Heineken N.V.: Global Branding and Advertising I INDEX 1. EXECUTIVE SUMMARY...................................................................................... 2 2. S SITUATION ANALYSIS ...................................................................................... 2 2.

1 The Company P Profile 2.2 The Heineken Brand 3. SWOT A ANALYSIS................................................................................................ 7 3.1 Strengths 3.2 3.3 O Opportunities Weaknesses 7 8 8 9 2 4 3 3.4 Threats 4. THE HEADQUARTERS ROLE IN SHAPING THE GLOBAL BRAND............... 9 5 5. RECOMMENDED MARKETING STRATEGY ................................................... 11 6. R REFERENCES ................................................................................................... 12 Page | 1

1. EXECUTIVE SUMMARY The case study of Global Branding and Advertising at Heineken N.V. describes the findings and recommendations of two research projects, which were commissioned by Heineken in the mid 1990ies in order to clarify brand identity. Project Comet found that the brand image was not consistently being projected and therefore the Heineken brand was perceived differently across various different nations. The project recommended to internationally aligning the brands premium taste image using five core brand values: Taste, premiumness, tradition, winning spirit and friendship. Project Mosa was designed to elicit consumer reactions in order to clarify the consumers perception of the core values premium taste and friendship. The indicators of premium beer taste differed among the different cultures, while there was substantial agreement across national markets on the social occasions that would call for a premium beer over a standard beer. The results of both research projects should guide Heinekens advertising efforts in the future to create a more consistent brand identity. 2. SITUATION ANALYSIS More than two decades ago, Harvard Business School professor Theodore Levitt provocatively declared in a 1983 HBR article, "The Globalization of Markets" that a global market for uniform products and services had emerged. He argued that corporations should exploit the "economics of simplicity" and grow by selling standardized products all over the world. To grasp how consumers perceive global brands, companies should think about the issue in cultural terms. The forces that Levitt described didn't produce a homogeneous world market; they produced a global culture. The rise of a global culture doesn't mean that consumers share the same tastes or values. Rather, people in different nations, often with conflicting viewpoints, participate in a shared conversation, drawing upon shared symbols. One of the key symbols in that conversation is the global brand. Like entertainment stars, sports celebrities, and politicians, global brands have become a lingua franca for consumers all over the world. People may love or hate transnational companies but they can't ignore them (Holt et al, 2004). Heineken is perceived differently in different markets. In the Netherlands, Heineken is the market leader and therefore viewed as a mainstream brand. Outside the Netherlands, however Heineken had consistently been marketed as a premium brand. In the United States and Hong Kong Heineken was seen as appropriate for special occasions or when making a social statement. In other markets, such as Latin America, Heineken was viewed as one among many European imported beers. 2.1 THE COMPANY PROFILE The Heineken story began more than 140 years ago in 1864 when Gerard Adriaan Heineken acquired a small brewery in the heart of Amsterdam. After 13 years of prohibition, in 1933, Heineken set foot on American soil and in 1937 the first Heineken beer was brewed outside the Netherlands, in the Dutch East Indies. Over the ensuing 60 years, growth and acquisitions

substantially expanded the company. Four generations of the Heineken family have been

involved in the expansion of the Heineken brand and the Heineken company throughout the world. By the 21st century, the small 19th century local Amsterdam brewer has grown into a worldwide business with a global brand, employing more than 50,000 people (Heineken N.V. Annual Report 2008). Heinekens brand portfolio includes more than 170 international premium, regional, local and specialty beers. The principal brands are Heineken and Amstel. The Heineken brand is available in almost every country on the planet. Heineken owns more than 119 breweries in more than 65 countries brewing a Group beer volume of 13.92 billion liters. (http://www.heinekeninternational.com/companystrategyprofile.aspx) Heineken has the widest presence of all international brewers, thanks to its global network of distributors and breweries. The acquisition of Brau Union in Austria in 2003 significantly extended the pre-eminence of Heineken in Europe. In Europe, Heineken is the largest brewer and cider producer. It achieves global coverage through a combination of wholly-owned companies, licence agreements, affiliates and strategic partnerships and alliances (Heineken N.V. Annual Report 2008). VALUES AND PRINCIPLES Heineken is committed to sustainable development and as such, to optimising its financial results with minimal impact to its business environment. To do this, Heineken abides by a number of governing business principles and three core values - respect and enjoyment and passion for quality - that reflect Heinekens passion for beer and its respect for its employees, business partners, customers, shareholders and all others who are connected to the company (http://www.heinekeninternational.com/valuesandprinciples.aspx). Heineken has published dedicated reports on sustainability and corporate responsibility since 2000. In an open dialogue with a significant number of stakeholders, seven areas were defined on which Heineken believes it should focus its energy in order to maximise benefits for society, its stakeholders and its company. These seven focus areas are: 1. Energy 2. Water 3. Safety 4. Agriculture 5. Supply chain responsibility 6. Responsible beer consumption 7. Impact on developing markets (http://www.heinekeninternational.com/7_focus_areas.aspx).

Source: Heineken N.V. Annual Report 2008 2.2 THE HEINEKEN BRAND As both the Group and its most valuable brand carry the same name, reputation management is of utmost importance. Heineken enjoys a positive corporate reputation and its operating companies are well respected in their region. Constant management attention is directed towards enhancing Heinekens social, environmental and financial reputation. The Heineken brand is the companys most valuable asset and one of the key elements in Heinekens growth strategy with a portfolio that combines the power of local and international brands. Anything that adversely affects consumer or stakeholder confidence in the Heineken brand or Company could have a negative impact on the overall business (Heineken N.V. Annual Report 2008). TASTE In the Project Mosa, quality and tradition were identified as the most suitable taste expressions for appealing to the head of Heineken consumers, averaging consumer reactions from eight different countries. Gerard Adriaan Heineken was reportedly committed to manufacturing a beer of the highest quality and craftsmanship in brewing. Heineken pilsner has a mildly bitter taste, fresh, fruity

aroma, bright color and clarity. These taste characteristics are obtained using only the purest water, hops and barley malt. Gravity: Original extracts 11-12% by weight Alcohol: 5% vol. Bitterness: 23 EBU Color: 7 EBC Heineken pilsner beer is brewed in the Netherlands, Vietnam, Thailand, Tahiti, Singapore, the United Kingdom and in Sweden. Rigorous standards ensure that the high quality of Heineken beer is the same all around the world (http://www.heinekeninternational.com/products_brands_brands_heineken_fact_sheet.aspx). PREMIUMNESS Heineken is positioned as a premium brand, except for its home market in the Netherlands. Its appeal is growing in many markets. Heineken is the leading beer brand in Europe (http://www.heinekeninternational.com/products_brands_brands.aspx) TRADITION The Heineken the world drinks today is still brewed using the original, unrivalled recipe invented three generations and over 140 years ago by the Heineken family. Since 1886, the same yeast strain, the unique Heineken A-yeast has been used for fermentation and is considered a significant contribution to the pure, premium taste of Heineken beer. (http://www.heinekeninternational.com/products_brands_brands.aspx). WINNING SPIRIT In 2008, the Heineken brand was at the heart of the companys growth, and confirmed its status as the companys flagship brand and key differentiator. With volume growth of 4.7 per cent, the Heineken brand outperformed the international premium segment, growing in almost all of Heinekens European and African markets. The brand also showed double-digit growth in markets like the UK, Canada, Chile, Argentina, Indonesia, Taiwan and South Korea. The UEFA Champions league is the companys main sponsorship platform. The Heineken brand has been associated with this prestigious club tournament since 2005. With over 140 million TV viewers watching live coverage of the UEFA Champions league in almost every country in the world, this global sporting event has become synonymous with the Heineken brand and underlines Heinekens commitment to extending its leadership within the premium beer segment (Heineken N.V. Annual Report 2008). FRIENDSHIP The Project Mosa identified true friends and always count on Heineken as suitable friendship expressions for appealing to the heart of Heineken consumers, averaging consumer reactions from eight different countries. As a premium beer brand that embraces quality over quantity, Heineken seeks to promote a responsible drinking culture. This became an even more visible component of its communications strategy in 2008, with the launch of its

international interactive know the Signs campaign. Heineken has also become known for its creative use of film to enhance the profile of the Heineken brand among its target consumers. (Heineken N.V. Annual Report 2008). It is putting fresh advertising impetus behind the brand in its domestic market with a TV campaign that takes a tongue-in-cheek look at the different way men and women view home improvements. TBWA\Amsterdam created the commercial, which shows a wife showing her friends around her new home during a housewarming party. The women scream with delight at her walk-in closet, which has been transformed into a showroom full of designer clothes and shoes. But their screams are cut short by the sounds coming from the neighboring room. It is their partners who have just discovered a closet converted into a walk-in fridge full of Heineken beer. The agency said the aim of the campaign was to draw the brand and its users closer together (Haymarket Business Publications Ltd, Campaign, 30 January 2009). Source: http://theinspirationroom.com/daily/commercials/2009/1/heineken-walk-in-fridge.jpg

3. SWOT ANALYSIS Strength (Internal) Strong portfolio of brands Strong network of breweries Opportunity (External) Acquisition of Scottish & Newcastle Innovations: Draught keg and extra cold program Weakness (Internal) Need for business integration of recent acquisitions Sluggish revenue growth of Western Europe Threat (External) Pressure on alcohol: Stringent advertising regulations in many countries Attractiveness of beer category under pressure: Sluggish beer consumption in US and Western Europe Volatility of input cost: Aggressive pricing policy Stability of Africa and the Middle East Region Economic downturn from credit crunch 3.1 STRENGTHS Heinekens leading brand portfolio includes more than 170 international premium, regional, local and specialty beers. The companys principal brands are Heineken and Amstel. During 2006, the company has undertaken various advertising and promotional initiatives, which would improve its brand equity. For instance Heineken launched its new advertising campaign for the Heineken brand and the UEFA Champions League partnership, which establishes the new theme Enjoyed together around the world. This brand campaign has

helped it to target sports lovers. Also in the same year Heineken brand association with the latest James Bond film Casino Royale has given it the opportunity to extend this reputation and build promotion and activation programs for those of legal drinking age and above in 55 markets around the world. Strong brand portfolio helps the company to create a favorable image in the market and ensures stable revenue. Heineken has a large network of breweries. At the end of fiscal 2006, the company owned 115 breweries and distributors in over 65 countries across Western Europe; Central and Eastern Europe; the Americas; Africa and the Middle East; and the Asia Pacific region. These breweries confer several competitive advantages on the company. Since these breweries are located close to their end markets, the company is in a position to serve fresh beer to customers. A geographically widespread plant network reduces transportation costs as well. Strong network of breweries helps the company boost customer satisfaction and reduce costs (Datamonitor, Company Profile, 14 January 2008). 3.2 OPPORTUNITIES Heinekens acquisition of parts of Scottish & Newcastle includes businesses, licences and investments in Belgium, Finland, India, Ireland, Portugal, the UK and the US, with core brands including Fosters, Kronenbourg 1664, John Smiths, Newcastle Brown Ale, Sagres, Lapin Kulta, Maes and Beamish (Heineken N.V. Annual Report 2008). Innovations contribute to the top-line growth and to the strength of the Heineken brand in particular. In 2008, DraughtKeg, the unique 5litre go-anywhere draught system, and Beertender, the genuine home draught beer experience, accounted for part of the volume growth of the Heineken brand. Driving top-line growth by winning customers at the point of purchase has been the key rationale behind the roll-out of Heinekens extra Cold program. Heineken Extra Cold is a different way to serve Heineken. It is the original Heineken beer served extra cold and covers both draught and packaged beer. Since the launch of the program in 2005, extra cold draught beer has been installed in 62,000 outlets (Heineken N.V. Annual Report 2008). 3.3 WEAKNESSES Beer markets in Western Europe faced a challenging year due to the combined impact of the financial crisis, mixed weather, smoking bans in France, the UK, Finland and the Netherlands, and unprecedented increases in excise duties in the UK. Beer consumption in Western Europe came increasingly under pressure, particularly in the on-trade and consolidated beer volume declined 1.6 per cent organically (Heineken N.V. Annual Report 2008). Western Europe, Heineken's largest geographical market, accounts for approximately 40% of the total revenues of the company. Sluggish revenue growth of this market would affect the overall revenue growth of the company (Datamonitor, Company Profile, 14 January 2008). In the pursuit of further expansion, Heineken seeks to strike a balance between organic and acquired growth. In recent years, Heineken has been very acquisitive, with smaller transactions in mostly emerging markets and the Scottish & Newcastle acquisition. In any acquisition, Heineken is faced with different cultures, business principles and political,

economic and social environments. This may affect corporate values, image and quality standards (Heineken N.V. Annual Report 2008). 3.4 THREATS An increasingly negative perception in society towards alcohol could prompt legislators to restrictive measures. Limitations in advertising could lead to a decrease in sales and damage the industry in general. Sales of Heineken products could materially decrease, in particular in Europe. Heinekens alcohol policy is based on the principle to brew, market, and sell beer in ways that have a positive impact on society at large. With this policy, Heineken promotes awareness of the advantages and disadvantages of alcohol, encouraging informed consumers to be accountable for their own actions. Heineken has many operations in mature beer markets where the attractiveness of the beer category is being challenged by other beverage categories. In these markets, especially, the on-trade channel is under pressure, which makes adjustments to the cost base unavoidable. Heineken is relatively highly geared to mature markets since their acquisition of S&N. Management focus is on product innovation, portfolio management and cost-effectiveness in order to secure market position and profitability. Input costs (including transportation and energy) accelerated to unprecedented levels in 2008. The world economic climate and Heinekens active re-negotiation efforts has since meant that some commodities (such as barley, aluminium and energy) have come off the peak levels reached in mid-2008, however the costs of some packaging materials (glass bottles, steel cans/kegs and crown corks) continue to increase. In addition the outlook is strongly regionalized and also affected by currency fluctuations. Pricing strategies are top priority in all of Heinekens markets. This includes assessments of customer, consumer and competitor responses based on different pricing scenarios, which will have different outcomes market by market. In principle, Heineken will pass on increased input costs. The effect on volume developments is at present unclear (Heineken N.V. Annual Report 2008). 4. THE HEADQUARTERS ROLE IN SHAPING THE GLOBAL BRAND Marketing is the management function responsible for making sure that every aspect of the business is focused on delivering superior value to customers in the competitive marketplace. The business is increasingly likely to be a network of strategic partnerships among technology providers, manufacturers, distributors, and information specialists. The business will be defined by its customers, not its products or factories or offices. This is a critical point: in network organizations, it is the ongoing relationship with a set of customers that represents the most important business asset. These skills may define the core competence of some organizations as links between their vendors and customers in the value chain. In a world of strategic partnerships, it is not uncommon for a partner to be simultaneously customer, competitor, and vendor, as well as partner. Consequently, it is difficult to keep the traditional management functions distinct in dealing with strategic partners. Distributors must be treated as strategic partners, linked to the manufacturing firm with sophisticated telecommunications and data-processing systems that afford seamless integration of marketing activities throughout the network. Consumer marketers continue to shift resources toward the trade and

away from the consumer per se, and traditional selling functions for the field sales organization are evolving toward a broader definition of responsibilities for relationship management, assisted by interactive information management capability. The implementation of market-driven strategy will require skills in designing, developing, managing, and controlling strategic alliances with partners of all kinds, and keeping them all focused on the ever-changing customer in the global marketplace. Its end-use markets and its knowledge base, as well as its technical competence, not by its factories and its office buildings, will define the core firm. Customer focus, market segmentation, targeting, and positioning, assisted by information technology, will be the flexible bonds that hold the whole thing together (Webster, 1992). Heineken Headquarters insists on tight control over how the Heineken brand is marketed by its distributors and partners. However, it is also pursuing a strategy to gain more control over the marketing ambitions of its licensee, distributor or partner brands by seeking majority equity stakes. Especially pricing is an important issue and Heineken would like to see its positioning in the premium segment supported by a price premium for the Heineken beer. From Heinekens point of view the ideal national brewer partner should also not have ambitions for their domestic brands. Hewett et al. in their study investigating the conditions which are influencing headquarters and foreign subsidiary roles in marketing activities view the relational context- the subsidiary's trust in the headquarters, such that it results in conformity to the headquarters' practices, the perceived level of dependence of the subsidiary on the headquarters, and the extent to which the subsidiary feels as if it is a part of the parent organization - as key in determining the subsidiary's role in marketing activities vs that of the headquarters. Cooperation between the subsidiary and parent organization will reduce the uncertainty regarding the decisions being handed down, and will make adoption of practices from headquarters more likely. Their study found that the headquarters were more successful in handing down standardized marketing processes when the subsidiary perceives itself to be dependent on the headquarters. Therefore Heinekens strategy to gain more financial control is designed to improve the headquarters influence on marketing decisions. Nevertheless it seems that Heineken should rather adopt a strategy of "glocalization. Global marketing strategies aim to maximize standardization, homogenization and integration of marketing activities across markets throughout the world. However, global marketers must address a number of issues in their marketing strategy to ensure their brand will be successful worldwide. Examples of these include differences in economic environments, political environments and cultures around the world. While the theory of standardization of marketing activities works on a strategic level, it is often not suitable for the richness of detail needed on operative and tactical levels. Most marketing activities will be more successful when adapted to local conditions and circumstances in the marketplace. Marketers need to understand how their brand is meeting the needs of the customers and how successful their marketing efforts are in individual countries. A "glocal strategy standardizes certain core elements and localizes other elements. It is a compromise between global and domestic marketing strategies. In a glocal strategy the corporate level gives strategic direction while local units focus on local consumer differences (Kotler et al. , Marketing Management).

Participation in goal setting benefits subsidiaries with greater roles, but too much participation may become detrimental. Likewise, although less participation in goal setting is needed when headquarters is attempting to hand down marketing strategies such that subsidiaries are taking on a less significant role in marketing activities, too little participation may negatively affect performance. The more conditions deviate from those faced by subsidiary marketers of successful products who take on a particular role, the lower product performance tends to be. The ability of global managers to determine the extent to which they should foster greater roles for particular subsidiaries should also be enhanced in that these managers, unable to control market, industry, and/or relational conditions, can better forecast success by determining whether greater or lesser subsidiary roles are more aligned with these conditions. Performance assessment will also be improved by recognizing the obstacles faced in situations where alignment may not be ideal, such as when the headquarters is attempting to hand down processes under adverse industry conditions (Hewlett et al. ,2003). Heinekens headquarters should take a combined approach of centralization and decentralization to leveraging global marketing. The headquarters should pass on the specific guidelines that determine the face of the brand worldwide with fundamental. Local marketers should be challenged to develop locally relevant translations of the program recognizing the importance of inspiring marketing at a local level. The key is to find the right balance between central guidelines and the content of the brand at a local level. This will allow for consistency in Heinekens international advertising, yet permits local input and a regional adaptation of the promotion program. Heineken should also set up a best practices system and transfer knowledge from one country to another. 5. RECOMMENDED MARKETING STRATEGY A global brand is required to provide relevant meaning and experiences to people across multiple societies. Increasingly, a company's global stature indicates whether it excels on quality. A study conducted by Holt et al in 2004 measured for country-of-origin associations as a basis for comparison and found that, while they are still important, they are only onethird as strong as the perceptions driven by a brand's "globalness". Consumers look to global brands as symbols of cultural ideals. They use brands to create an imagined global identity that they share with likeminded people. Transnational companies therefore compete not only to offer the highest value products but also to deliver cultural myths Global brands usually compete with other global brands. To succeed, transnational companies must manage brands with both hands. They must strive for superiority on basics like the brand's price, performance, features, and imagery; at the same time, they must learn to manage brands' global characteristics, which often separate winners from losers. Smart companies manage their brands as global symbols because that's what consumers perceive them to be. Firms must learn to participate in that polarized conversation about global brands and influence it. A major obstacle is the instability of global culture. Consumer understandings of global brands are framed by the mass media and the rhizomelike discussions that spread over the Internet. Companies must monitor those perceptions constantly (Holt et al., 2004). Heinekens brand strategy needs to monitor the brand's own capabilities and competencies, the strategies of competing brands, and the outlook of consumers experience in their respective societies. The challenge for an international brand is to inspire on a global level but at the same time remain personally relevant, attached to the target groups personal cultures and origins. As consumer needs and tastes vary, Heineken must decide how much to adapt its

marketing strategy to local needs using a combination of standardized marketing mix and adapted marketing mix, respecting the strong brand preferences and loyalties that exist among the beer drinkers. Also, Heineken needs to prioritize between global integration vs. national responsiveness. The effects of this discrepancy become evident in the decreasing sales in Western Europe. The real test lies for Heineken to restore its market lead and reputation in Western Europe, which by far is the largest contributor to its sales. Heineken beer is a globally well-known and respected brand. Its values and principles, its CSR program and program for responsible alcohol consumption all provide an excellent global strategy to build local efforts on. Heinekens sponsorship strategy to build brand equity through relevant associations with high-impact, high-profile sports and music events, films is no less excellent and should be adopted in other markets for brand enrichment after brand building, e.g. in Asia. The Project Comet identified the core values, taste, tradition, premiumness, friendship and winning spirit, which are transported by the Heineken Brand as explained in 2.2. However, Project Mosa revealed that different values are associated with different expressions in different cultures. These findings should be used to establish locally driven campaigns. By connecting to local situations and preferences, consumers will develop a greater emotional tie to the company. In Germany, where consumers are loyal to domestic brands and consider the brewing process an important element of taste, Heineken should incorporate the quality of the raw materials and brewing details into advertisement campaigns. National advertising should play a prominent role in promoting the Heineken brand. In Latin America, Heineken needs to communicate what makes Heineken beer distinctively different from other imported European beer. The focus on taste and friendship and could be supported by sponsoring sporting events in Brazil. In the United States, Heineken needs to move a away from the image of a drink for special occasions and start promoting Heineken as the beer of choice at college or spring break parties. 6. REFERENCES Bulik B. WHAT YOUR TASTE IN BREW SAYS ABOUT YOU. Advertising Age. November 2, 2009;80(37):12. Chi-Fai C, Holbert N. Marketing Home and Away: Perceptions of Managers in Headquarters and Subsidiaries. Journal of World Business. Summer2001 2001;36(2):205 DATAMONITOR: Heineken N.V. Heineken N.V. SWOT Analysis. April 2009;:1-9. Heineken USA focuses on its on-premise strategy. Beverage Industry. March 2009;100(3):10. Hewett K, Roth M, Roth K. Conditions influencing headquarters and foreign subsidiary roles in marketing activities and their effects on performance. Journal of International Business Studies. November 2003;34(6):567-585

 Holt D.B., Quelch J.A., Taylor E.L., How Global Brands Compete, Harvard Business Review, September 2004: 68 75 Jay R. Heineken holds agency meetings over $40m global ad business. Marketing Week (01419285). July 24, 2008;31(30):2. Kotler P., Keller K.L., Brady M., Goodman M., Hansen T., (ed.), Marketing Management, Pearson Education Limited, 2009. Mikhailitchenko A, Javalgi R, Mikhailitchenko G, Laroche M. Cross-cultural advertising communication: Visual imagery, brand familiarity, and brand recall. Journal of Business Research. October 2009;62(10):931-93 NEW CAMPAIGNS THE WORLD. Campaign (UK). January 30, 2009;(4):31 Polonsky M, Colin J. Global branding and strategic CSR: an overview of three types of complexity. International Marketing Review. June 2009;26(3):327-347. TOP BEER MARKETERS. Advertising Age. December 28, 2009;80(43):13. Webster F E, The changing Role of Marketing in the Corporation, Journal of Marketing, Vol.56 October 1992: 1 17