Heineken Light: Reviving Franchise but Missing Sales Goals

Big-Spending Brew Will Turn to Innovation to Spur Future Growth

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It's the most expensive import-beer launch in the U.S. market in history. It was supported by a $50 million first-year campaign, numbers equivalent to mainstream brew, and busted all expectations, landing the No. 9 slot in the sizzling import-beer sector after just one year.
Ad spending on Heineken Light's debut set an imported-light-beer record of $70 million.
Ad spending on Heineken Light's debut set an imported-light-beer record of $70 million.

Yet Heineken Premium Light is falling short of its second-year targets, company executives said last week.

That's because Heineken, perhaps a little intoxicated by the brand's success, set lofty goals for 2007: It would raise the ad budget to an imported-light-beer record of $70 million, grow volume to 1 million hectoliters and turn a profit.

Falling short
Some six months later, however, brewery executives say the only one of those goals they're likely to hit is the inflated spending tally. "We will not reach the 1 million hectoliter mark or break even for this year," Heineken Chief Financial Officer Rene Hooft Graafland told investors recently, citing a 3.5% price increase, along with uneven and spotty summer weather in the U.S. as factors in the underperformance.

In the brand's defense, it still grew volume 30% despite the higher price point, a far superior second-year result compared with other recent big-spending beer launches, such as Budweiser Select. And its early success also helped Heineken USA secure U.S. rights for Femsa Cerveza's stable of beers, including hot sellers such as Tecate and Dos Equis.

"Heineken Premium Light has had a huge benefit for Heineken, even with the underperformance this year and the over-performance last year," said Thomas A. Russo, portfolio manager of Pennsylvania-based Gardner Russo Gardner, which holds more than 5 million Heineken shares, as well as positions in several of its rivals, including Diageo, SABMiller and Brown-Forman. "The targets they set were perhaps too ambitious, but that was mostly because of the tremendous success of the first year.
Heineken Chief Financial Officer Rene Hooft Graafland
Heineken Chief Financial Officer Rene Hooft Graafland

"The fact is, it revived the entire franchise."

Tapping draft kegs
For the rest of the year, Heineken Premium Light, which is handled by Berlin Cameron United, New York, will be looking to innovation to spur future growth. Having already introduced a stylish slim can, executives told analysts that in September, they'll introduce Heineken Premium Light in draft-keg format. The self-tapping mini-kegs have helped grow volumes on Heineken's flagship lager. The brewer said it sold 5 million draft kegs of regular Heineken worldwide during the first half of this year, compared to 5.2 million during all of 2006.

The brand also plans the rollout of a "Beertender," an appliance that keeps draft kegs of beer refrigerated and accessible on the kitchen counter. "[The Beertender] is a sort of an espresso machine for beer," said Mr. Graafland.
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