Heineken’s tribute to Sophrosyn: No and low-alcohol innovation helps brewer hit €1.5bn jackpot

By Ben BOUCKLEY contact

- Last updated on GMT

Heineken chair and CEO, Jean-François van Boxmeer
Heineken chair and CEO, Jean-François van Boxmeer

Related tags: Alcoholic beverage

Heineken says moderation is increasingly important for today’s consumers as its growing no- and low-alcohol beer portfolio helped deliver €1.5bn in innovation-related sales in 2014.

Today the Dutch brewer reported its results for the full year ending December 31, with group revenue – including JVs and associate companies – up 3.3% on an organic basis to €21.174bn ($23.927bn), while overall net profit rose 11% to €1.516bn.

Glossing the numbers – which saw Heineken post single-digit volume and revenue growth in every region bar Central & Eastern Europe, where bad weather and the Russian rouble slide hit sales – CEO Jean-François van Boxmeer (pictured) devoted a slide to Heineken’s innovation program.

This showed a company-wide innovation rate of 7.7% throughout 2014, versus a long-term company target of 6.6%; last year innovation delivered €1.5bn in sales, up from €400m in 2010.

Alongside new pack types, brand extensions, and an improved home draft offer with last year’s launch The Sub, Heineken said its low alcohol Radler portfolio and alcohol-free drinks also helped deliver the higher number, with innovation lending Heineken a “significant competitive advantage”​.

'Directly addressing the emerging theme of moderation'

“One of our key innovations, [the lager and cloudy lemon mix] Radler, is now present in 41 markets – up from 31 last year, across all five of our regions,”​ Van Boxmeer said.

“It’s directly addressing the emerging theme of moderation*, and creating new drinking occasions for our brands. Its success has ensured that we are market share leaders in this growing category.”

The Heineken boss also flagged-up a successful pilot launch for Maxx alcohol-free beer in five markets – Greece, Bulgaria, Croatia, Hungary and Romania.

Fosters Radler

Launching Maxx last year, Heineken noted increasing health consciousness among younger people, and said the drink gave beer drinkers a non-alcoholic alternative for lunch meetings or as a post-gym refresher, and was a more grown-up alternative to soft drinks or juices when socializing with friends.

This piqued the interest of ACA beverages equity analyst Edward Mundy in today’s Q&A following the results call.

“How quickly can you scale-up with Maxx, and in those markets where it has been rolled out, is there any cannibalization of the Radler product?”​ Mundy asked.

“We see more and more traction behind alcohol-free products – you scale that up more rapidly…it’s not just pushing, it’s about finding the right consumer response – you get different reactions to alcohol-free propositions in different countries,”​ Van Boxmeer replied.

“But overall we see moderation is a big theme for consumers, and the alcohol-free portfolio is clearly playing an important role there.

Substituting for soft drinks, water and juice

Van Boxmeer said Heineken’s low alcohol drinks (Foster’s Radler, for instance, at 2% ABV in the UK) or alcohol-free beverages (Maxx beer or Radler 0.0%) were substituting for soft drinks, water or juice on social occasions, and were “becoming a more realistic, more adult-focused alternative – so we’re expanding the market with that and there’s limited cannibalization”.

Other contributors to Heineken’s strong innovation top line in 2014 included new pack types (Van Boxmeer checked off 50cl Primus in the Democratic Republic of Congo) and brand extensions – successful Brazil launch Kaiser Radler and Malta Gold in Nigeria.

Finally, Heineken’s home draft offering, The Sub was launched in four markets in 2014. With additional launches slated for 2015, Van Boxmeer said it provided a “new, important and exciting”​ route to market via e-commerce.

*Our headline alludes to Sophrosyne as Greek goddess of moderation, self-control, temperance and discretion.

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