The Performance of Heineken - Case Study Example

Marketing: Heineken case study

Table of Contents

Introduction3

Strategies that Heineken took to reach a success point3

Brand equity3

Product management4

Niche Penetration5

Challenges and issues that Heineken faced during these years6

The Heineken brand in the changing markets7

The most suitable branding option for Heineken for the future8

Conclusion9

• Introduction

Heineken is a leading beer brand that has started exporting since 1930. The iconic beer brand was led by the global brand manager Cyril Charzat by enforcing the glocal branding strategy. Charzat realised himself as the steward of the Heineken family who carefully had build up the brand legacy. The brand was successfully till 2008 due to the effort put forward by the company to tailor its marketing strategy to the local context. Heineken started experiencing its first stagnation of growth in the volume of beers being sold across the world. There were multiple reasons that affected the performance of Heineken among which the economic downfall and intensified competition in the industry was significant for its failure.

Heineken developed a profitable market in France by initiating its own tagline, advertising and price setting. Charzat realised that development of “glocal” strategy is essential to combat the slackening growth which has made it apparent to change the conventional brand strategy.

• Strategies that Heineken took to reach a success point

In response to the different market threat, the company has developed their own unique strategies which have led to even more diverse positioning of the brand. The brand focused on music in the markets of Hungary, Poland and Italy. Alternatively, the company focused on reviving its Heineken light on other key markets such as in Puerto Rico and US.

• • Brand equity

The consumer’s perception on a brand is strategically valuable for the brand management. Consumers who experience the brand and their perception of brand equity, is defined as the consumer’s perseverance of a brand and whereas its value adds effect to the functionality or service associated with brand name.

In reference to the brand management theory, Heineken has developed strong brand equity through the significant contribution of the following factors:

• Heineken is signified through the beer they produce, that always had an accessible and balanced taste, which has never changed over the years.
• The credentials of Heineken have contributed in making it a leading international brand.
• More focussed on local strategies and implements effective advertising campaigns and sponsoring platforms in alignment with the local taste.
• The company claims to be an iconic design due to its consistent design of bottles on the local scale.

The launch of Heineken light version in the US has enabled significant growth as a result of which the company saw a turnaround in the year 2006. The light beer by Heineken represents 50 % of the sales in the US beer market. The world beer market estimated 200 million hectolitres beer sold in 2009. Only 6% of this volume represented the International Premium Sector (IPS) out of which Heineken was the largest player having more than 20% market share.

• • Product management

The above study is assessed by evaluating the theory of product management that relates to the marketing mix variables. The marketing mix is an efficient tool available to the marketer to manage the physical product through various phases of product life cycle. Marketing mix is related to the application of different strategies such as branding, product modifications, product line extensions, positioning and growth of strategies.

• • Niche Penetration

According to Hatch, Schultz and Skov (2015), niche penetration is defined by implementing sales promotion, advertising, trade promotion activities. The short-term objective of niche marketing penetration is to maximise the adopters and explorers in the target segment in order to achieve a largest market share. On the other hand, the long term market objectives are to maximise the return on investment.

Heineken has launched several local campaigns enforcing the idea of local drinking related to the increasing awareness against negative effect of drinking. The management was aware of the trend and increasing legal restrictions in respect to international communication on promoting beer brands, as a result of which Heineken has implemented the concept of responsible drinking in its marketing communications.

Moreover, Heineken strongly felt the importance of localness in their beer business which is voiced by their local managing marketers. They have taken the following steps to regain their position as the strong player:

• Heineken reassured the consumers with credibility in countries that have strong beer culture.
• The company has strongly focussed on local branding of its products.
• In reference to social context, the Asian consumers are much different from that of the western customs. Consequentially, their advertisement strategies significantly focussed on the local customs.

Even though the company has imposed less attention on their marketing strategies, Heineken brand was doing relatively well in majority of its market.

• Challenges and issues that Heineken faced during these years

Heineken has faced severe competition in the beer industry, which has intensified with the introduction of potential rivals. The consumers had growing number of options in the beer industry with lower artisanal brews and lower budget beers. The rising numbers of international brands has major impact on Heineken’s performance. The global competitors in the beer industry include, Budweiser, Carlsberg, Tuborg, Stella Artois and Beck’s. The company lost its momentum and its growth rate started to decline by 2004, as the developed brewery showed less growth than ever. The acquisition strategy of Heineken had enabled it to become the portfolio company. The influence of Heineken in the company portfolio has decreased to a considerable level. The company has represented 35% of the global volume sold; however, by the year 2009, Heineken has shared the total volume of the company that was decreased by 20%.

By the time crisis hit in 2008, the brand was affected from various aspects. The mainstream local brands attacked the company with price-cuts; whereas, the product focussed brands made Hieneken look shallow and the advanced brands made Heineken look old fashioned. The acquisition strategy has resulted into diversified portfolio; however, it has substantial impact on its downfall as well. Charzat has stated that majority of companies has heavily focussed on ROI in order to create cash for takeovers. In developing countries such as in Central Eastern Europe, the brand has modest contribution to the sales and profit; hence, it became less of a focussed company. Also, the brand was too small in majority of countries and has created too little profit in order to justify their marketing budget with the aim to position their strategies properly.

• • The Heineken brand in the changing markets

In reference to the 2007 economies, the developed markets highlighted substantial slowdown in the growth.

Figure1: Degrading economic growth

(Hatch, Schultz and Skov, 2015)

The significant decline in the developed market had apparent effect on the sales volume of Heineken. The volume shows negligible growth by the fourth quarter of 2008 (Hatch, Schultz and Skov, 2015). Statistics reveal that Heineken was not the only brand who suffered such contingencies due to the changing economic conditions. The phase of recession has forced the consumers to make tradeoffs between the premium and main stream products. Moreover, the economic conditions significantly impact overall beer consumption as a result of which the premium brands like Heineken were severely affected.

Heineken target the upper economic class who were consistent with their purchase of premium products like beer. However, the consumers of premium segment started looking for sustainability, authenticity and craftsmanship.

In order to manage the brand on a global scale, the company made serious attempts in 2005 by tailoring its marketing efforts locally. The company’s global brand manager decided to exploit their global tagline of “Meet you there”. The second attempt was made in 2008 with the plan of new design. The strategy executed by enforcing global Heineken beer bottles with a proprietary shape and special design.

However, both the attempt was for global branding which encountered strong resistance from the market as a result of which the company was at a huge loss.

• The most suitable branding option for Heineken for the future

Heineken should follow the three options to establish its brand in future which is discussed below:

Logo option- Heineken can create eye-catching corporate branding almost instantly by designing a logo for their domestic and international business. The company will have to ensure that such logo is not randomly chosen out of whims but rather be representation of attitude, vision, mission and goals of the business. The logo must be very specific and not general and should be designed in a manner that it suits the product portfolio of the company and meet the expectations of the target customers.

Web site/ Social media option – Heineken can leverage technology for expanding the brand in future. A lot of people in the modern era prefer to communicate via internet and social media. The company can use this as an advantage for spreading its brands, products and services. The content of the website should very clearly demonstrate the unique selling proposition of the brands. With the help of social media the company will be able to connect to millions of customers almost instantly and create brand awareness.

Advertisements – Heineken should not forget the benefits of advertisements which can be print media (brochures and flyers) which have been effective for promotion of branding in the past. Otherwise, it can even choose modern digital media for grabbing the attention of public.

Glocal strategy – The brand must stick with one significant Heineken recipe; at the same time, it should allow its market to develop and implement their own brand strategies. The head office would offer a particular range of marketing tools for the market to pick and select from the local brand strategy.

Global strategy- The Company should focus on developing a global existence revolving around their Heineken brand. The strategy must be implemented in respect to the various elements of marketing mix along with the top-down approach.

• Conclusion

As Heineken follows a global strategy of expansion, the necessary steps chosen by the company was standardization of marketing communications. The emerging market in the beer industry carried a lot of opportunity for Heineken due to the growth in population and increase in consumption per capita. The brand name and brand equity developed by the company has significant contribution in developing a strong market base even in the presence of intense competition. The brand strategy of Heineken revolves around the development of a strong portfolio that amalgamates the power of international as well as local brands, which has been successful in achieving the sustainable growth.

Reference List

Hatch, M.J., Schultz, M. and Skov, A.M., 2015. Organizational Identity and Culture in the Context of Managed Change: Transformation in the Carlsberg Group, 2009–2013. Academy of Management Discoveries, 1(1), pp.56-87.