company hired four quality managers to oversee education initiatives in each of its four sales regions: Northeast, Southeast, Central and West.

“It’s really a point of differentiation in the industry.”

Positioning itself in the high-end segment of the market is supported through an on-premise sales focus, namely Heineken on draft. HUSA has invested in three times the manpower it had in efforts to build on its small draft presence. So far, the company has added roughly 2,600 draft handles across the country focusing on upscale accounts. This strategy, says Blazek, not only will help build Heineken’s brands and drive volume, but also compete against one of the main challenges that the company faces in today’s market, which is the growing craft beer segment.

With about 75 percent of HUSA’s sales coming from the off-premise the company also has invested in a category management strategy hiring Nick Lake as its senior director, category management. Lake served as vice president, group client director for the beverage alcohol industry for Nielsen.

“The goal for us is to really be known as the leaders within the upscale beer market,” says Blazek. “What that means is, we have a solution-based story for our retailers we call GPS, Growth and Profit Solutions, that is grounded in consumer and shopper insights.”

Initial upticks in sales according to a Nielsen Consumption Report for the four weeks ending Dec. 3, 2011 show Heineken lager growth at 3.6 percent compared with the previous four weeks at 2.9 percent. Newcastle saw an increase of 2.4 percent, led by seasonals for the year, and Dos Equis was up 26.7 percent. “We are not declaring victory yet, but we are starting to see momentum,” Blazek says.

That momentum is being fueled by a new approach to the company’s marketing strategy, including investing 15 percent of its marketing spend on social media. Focusing on brand Heineken, the company is looking to speak to consumers who are predominantly in their 20s and largely Hispanic, African American and Caribbean, says HUSA’s CMO Lysyj. To relate to this consumer, “the man of the world” character was born and appears in Heineken’s new TV spots, “The Entrance” and “The Date,” part of the “Legends” campaign that invites consumers to “Open Your World.”

“This is the guy who inspires confidence, resourcefulness and he can navigate in any social situation,” says Lysyj. These cinematic commercials that are intended to be multi-dimensional ran first online for several months before hitting the airwaves. “What we are trying to do is engage the consumer where they live and take that not as an afterthought, but as a primary point of entry,” she explains.

Recently, the Heineken brand in the U.S. reached 1 million Facebook likes. Earlier in 2011, Dos Equis was the first beer brand to reach 1 million likes on Facebook globally. Heineken NV also signed a deal last year with Google to run Heineken ads on YouTube, among other sites, in exchange for consumer data.

“If you talk about reshaping beer marketing, part of that was messaging, which is much more conversation, much more discovery rather than something very easy to get,” says van den Brink. “It’s about a significantly higher budget and it’s about digital.”

Another program, called Red Star, targeting African Americans, was an initiative to create some excitement around brand Heineken where a pop-up concert was orchestrated with rapper Kanye West in June that was invite-only and consumers had to find their invite in the digital space. Lysyj notes that to date, the company has accumulated more than 120 million PR impressions on the concert.

In 2011, the brand’s advertising activities centered on the consumer. In 2012, the company plans to add focus on the beer itself, its heritage and its history, says Lysyj.

“For this year, the balance of that will be to talk about what a great quality beer we’ve got. We’ve got 150 years of the same recipe; we’ve got a long history of a family-owned company, and to focus on the beer culture of Amsterdam,” she says. “We need to remind some consumers, and educate some consumers for the first time, about that.”

As the company works to reengage its consumers, it’s also worked to motivate its employees and improve company culture, which has been the center of the turnaround strategy. Standing on four cultural pillars—Be Brave, Decide and Do, Hunt as a Pack and Take it Personally—the goal is to allow employees the freedom to be creative and inspire new ideas to reshape the company.

“We can’t do things the same old way and expect different results,” says Timoney. “At the end of the day we are a small company in the U.S. and we have to act different, think differently and think big.”

To measure its success, HUSA has commissioned climate surveys, a survey run by an independent party, for 2010 and 2011. Among the results for 2011, 96 percent of employees said they feel proud to work for HUSA.

“People breathe green; people have a green heart,” says van den Brink. “That is what we are building on. We are dusting off and reshaping [HUSA] in new ways, but it goes back to the old core of this company that has been built on the entrepreneurial spirit of great people.”