Heineken N.V.: Global Branding and Advertising -

INDEX 1. EXECUTIVE SUMMARY...................................................................................... 2 2.

SITUATION ANALYSIS ...................................................................................... 2 2.1 The

Company Profile 2.2 The Heineken Brand 3. SWOT

ANALYSIS................................................................................................ 7 3.1 Strengths 3.2 3.3

Opportunities Weaknesses 7 8 8 9 2 4

3.4 Threats 4. THE HEADQUARTER’S ROLE IN SHAPING THE GLOBAL BRAND...............

9 5. RECOMMENDED MARKETING STRATEGY ................................................... 11 6.

REFERENCES ................................................................................................... 12

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1.

EXECUTIVE SUMMARY

The case study of Global Branding and Advertising at Heineken N.V. describes the findings and

recommendations of two research projects, which were commissioned by Heineken in the mid

1990ies in order to clarify brand identity. Project Comet found that the brand image was not

consistently being projected and therefore the Heineken brand was perceived differently across

various different nations. The project recommended to internationally aligning the brand’s

premium taste image using five core brand values: Taste, premiumness, tradition, winning spirit

and friendship. Project Mosa was designed to elicit consumer reactions in order to clarify the

consumers’ perception of the core values premium taste and friendship. The indicators of premium

beer taste differed among the different cultures, while there was substantial agreement across

national markets on the social occasions that would call for a premium beer over a standard beer.

The results of both research projects should guide Heineken’s advertising efforts in the future to

create a more consistent brand identity.

2. SITUATION ANALYSIS

More than two decades ago, Harvard Business School professor Theodore Levitt provocatively

declared in a 1983 HBR article, "The Globalization of Markets" that a global market for uniform

products and services had emerged. He argued that corporations should exploit the "economics of

simplicity" and grow by selling standardized products all over the world. To grasp how consumers

perceive global brands, companies should think about the issue in cultural terms. The forces that

Levitt described didn't produce a homogeneous world market; they produced a global culture. The

rise of a global culture doesn't mean that consumers share the same tastes or values. Rather, people

in different nations, often with conflicting viewpoints, participate in a shared conversation,

drawing upon shared symbols. One of the key symbols in that conversation is the global brand.

Like entertainment stars, sports celebrities, and politicians, global brands have become a lingua

franca for consumers all over the world. People may love or hate transnational companies but they

can't ignore them (Holt et al, 2004). Heineken is perceived differently in different markets. In the

Netherlands, Heineken is the market leader and therefore viewed as a mainstream brand. Outside

the Netherlands, however Heineken had consistently been marketed as a premium brand. In the

United States and Hong Kong Heineken was seen as appropriate for special occasions or when

making a social statement. In other markets, such as Latin America, Heineken was viewed as one

among many European imported beers.

2.1

THE COMPANY PROFILE

The Heineken story began more than 140 years ago in 1864 when Gerard Adriaan Heineken

acquired a small brewery in the heart of Amsterdam. After 13 years of prohibition, in 1933,

Heineken set foot on American soil and in 1937 the first Heineken beer was brewed outside the

Netherlands, in the Dutch East Indies. Over the ensuing 60 years, growth and acquisitions

substantially expanded the company. Four generations of the Heineken family have been

involved in the expansion of the Heineken brand and the Heineken company throughout the

world. By the 21st century, the small 19th century local Amsterdam brewer has grown into a

worldwide business with a global brand, employing more than 50,000 people (Heineken N.V.

Annual Report 2008). Heineken’s brand portfolio includes more than 170 international premium,

regional, local and specialty beers. The principal brands are Heineken® and Amstel®. The

Heineken brand is available in almost every country on the planet. Heineken owns more than 119

breweries in more than 65 countries brewing a Group beer volume of 13.92 billion liters.

(http://www.heinekeninternational.com/companystrategyprofile.aspx) Heineken has the widest

presence of all international brewers, thanks to its’ global network of distributors and breweries.

The acquisition of Brau Union in Austria in 2003 significantly extended the pre-eminence of

Heineken in Europe. In Europe, Heineken is the largest brewer and cider producer. It achieves

global coverage through a combination of wholly-owned companies, licence agreements, affiliates

and strategic partnerships and alliances (Heineken N.V. Annual Report 2008). VALUES AND

PRINCIPLES Heineken is committed to sustainable development and as such, to optimising its’

financial results with minimal impact to its’ business environment. To do this, Heineken abides by

a number of governing business principles and three core values - respect and enjoyment and

passion for quality - that reflect Heineken’s passion for beer and its’ respect for its’ employees,

business partners, customers, shareholders and all others who are connected to the company

(http://www.heinekeninternational.com/valuesandprinciples.aspx). Heineken has published

dedicated reports on sustainability and corporate responsibility since 2000. In an open dialogue

with a significant number of stakeholders, seven areas were defined on which Heineken believes it

should focus its’ energy in order to maximise benefits for society, its’ stakeholders and its’

company. These seven focus areas are: 1. Energy 2. Water 3. Safety 4. Agriculture 5. Supply chain

responsibility 6. Responsible beer consumption 7. Impact on developing markets

(http://www.heinekeninternational.com/7_focus_areas.aspx).

Source: Heineken N.V. Annual Report 2008

2.2 THE HEINEKEN BRAND

As both the Group and its most valuable brand carry the same name, reputation management is of

utmost importance. Heineken enjoys a positive corporate reputation and its operating companies

are well respected in their region. Constant management attention is directed towards enhancing

Heineken’s social, environmental and financial reputation. The Heineken brand is the company’s

most valuable asset and one of the key elements in Heineken’s growth strategy with a portfolio

that combines the power of local and international brands. Anything that adversely affects

consumer or stakeholder confidence in the Heineken brand or Company could have a negative

impact on the overall business (Heineken N.V. Annual Report 2008). TASTE In the Project Mosa,

quality and tradition were identified as the most suitable taste expressions for appealing to the

head of Heineken consumers, averaging consumer reactions from eight different countries. Gerard

Adriaan Heineken was reportedly committed to manufacturing a beer of the highest quality and

craftsmanship in brewing. Heineken pilsner has a mildly bitter taste, fresh, fruity

aroma, bright color and clarity. These taste characteristics are obtained using only the purest water,

hops and barley malt. Gravity: Original extracts 11-12% by weight Alcohol: 5% vol. Bitterness:

23 EBU Color: 7 EBC Heineken pilsner beer is brewed in the Netherlands, Vietnam, Thailand,

Tahiti, Singapore, the United Kingdom and in Sweden. Rigorous standards ensure that the high

quality of Heineken beer is the same all around the world

(http://www.heinekeninternational.com/products_brands_brands_heineken_fact_sheet.aspx).

PREMIUMNESS Heineken is positioned as a premium brand, except for its’ home market in the

Netherlands. Its’ appeal is growing in many markets. Heineken is the leading beer brand in Europe

(http://www.heinekeninternational.com/products_brands_brands.aspx) TRADITION The

Heineken the world drinks today is still brewed using the original, unrivalled recipe invented three

generations and over 140 years ago by the Heineken family. Since 1886, the same yeast strain, the

unique Heineken A-yeast has been used for fermentation and is considered a significant

contribution to the pure, premium taste of Heineken beer.

(http://www.heinekeninternational.com/products_brands_brands.aspx). WINNING SPIRIT In

2008, the Heineken brand was at the heart of the company’s growth, and confirmed its status as

the company’s flagship brand and key differentiator. With volume growth of 4.7 per cent, the

Heineken brand outperformed the international premium segment, growing in almost all of

Heineken’s European and African markets. The brand also showed double-digit growth in markets

like the UK, Canada, Chile, Argentina, Indonesia, Taiwan and South Korea. The UEFA

Champions league is the company’s main sponsorship platform. The Heineken brand has been

associated with this prestigious club tournament since 2005. With over 140 million TV viewers

watching live coverage of the UEFA Champions league in almost every country in the world, this

global sporting event has become synonymous with the Heineken brand and underlines

Heineken’s commitment to extending its leadership within the premium beer segment (Heineken

N.V. Annual Report 2008). FRIENDSHIP The Project Mosa identified “true friends” and “always

count on Heineken” as suitable friendship expressions for appealing to the heart of Heineken

consumers, averaging consumer reactions from eight different countries. As a premium beer brand

that embraces quality over quantity, Heineken seeks to promote a responsible drinking culture.

This became an even more visible component of its communications strategy in 2008, with the

launch of its

international interactive ‘know the Signs’ campaign. Heineken has also become known for its

creative use of film to enhance the profile of the Heineken brand among its target consumers.

(Heineken N.V. Annual Report 2008). It is putting fresh advertising impetus behind the brand in

its domestic market with a TV campaign that takes a tongue-in-cheek look at the different way

men and women view home improvements. TBWA\Amsterdam created the commercial, which

shows a wife showing her friends around her new home during a housewarming party. The women

scream with delight at her walk-in closet, which has been transformed into a showroom full of

designer clothes and shoes. But their screams are cut short by the sounds coming from the

neighboring room. It is their partners who have just discovered a closet converted into a walk-in

fridge full of Heineken beer. The agency said the aim of the campaign was to draw the brand and

its users closer together (Haymarket Business Publications Ltd, Campaign, 30 January 2009).

Source: http://theinspirationroom.com/daily/commercials/2009/1/heineken-walk-in-fridge.jpg

3.

SWOT ANALYSIS

Strength (Internal) Strong portfolio of brands Strong network of breweries

Opportunity (External) Acquisition of Scottish & Newcastle Innovations: Draught keg and

extra cold program

Weakness (Internal) Need for business integration of recent acquisitions Sluggish revenue

growth of Western Europe

Threat (External) Pressure on alcohol: Stringent advertising regulations in many countries

Attractiveness of beer category under pressure: Sluggish beer consumption in US and Western

Europe Volatility of input cost: Aggressive pricing policy Stability of Africa and the Middle

East Region Economic downturn from credit crunch

3.1 STRENGTHS

Heineken’s leading brand portfolio includes more than 170 international premium, regional, local

and specialty beers. The company’s principal brands are Heineken and Amstel. During 2006, the

company has undertaken various advertising and promotional initiatives, which would improve its

brand equity. For instance Heineken launched its new advertising campaign for the Heineken

brand and the UEFA Champions League partnership, which establishes the new theme “Enjoyed

together around the world. This brand campaign has

helped it to target sports lovers. Also in the same year Heineken’ brand association with the latest

James Bond film –Casino Royale – has given it the opportunity to extend this reputation and build

promotion and activation programs for those of legal drinking age and above in 55 markets around

the world. Strong brand portfolio helps the company to create a favorable image in the market and

ensures stable revenue. Heineken has a large network of breweries. At the end of fiscal 2006, the

company owned 115 breweries and distributors in over 65 countries across Western Europe;

Central and Eastern Europe; the Americas; Africa and the Middle East; and the Asia Pacific

region. These breweries confer several competitive advantages on the company. Since these

breweries are located close to their end markets, the company is in a position to serve fresh beer to

customers. A geographically widespread plant network reduces transportation costs as well. Strong

network of breweries helps the company boost customer satisfaction and reduce costs

(Datamonitor, Company Profile, 14 January 2008).

3.2

OPPORTUNITIES

Heineken’s acquisition of parts of Scottish & Newcastle includes businesses, licences and

investments in Belgium, Finland, India, Ireland, Portugal, the UK and the US, with core brands

including Foster’s, Kronenbourg 1664, John Smith’s, Newcastle Brown Ale, Sagres, Lapin Kulta,

Maes and Beamish (Heineken N.V. Annual Report 2008). Innovations contribute to the top-line

growth and to the strength of the Heineken brand in particular. In 2008, DraughtKeg, the unique 5-

litre ‘go-anywhere’ draught system, and Beertender, the ‘genuine home draught beer experience’,

accounted for part of the volume growth of the Heineken brand. Driving top-line growth by

winning customers at the point of purchase has been the key rationale behind the roll-out of

Heineken’s extra Cold program. Heineken Extra Cold is a different way to serve Heineken. It is

the original Heineken beer served extra cold and covers both draught and packaged beer. Since the

launch of the program in 2005, extra cold draught beer has been installed in 62,000 outlets

(Heineken N.V. Annual Report 2008).

3.3 WEAKNESSES

Beer markets in Western Europe faced a challenging year due to the combined impact of the

financial crisis, mixed weather, smoking bans in France, the UK, Finland and the Netherlands, and

unprecedented increases in excise duties in the UK. Beer consumption in Western Europe came

increasingly under pressure, particularly in the on-trade and consolidated beer volume declined 1.6

per cent organically (Heineken N.V. Annual Report 2008). Western Europe, Heineken's largest

geographical market, accounts for approximately 40% of the total revenues of the company.

Sluggish revenue growth of this market would affect the overall revenue growth of the company

(Datamonitor, Company Profile, 14 January 2008). In the pursuit of further expansion, Heineken

seeks to strike a balance between organic and acquired growth. In recent years, Heineken has been

very acquisitive, with smaller transactions in mostly emerging markets and the Scottish &

Newcastle acquisition. In any acquisition, Heineken is faced with different cultures, business

principles and political,

economic and social environments. This may affect corporate values, image and quality standards

(Heineken N.V. Annual Report 2008).

3.4 THREATS

An increasingly negative perception in society towards alcohol could prompt legislators to

restrictive measures. Limitations in advertising could lead to a decrease in sales and damage the

industry in general. Sales of Heineken products could materially decrease, in particular in Europe.

Heineken’s alcohol policy is based on the principle to brew, market, and sell beer in ways that

have a positive impact on society at large. With this policy, Heineken promotes awareness of the

advantages and disadvantages of alcohol, encouraging informed consumers to be accountable for

their own actions. Heineken has many operations in mature beer markets where the attractiveness

of the beer category is being challenged by other beverage categories. In these markets, especially,

the on-trade channel is under pressure, which makes adjustments to the cost base unavoidable.

Heineken is relatively highly geared to mature markets since their acquisition of S&N.

Management focus is on product innovation, portfolio management and cost-effectiveness in order

to secure market position and profitability. Input costs (including transportation and energy)

accelerated to unprecedented levels in 2008. The world economic climate and Heineken’s active

re-negotiation efforts has since meant that some commodities (such as barley, aluminium and

energy) have come off the peak levels reached in mid-2008, however the costs of some packaging

materials (glass bottles, steel cans/kegs and crown corks) continue to increase. In addition the

outlook is strongly regionalized and also affected by currency fluctuations. Pricing strategies are

top priority in all of Heineken’s markets. This includes assessments of customer, consumer and

competitor responses based on different pricing scenarios, which will have different outcomes

market by market. In principle, Heineken will pass on increased input costs. The effect on volume

developments is at present unclear (Heineken N.V. Annual Report 2008).

4.

THE HEADQUARTER’S ROLE IN SHAPING THE GLOBAL BRAND

Marketing is the management function responsible for making sure that every aspect of the

business is focused on delivering superior value to customers in the competitive marketplace. The

business is increasingly likely to be a network of strategic partnerships among technology

providers, manufacturers, distributors, and information specialists. The business will be defined by

its customers, not its products or factories or offices. This is a critical point: in network

organizations, it is the ongoing relationship with a set of customers that represents the most

important business asset. These skills may define the core competence of some organizations as

links between their vendors and customers in the value chain. In a world of strategic partnerships,

it is not uncommon for a partner to be simultaneously customer, competitor, and vendor, as well as

partner. Consequently, it is difficult to keep the traditional management functions distinct in

dealing with strategic partners. Distributors must be treated as strategic partners, linked to the

manufacturing firm with sophisticated telecommunications and data-processing systems that

afford seamless integration of marketing activities throughout the network. Consumer marketers

continue to shift resources toward the trade and

away from the consumer per se, and traditional selling functions for the field sales organization

are evolving toward a broader definition of responsibilities for relationship management, assisted

by interactive information management capability. The implementation of market-driven strategy

will require skills in designing, developing, managing, and controlling strategic alliances with

partners of all kinds, and keeping them all focused on the ever-changing customer in the global

marketplace. Its end-use markets and its knowledge base, as well as its technical competence, not

by its factories and its office buildings, will define the core firm. Customer focus, market

segmentation, targeting, and positioning, assisted by information technology, will be the flexible

bonds that hold the whole thing together (Webster, 1992). Heineken Headquarters insists on tight

control over how the Heineken brand is marketed by its distributors and partners. However, it is

also pursuing a strategy to gain more control over the marketing ambitions of its licensee,

distributor or partner brands by seeking majority equity stakes. Especially pricing is an important

issue and Heineken would like to see its positioning in the premium segment supported by a price

premium for the Heineken beer. From Heineken’s point of view the ideal national brewer partner

should also not have ambitions for their domestic brands. Hewett et al. in their study investigating

the conditions which are influencing headquarters and foreign subsidiary roles in marketing

activities view the relational context- the subsidiary's trust in the headquarters, such that it results

in conformity to the headquarters' practices, the perceived level of dependence of the subsidiary

on the headquarters, and the extent to which the subsidiary feels as if it is a part of the parent

organization - as key in determining the subsidiary's role in marketing activities vs that of the

headquarters. Cooperation between the subsidiary and parent organization will reduce the

uncertainty regarding the decisions being handed down, and will make adoption of practices from

headquarters more likely. Their study found that the headquarters were more successful in handing

down standardized marketing processes when the subsidiary perceives itself to be dependent on

the headquarters. Therefore Heineken’s strategy to gain more financial control is designed to

improve the headquarters influence on marketing decisions. Nevertheless it seems that Heineken

should rather adopt a strategy of "glocalization“. Global marketing strategies aim to maximize

standardization, homogenization and integration of marketing activities across markets throughout

the world. However, global marketers must address a number of issues in their marketing strategy

to ensure their brand will be successful worldwide. Examples of these include differences in

economic environments, political environments and cultures around the world. While the theory of

standardization of marketing activities works on a strategic level, it is often not suitable for the

richness of detail needed on operative and tactical levels. Most marketing activities will be more

successful when adapted to local conditions and circumstances in the marketplace. Marketers need

to understand how their brand is meeting the needs of the customers and how successful their

marketing efforts are in individual countries. A "glocal strategy“ standardizes certain core

elements and localizes other elements. It is a compromise between global and domestic marketing

strategies. In a glocal strategy the corporate level gives strategic direction while local units focus

on local consumer differences (Kotler et al. , Marketing Management).

Participation in goal setting benefits subsidiaries with greater roles, but too much participation

may become detrimental. Likewise, although less participation in goal setting is needed when

headquarters is attempting to hand down marketing strategies such that subsidiaries are taking on a

less significant role in marketing activities, too little participation may negatively affect

performance. The more conditions deviate from those faced by subsidiary marketers of successful

products who take on a particular role, the lower product performance tends to be. The ability of

global managers to determine the extent to which they should foster greater roles for particular

subsidiaries should also be enhanced in that these managers, unable to control market, industry,

and/or relational conditions, can better forecast success by determining whether greater or lesser

subsidiary roles are more aligned with these conditions. Performance assessment will also be

improved by recognizing the obstacles faced in situations where alignment may not be ideal, such

as when the headquarters is attempting to hand down processes under adverse industry conditions

(Hewlett et al. ,2003). Heineken’s headquarters should take a combined approach of centralization

and decentralization to leveraging global marketing. The headquarters should pass on the specific

guidelines that determine the face of the brand worldwide with fundamental. Local marketers

should be challenged to develop locally relevant translations of the program recognizing the

importance of inspiring marketing at a local level. The key is to find the right balance between

central guidelines and the content of the brand at a local level. This will allow for consistency in

Heineken’s international advertising, yet permits local input and a regional adaptation of the

promotion program. Heineken should also set up a best practices system and transfer knowledge

from one country to another.

5. RECOMMENDED MARKETING STRATEGY

A global brand is required to provide relevant meaning and experiences to people across multiple

societies. Increasingly, a company's global stature indicates whether it excels on quality. A study

conducted by Holt et al in 2004 measured for country-of-origin associations as a basis for

comparison and found that, while they are still important, they are only onethird as strong as the

perceptions driven by a brand's "globalness". Consumers look to global brands as symbols of

cultural ideals. They use brands to create an imagined global identity that they share with like-

minded people. Transnational companies therefore compete not only to offer the highest value

products but also to deliver cultural myths Global brands usually compete with other global

brands. To succeed, transnational companies must manage brands with both hands. They must

strive for superiority on basics like the brand's price, performance, features, and imagery; at the

same time, they must learn to manage brands' global characteristics, which often separate winners

from losers. Smart companies manage their brands as global symbols because that's what

consumers perceive them to be. Firms must learn to participate in that polarized conversation

about global brands and influence it. A major obstacle is the instability of global culture.

Consumer understandings of global brands are framed by the mass media and the rhizomelike

discussions that spread over the Internet. Companies must monitor those perceptions constantly

(Holt et al., 2004). Heineken’s brand strategy needs to monitor the brand's own capabilities and

competencies, the strategies of competing brands, and the outlook of consumers experience in

their respective societies. The challenge for an international brand is to inspire on a global level

but at the same time remain personally relevant, attached to the target group’s personal cultures

and origins. As consumer needs and tastes vary, Heineken must decide how much to adapt its

marketing strategy to local needs using a combination of standardized marketing mix and adapted

marketing mix, respecting the strong brand preferences and loyalties that exist among the beer

drinkers. Also, Heineken needs to prioritize between global integration vs. national

responsiveness. The effects of this discrepancy become evident in the decreasing sales in Western

Europe. The real test lies for Heineken to restore its market lead and reputation in Western Europe,

which by far is the largest contributor to its sales. Heineken beer is a globally well-known and

respected brand. It’s values and principles, its CSR program and program for responsible alcohol

consumption all provide an excellent global strategy to build local efforts on. Heineken’s

sponsorship strategy to build brand equity through relevant associations with high-impact, high-

profile sports and music events, films is no less excellent and should be adopted in other markets

for brand enrichment after brand building, e.g. in Asia. The Project Comet identified the core

values, taste, tradition, premiumness, friendship and winning spirit, which are transported by the

Heineken Brand as explained in 2.2. However, Project Mosa revealed that different values are

associated with different expressions in different cultures. These findings should be used to

establish locally driven campaigns. By connecting to local situations and preferences, consumers

will develop a greater emotional tie to the company. In Germany, where consumers are loyal to

domestic brands and consider the brewing process an important element of taste, Heineken should

incorporate the quality of the raw materials and brewing details into advertisement campaigns.

National advertising should play a prominent role in promoting the Heineken brand. In Latin

America, Heineken needs to communicate what makes Heineken beer distinctively different from

other imported European beer. The focus on taste and friendship and could be supported by

sponsoring sporting events in Brazil. In the United States, Heineken needs to move a away from

the image of a drink for special occasions and start promoting Heineken as the beer of choice at

college or spring break parties.

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