The Heineken brewery, founded in Amsterdam in 1863 by Gerard Adriaan Heineken, is one the largest brewers in the world. With sales throughout Europe, America, Asia, Australia and Africa, Heineken was second in volume of beer brewed behind only Anheuser-Busch in 1993. While Europe, particularly the Netherlands, provided the majority of its sales revenue, international expansion provided the majority of sales growth from 1992 to 1993. As the trend toward international expansion and the globalization of the brewing industry increased, the importance of effective advertising strategies and projecting an appropriate brand image became increasingly important.
Expansion into emerging markets forced Heineken to deal with many new challenges. Heineken began losing control over advertising and pricing when it licensed foreign brewers to produce Heineken beer. Also, the landscape of the beer industry was quite different in emerging markets when compared with the European beer industry. Variables such as per capita consumption, consumer preferences and behaviors changed considerably depending upon the country and its stage on the beer market evolution scale. Simultaneously, the European market was also changing as sluggish growth created increased price competition and margin pressures. As a result of all these pressures, the Heineken brand was being inconsistently communicated through fragmented marketing strategies to its worldwide base of customers. Heineken executives viewed this as a potential problem that needed to be addressed if the company was to continue as a leader in the beer industry. (See Exhibit 1)
In the early nineties, major changes were taking place within the beer industry. The brewing industry was becoming increasingly global causing major brewers, particularly in emerging markets, to expand by way of acquisitions and joint ventures. The untapped Chinese market, for instance, offered vast growth potential. By late 1993, China would surpass Germany as the second largest beer drinking nation in terms of volume (Beer Companies Set up Role in China Market). Industry experts forecasted double digit growth for years to come as China’s per capita beer consumption increased, eventually making China the world’s largest beer drinking nation. Other emerging markets presented similar opportunities such as Mexico and other Latin American countries. Along with these opportunities, however, came the challenge of gaining acceptance in foreign markets and meeting the unique needs of its consumers. As new markets emerged, the more traditional markets were showing the effects of being in latter stages of the beer market evolution scale. The U.S. market like many in Europe, for instance, had reached the point of stagnation as a result of its aging population. Sales of domestic beers within the U.S. had fallen 2.1% in 1992. Of the U.S market, only 4% was comprised of imports. Sales of Heineken, the leader in the import market, made up 22.8% of the segment. As noted in a 1992 industry article, “The Brand’s $11 million advertising budget, hefty for an import, dwarfed all but the smallest domestic beers” (Imports Brew New Success, 1992). However, U.S. consumer’s price sensitivity and increased competition continued to keep the import segment at a low percentage of overall sales. Other trends stemming from consumers personal preferences also began to emerge during this time. For instance, the number of Heineken’s glass shipments to U.S beverage businesses increased considerably. Glass shipments were up 4% in 1993 (“Glass of 94”, 1994). This was most likely a result of consumers’ preference for a higher quality or “premium” glass container to hold their beverage as opposed to a can or plastic bottle. Increased sales of “premium” glass containers showed that more consumers were choosing premium products over the “lesser quality” domestic beers, a trend that continues today. However,...
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