Heineken USA CEO: This is why the small stuff matters in making good beer
Source: Heineken USA. Brewer Heineken has beaten Coca-Cola to become the world's most awarded advertiser, with campaigns such as Le Big Swim for Kronenbourg helping it win ·CNBC
Tom Rotunno
Updated
It's been one year since Ronald den Elzen took the top spot at Heineken (Euronext Amsterdam: HEIA-NL) USA. While one could say he hit the ground running, it might be more accurate to say the new CEO embarked on his own version of the 1987 hit movie, "Planes, Trains and Automobiles."
A 20-year veteran of the Dutch beer giant, den Elzen previously held positions in Amsterdam, the U.K. and Portugal. Looking to familiarize himself with his new territory and meet as many distributors in different markets, he immediately embarked on a 60-day cross-country tour — ultimately hitting 28 different states in his first year on the job.
"I thought when I came over here there would be more similarities across the states," den Elzen told CNBC in a recent interview. "When you look through a European lens you see this one huge country, but when you travel across it you see that every state is different in terms of different legislation, different sales tax, different food habits and brands."
Navigating the state-by-state differences, along with the three-tier distribution system required in the United States, adds a layer of complexity.
"You can have a national strategy but not a national activation without fine-tuning for each different state," he said. "So these small exceptions matter, and can have a big impact in the deployment of your plans."
Another difference that stood out to den Elzen was the broad palate of the U.S. consumer, which prefers a range of different brews.
"Here you go from 100 IBU [International Bitterness Units] crafts on left side, to flavored malt beverages and hard sodas on the right with imports and domestics in the middle," said den Elzen. Currently, craft brews and hard sodas are among the most popular domestic brands.
"Normally you would see some people like bitter, some people like sweet but we're seeing people buying on the shelf from left to right and in the middle," he said. "They buy everything. It's very unique."
While learning the ins and outs of his new market, den Elzen was also making some tough calls. One of the toughest was Heineken's decision to end one of the most successful campaigns in advertising history: Dos Equis' "Most Interesting Man in the World."
The decision to stop the campaign was one the company spent more than a year discussing, internally debating if and when such a move should be made, before deciding in March the time was right.
"It's been highly successful for nine years and you want to be consistent, but you don't want to be predictable," den Elzen told CNBC. "We believed it still had legs, but it was time to move on and go out on a high [note], rather than saying the campaign is eroding and you're two years too late."
When we last saw "The Most Interesting Man" character, played by actor Jonathan Goldsmith, he was sent to the planet Mars in the final ad. However, the campaign is slated for a reboot this fall, and is tied to the Dos Equis debut as the official beer sponsor of the College Football Playoff (CFP).
The CFP sponsorship highlights the importance of Dos Equis to the Heineken portfolio, with the Dos Equis and Tecate brands combining to make up about 40 percent of the overall portfolio volume.
It's a favorable positioning for Heineken, with Mexican imports surging. According to Chicago-based market research firm IRI, that category was up double digits in 2015 and 7 percent for the 52-week period ended July 10.
During that same time period, both Dos Equis and Tecate Light saw an increase in total dollar sales of 8 percent and 40 percent, respectively.
The laggard in the group, Tecate, saw a decline of 3.6 percent. Toward that end, den Elzen says the company is working to broaden the brand's base beyond the South and Southwest, where the bulk of Tecate's sales volume has traditionally occurred. Heineken plans to roll out its first ever national advertising campaign.
"It's not just Mexican brands for first, second or third generations in the U.S.," the CEO told CNBC. "It's the whole general market buying the product," he added.
"There is a big wave in the imported Mexican market, so we have to make sure that we not only ride that wave but surf faster than anyone else," den Elzen said.
While Mexican imports are surging, another member of the Heineken portfolio is performing well in a category which has seen a slowdown of late: Strongbow cider.
"We are still growing 27 percent on this brand, which is massive and in a market that has declined 12 percent," said den Elzen. "But I would love to see the whole category grow not just Strongbow because that would be good for the long-term sustainability of the category."
While den Elzen works to build momentum for the overall portfolio, he knows it's his ability to defend the flagship brand's position as the No. 1 European import that's the criteria by which his tenure will be judged.
"Heineken is the name above the door. So without a doubt if we as Heineken USA want to win, we need to win on the Heineken brand," he said.
According to IRI, Heineken was up 1 percent in dollar sales over the last 52 weeks, with European imports one of a handful of categories showing consistent growth recently, with 4 percent dollar sales growth in 2015 and 1 percent in the last 52 weeks.
Looking to keep the trends going in the right direction, den Elzen says he plans to continue spending plenty of time on the road in his second year on the job.
"At the end of the day it's our people, our partners and our distributors that will make or break what's happening in the marketplace." he said.
"I want to be there to show our appreciation, and at the same to ask them for more or hold them accountable if necessary," the CEO said. "It's critical to travel around and show your face. So I need to do more of that."
