Thursday, July 10, 2008

Heineken N. V.: Global Branding and Advertising

Situation Analysis

Heineken has been present in market outside Netherlands, but it started granting license with original formula and gave guidelines as to how the brand should be marketed. It wanted to gain majority equity stakes in its existing and prospective partners to ensure stringent control over production and marketing. In Europe, Price competition was high and markets were segmented to no or low alcohol beers, flavored beers and dry beers. The per capita consumption differed due to consumer preferences and behaviors and varying competition mix from one market to another.

Heineken N.V has all the essential strengths that a brewery company should have to be a global brand, and it is consumed by people across the globe. Though it has a global presence, its image and identity perception is varied across the world. In Netherlands, it is viewed as a mainstream brand, and a market leader. In the United States and Hong Kong it is perceived to be a beer that is used for special occasion rather than for daily consumption. In Latin America it is viewed as just one among many European imported beers. So we see that Heineken does not have a consistent brand image. Sales volume was declining and the brand needed to be regenerated with a uniform identity.

Two projects, Comet and Mosa have been established to address different situation. Project Comet was established to recommend making the brand image consistent and positioning the brand as the world’s leading premium beer, and concluded that the good taste image would be built on the five core values of the brand, taste, premium ness, tradition, winning spirit and friendship. Project Mosa was established to find out which expressions of taste and friendship can be used to brand in its advertising, which intends to draw consumer reactions to both the visual and message claims presented on the taste and the friendship board to promote the brand based on the responses of the focus group.

SWOT Analysis

Strengths

1. Light beer of superior quality presented in attractive packaging
2. Most heavily advertised premium beer in Europe and worldwide mostly through TV commercials
3. Market leader in Netherlands and is viewed as mainstream brand
4. Good acquisition strategy
Weaknesses

1. Sales volume was declining
2. Image of the brand was different in different countries (lack of global branding)
3. Lack of worldwide advertising campaign
4. No production base

Opportunities

1. Growing non-alcoholic market
2. Global expansion
3. Growth in the flavored beer and draught beer market
4. Africa still at the embryonic stage in the beer market
Threats

1. Price competition in Europe due to overcapacity and minimal population growth.
2. Presence of no-or-low-alcohol, flavored beers, and dry beers in the market.
3. Variation in market on the basis of per capita consumption, consumer preferences and behaviors, and competition mix.
4. High local consumer loyalty in Africa


Issue Analysis
- Building a Standardized Global Brand Image

As stated earlier, Heineken N.V. has been present in markets outside Netherlands. According to the Exhibit 1, Heineken is still in the embryonic stage in the countries like Africa, Eastern Europe, Brazil, Argentina, etc. It has to still build its brand in these countries. In other countries like Italy, Spain, Japan and Germany, Heineken has already established itself as a brand and has been trying to enrich its image in these markets. In Netherlands, it is viewed as a mainstream brand, and a market leader. In the United States and Hong Kong it is perceived to be a beer that is used for special occasion rather than for daily consumption. In Latin America it is viewed as just one among many European imported beers. Thus, though the company has a global presence, its image and identity perception is varied across the world. The main issue surrounding the company is to establish a strong global brand which is standardized across all the countries in the world. Heineken, in its Project Comet, has defined five components of Heineken’s global brand identity and has explored how they should be expressed in Heineken brand communicators. Project Mosa has also involved a different team of executives and identified the expressions of taste and friendship that had the most appeal and explored how they should be expressed in Heineken television advertising worldwide. The aim was to make sure that both the projects were mutually consistent and together work towards standardization of Heineken’s brand image and advertising worldwide.

Case Exhibits Analysis

Exhibit 1
Beer Market Evolution for Selected Countries and Regions:
Stage of Development: EmbryonicMarket: Africa
Ø Africa is still at the embryonic stage, where beer is just introduced in the market
Ø Since the consumers are loyal to local brands the company needs to build a strong portfolio to combine the power of local and itself
Ø The consumers have to be introduced and accustomed to the brand, thereby reaping the market share
Ø Reach and frequency of advertising will have to be higher as the aim is to get the people familiarized with the company and to create brand awareness
Stage of Development: Take-offMarkets: Eastern Europe, Southeast Asia, South America, Greece/Portugal
Ø Eastern Europe is at the take off stage, characterized by shifts in consumer taste and development of standard beer
Ø Most of the people already know the brand exists but not all so the company can create awareness through advertising
Ø There exists shift in consumer taste company needs to communicate to the consumers that Heineken beer has superior taste and high quality.
Ø At this stage the company needs to communicate about the quality of beer they produce and also introduce premium quality to maintain the customers
Stage of Development: GrowingMarket: Italy, Spain, Japan, North & Central Europe, Australia
Ø Italy, Spain, North/Central Europe and Australia are at the growth stage
Ø In Italy, Spain and Japan portray focus on high volume and price competition, and the latter three indicates segmentation and consumer sophistication
Ø The market here is in the process of growth and so it will be very competitive with a lot of players trying to get into the game – the emphasis here will be on frequency and increasing the market share
Ø It needs to increase its distribution coverage and enter new distribution channels or it can enter new market segments and it can offer beer at different sizes and flavors
Stage of Development: MatureMarkets: North Central Europe/Australia
Ø Market that has reached a state of equilibrium is called as a Mature market
Ø A mature market has to be revitalized with quality and premium ness of brand
Ø At this stage of the product, Heineken needs to increase its investment to dominate the market and strengthen its competitive advantage
Stage of Development: DecliningMarket: USA
Ø The United States is at the decline stage revealing brand segment proliferation and product differentiation
Ø Here, the market for the Heineken beer is declining as there is high competition and people are preferring variation in their drinking habits.

Exhibit 2
Key Heineken Marketing Objectives in Eight Countries:
This exhibit shows the various marketing objectives of Heineken in eight countries in which the company is doing business. These objectives are set according to each country’s stage of market evolution.

Building: In certain markets it has to build its imageMarkets: Brazil, Argentina, and Germany
The German consumer remains fiercely loyal to local German breweries so posing a particular challenge to a newcomer introducing a global brand. The regional administrative control further hinders achievement of an efficient national distribution network.
Enrichment: In other markets it has to enrich its imageMarkets: Hong Kong, JapanThe markets here are highly competitive as far as price is concerned and they are high volume market, the brand has to cut across the clutter and enrich its image by corporate advertisements, and promotions.Confirmation: In others it has to confirm its brand promiseMarkets: USAThis market is characterized by high brand as well as segment proliferation, product differentiation. Confirmation of the brands’ premium quality and its image of being better than standard is needed in this country. The strategy needs to reflect that and communication should probably focus on the core brand value of premium taste, friendship and the winning spiritRestoration: And in some it has to restore its imageMarkets: Italy, NetherlandsIn markets that are characterized by consumer sophistication, segmentation, price competitiveness and high volume focus the objective is restoration of the image. Here also, the company has to provide lot of advertisements to the stand out from the crowd and prove its worth to the consumers.

Exhibit 3
Comparative Heineken Usage data for Seven European Markets:

There are several insights to be gathered by a market survey namely as to where there is greater brand usage and market share and where the trial/awareness ratio is good and where it needs further push. The relationship between the product-trial rate and the customer awareness level will remain to be the deciding factor on reach, frequency & impact of the advertising campaign. These things help decide on the marketing mix that the company uses.
Ø Ireland and UK rank amongst the highest in beer consumption yet market share position is weak in UK.
Ø The highest percentage of people naming Heineken as their first choice is highest in Greece and lowest in Italy and Spain with UK as the third lowest.
Ø Market share position is weakest in Spain and UK so Heineken needs to build and infiltrate the market
Ø Heineken needs to increase its SOV in UK and Spain
Ø Greece is its best market
Exhibit 4 and 5
Sample Project Mosa Concept Boards: Taste and Friendship Expressions
For Heineken the desired image was 'good taste’ and the key goal was to enhance Heineken’s competitive advantage by more consistently projecting the brand as ‘the world’s premier beer’. According to Project Mosa which conducted focus groups in 8 countries to understand what male drinkers meant by taste and friendship in relation to premium beer drinking and which expressions of taste and friendship could be used by the Heineken brand in advertising

Exhibit 7
Standard Vs Premium Beer: Summary of Focus Group Responses:
According to the focus group the word ‘premium’ brought certain ideas and images to the mind of the people, these were diametrically opposite to ‘standard'. When you think of both the words different associations come to mind and so Heineken can leverage these associations to promote their premium quality.

Exhibit 8 and 9
Taste and Friendship Expressions: Overall Heineken Suitability:
Markets have different ideas about what they believe and what they respond to.The reason to believe as far as taste is concerned stays relatively the same in most of the markets, whereas the expressions of friendship do change from country to country.
Taste Expressions
Quality: This remains same in all the markets.
Brewing Skills
Ø For Netherlands is concerned the ‘pure taste’ is the reason to believe as far as brewing skill is concerned.
Ø For Germany it is 100% malt and smooth taste
Ø For Italy it’s smooth and pure taste
Ø For USA its al three 100% malt and smooth and pure taste
Ø As far as the average of the 8 countries was concerned none of the factors figured in as important or a positive indicator of quality.
Tradition
Ø For Netherlands ‘Family since 1863’ was not an indicator or an expression of taste but ‘Original Recipe’ and ‘Where the beer was born’ were reasons.
Ø For Germany all three were positive expression of taste
Ø For Italy only ‘where the beer was born’ was a reason to believe in tradition as expression of taste
Ø For USA like Italy all three were reasons to believe in tradition

Availability
Ø More bars/more countries
Ø More bar/more countries was a reason to believe in Availability as expression of taste only in Netherlands

Friendship Expressions
Ø For Netherlands ‘Rugby’, True Friends and ‘Always count on Heineken’ were the expressions when they were asked to convey the core value of friendship
Ø For Germany only ‘true friends’ and ‘Always count on Heineken’ were the expressions.
Ø For Italy ‘cat and dog’, ‘Rugby’, and ‘Always count’ on Heineken were the expressions of friendship
Ø For USA like Germany only ‘true friends’ and ‘Always count on Heineken’ were reasons to believe
Ø As far as the average of the 8 countries is concerned only ‘true friends’ and ‘Always count on Heineken’ were reasons to believe

Recommendations

Heineken should create different strategies to meet the different features of each country. For example, Netherlands, Germany and the other four target countries show in exhibit 6 similar indications of beer taste. They are interested in manufacturing and product categories. Nevertheless as shown in exhibit 2, Heineken’s position and objective are different among these countries. This means that each country requires different marketing mix from the other. We have identified the issue that Heineken needs to build a stronger and standardized global brand image. On the basis of this issue, here are few suggestions that can be applied by Heineken N.V. in order to meet the objective.


1. Brand Reinforcement:
Heineken needs to convey the meaning of the brand to consumers in terms of what needs it satisfies; as well as how the brand makes its product superior and which strong, favorable and unique brand associations should exist in the minds of the consumers. Heineken needs to reinforce its brand as a premium light beer that can be drunk anytime irrespective of the occasion. In United States and Hong Kong, Heineken beer is perceived to be a beer that is used for special occasion rather than for daily consumption. The company has to use creative marketing and communication strategies to change this perception of the people. They can do this by coming up with a universal tag-line “Anytime Beer”. They can also include this in a ‘Positioning Statement’ which could be as follows:

“To different ages, stages and lifestyles, Heineken is the premium light beer you can drink and enjoy for any occasion as it tastes better and gives rare pleasure than any other brand since it is brewed from finest quality of malted barley and hops. Thirsty, tired, stressed out or just chilling out? Heineken, anytime beer, is all you need!!”

2. Sponsorship:
Sponsorship strategy for the Heineken brand should be to build brand equity through relevant associations with high-impact, high-profile sports and music events, films and the world of Hollywood.
Film:
Heineken brand should seek association with ‘blockbuster’ movies with a relevant demographic profile. We find this particularly useful for establishing the brand position in crowded marketplaces.
Sports:
They should sponsor numerous sports events at local, regional and national level. It can be seen as a core component in strengthening the brand equity, re-enforcing the international, premium positioning and driving spontaneous awareness of the brand.
Music:
They can also sponsor musical events where they can bring the worlds leading DJs in a traveling music show. This can be a significant part of the strategy to build presence and credibility in the contemporary music.

3. Mergers and Acquisitions:

The company should think of mergers and acquisitions in countries like Africa and Brazil. As there is high price competitiveness, and people tend to be loyal for local breweries, Heineken should acquire these local breweries in order to cut the competition. Since there are no factories in Africa, they import the beer to this country form Netherlands. This increases the price of the beer as against the local beers. Due to the acquisition, the company can use the factories of these local breweries to produce Heineken beer so that the price of the beer is reduced to a greater extent and thus, it can establish its brand image as one of the price effective beer available in the country. The main disadvantage in this strategy is that it incurs a lot of initial investment to merge and also to set up factories.

4. Intensive Growth (product development) Strategy
In Italy and Netherlands, Heineken should try to restore the brand image and increase the market share. To do this, it should grow intensively by adding more products to its product line. Like, introduction of different flavored beers, dry beer etc so that its current consumers have more variety in their choices and thus encourages them to buy more and remain loyal to the brand, which enhances the brand image. It can also try different packaging and distribution channels for the new products to attract more customers and also non-users.

5. Advertising
Advertising plays an important role in building a brand image of a product. Developing and maintaining a brand image is vital to any successful marketing and communication campaign. In order to succeed in the integrated marketing communication, Heineken has to consider the consistent and coordinated messages in their commercials. The messages should also generate positive effects on their customers. Heineken should base their advertisement on communicating a unified image which should be “Anytime beer”. The advertising goal for Heineken should be to enhance its image by means of focusing on the good taste. Heineken should communicate all the five core values (Taste, Premium ness, Tradition, Winning Spirit and Friendship) in every advertisement to establish the unique and differentiated brand in beer market. It should also communicate that it is the brand of people who prefer premium beer which has true value to mass-gathering beer. The casting and tone of voice in their commercials should be chosen carefully because the effective communication of winning spirit and friendship depends on the persons in the commercials who are self confident, warm, winners and also among those who really enjoy their relationships. It should also contain elements such as enjoyment appeal, natural appeal, affiliation appeal, sexuality appeal, information content and the occasion for product usage. Commercials where main characters are at places where they enjoy themselves, a pool party or a pub would be an enjoyment appeal. When the main character enters, he is immediately accepted by others is an indication of use of affiliation appeal. The fact the Heineken beer is brewed from the finest quality of the malted barley and hops addresses the natural appeal. Flirting, seen as form of romance is the characteristic of sexuality appeal. Along with these, information content is also a major part of any commercial which can be about the packaging, the shape, availability, price, etc. Different advertisements showing people drinking in pubs, at home, at parties, after work, dinners, while enjoying baseball game or just while watching television would indicate that Heineken can be drunk anytime, anywhere. To be entertained is a good way to keep a brand name in mind, which they can do by using humor in their commercials.

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