The Story of Heineken

The story of Heineken Here are some parts that I have marked in my copy of the book“The Heineken Story” by Barbara Smit. Alfred ‘Freddy’ Heineken 1.“Alfred ‘Freddy’ Heineken, the Dutchman who built up the brand after the Second World War, often acknowledged that his fortune started with his family name. Had there been a computer program to think up ideal beer brands, it might well have come up with ‘Heineken’. Like many other popular beers, the name has three syllables, sounds friendly and has a Germanic ring to it that brings to mind ancestral brewing traditions. Small wonder, since the Dutch beer’s name is German.” 2.“The name can be traced back to Bremen, the Hanseatic port city in northern Germany.” 3.“In the seventeenth century, however, hundreds of such family outfits ran dry, as former beer drinkers switched to wine. ‘Even the brewers drank wine when they congregated to discuss the downfall of their business’, one historian lamented. This decline accelerated towards the end of the seventeenth centuary, when the Dutch discovered jenever, a sort of gin, as well as coffee and tea. While distilleries sprang up, hundreds of breweries like The www.capitalideasonline.com Page - 1 The story of Heineken Haystack drowned.” 4. “One of their main tasks was to make sure that, from Tahiti to Pureto Rico, the distributors would respect Heineken’s premium positioning – and that they should never, ever, compromise on quality.” 5.“These and other such theatrical tactics were the preamble to a remarkably smooth and well-targeted pitch. Van Munching never attempted to compete with leading American lager brands such as Blue Ribbon from Pabst and Budweiser from Anheuser-Busch. Instead, he figured out that Heineken should be sold as an import – for those who had taste and could afford a European beer. It was all in the label on the distinctive green bottle: ‘imported from www.capitalideasonline.com Page - 2 The story of Heineken Holland’.” 6. “As in many other European countries, the beer market was entirely transformed in the Netherlands in the 1950s, as consumers started to change their habits. Instead of heading for the bar to quaff a few after work, Dutch men increasingly spent evenings in a home equipped with a television set and central heating. Friends who dropped by could be treated to chilled beers stacked in a brand-new refrigerator. All of this had huge repercussions for the beer business. It became increasingly clear that the brewers would have to adjust their distribution, as well as their entire marketing approach. While they previously dealt mostly with bar owners, they suddenly had to negotiate with fast- growing grocery companies – and start talking to consumers. Until the late ’40s Dutch brewers pumped nearly all of their beer into the market through the taps in bars and restaurants. The consumer was hardly relevant: it was bar owners who picked their brands, and only the most pedantic drinkers would go out of their way to find an establishment that served a specific beer. So the brewers’ game consisted chiefly in greasing bar owners. A few sunshades weren’t enough: bar owners were more likely to ask for discounts or cheap loans, with the odd carpet thrown into the bargain. Brewers occasionally made informal arrangements to avoid an escalation in such requests. But when agreements were breached, unleashing full-blown competition, bar owners could throttle brewers with financial demands that siphoned off the largest share of their profits. Selling beer at the time was a jolly affair, as the breweries’ agents spent their days buying rounds for regulars and staff. Yet the job required a lot more than a resilient stomach: a Heineken report titled ‘The ideal profile of the on-premise representative’ stated that a beer agent should have ‘tact and self-control’, should ‘master the art of listening’ and should be ‘mentally and physically balanced’. Perhaps more importantly, he should ‘have a good sense of humour’. If those really were the most important skills to sell beer, Heineken’s agents must www.capitalideasonline.com Page - 3 The story of Heineken have been hilarious: Heineken was served in more bars than any competing beers, and some who were tied to other brands still sold Heineken under the counter. Pieter Feith Heineken was the first of the major players in the Dutch beer market to start selling their brew outside bars. Pieter Feith drove industry-wide changes by organising separate distribution to sell Heineken to the grocers. He set up Heineken’s Store Committee and assigned it to write a report on distribution to grocers. When it started to circulate at the brewery in 1947, ‘Our Beer at the Grocer’s was met with consternation. It wasn’t so much the move into retailing as the approach advocated by Feith that stirred ill feelings: instead of working with the brewery’s established distributors, Feith wanted to assign the take-home market to specialist wholesalers. When they heard of the plans, the beer distributors were up in arms. They argued that the contracts they had sealed with the brewers gave them an exclusive right to sell their partners’ beer in a specific district regardless of the packaging. They wanted a chance to prove that they were able to service the retailers as well as the bars. Yet Feith apparently decided to ignore their pleas: his team quietly sealed exclusive contracts with wholesalers covering about 8,000 stores, roughly a third of the country’s entire retail network. All hell broke loose towards the end of February 1948, when it became clear that Heineken would start delivering beer to retailers through wholesalers about three months later. They were equally aghast to learn that Amstel was moving in the same direction. www.capitalideasonline.com Page - 4 The story of Heineken Leagued in the Dutch alliance of beer and soft drinks traders, the BBM, the irate distributors vowed to respond with ‘the most drastic of counter-actions’. The BBM drummed up support among distributors to set up their own beer production and sales unit, but only a minority were prepared to invest. They then established a list of brewers who pledged to respect their contracts with distributors, published in a pamphlet titled ‘Know Your True Friends’. And finally, in August 1948, they threatened to go on strike. This desperate rebellion never really worried Feith. The Heineken breweries made concessions that apparently enabled the distributors to test their skills in the retail sector, but the BBM’s battle never stood a chance. By the mid-50s the distributors had given up their campaign and wholesalers had firmly established their grip on the off-premise sales network for bottled beer. Heineken could quietly dismiss the entire stand-off as ‘a storm in a beer glass’. Feith’s overhaul of distribution and accompanying organisational adjustments came just in time to take advantage of sweeping social changes that led to a boom in the take-home market. Almost negligible in the late ’40s, the retail trade swiftly came to account for more than half of the Dutch market. It stimulated the entire market, which soared from a paltry 10 litres per capita in 1949 to 45.4 litres in 1968. As elsewhere in Europe, drinking habits were transformed by increased standards of welfare, as well as the addition of televisions and refrigerators in Dutch homes. Until then, bottles of beer had often been kept cool in a bucket, placed under a tap of running water. They had to be consumed quickly, and housewives purchased only a few bottles at a time. Refrigerators meant that the beer could be stored at home for much longer. There was no excuse for not having a few bottles at hand when the neighbours called. This market shift also required an entirely new marketing approach. All of a sudden, consumers had to make their own decisions in the stores, based on price and taste as well as brand recognition. Branding and packaging became a lot more important: all the changes driven by Freddy to make the brand look more appealing and recognisable took on their full www.capitalideasonline.com Page - 5 The story of Heineken impact with the rise of the take-home market. The market’s transformation prompted Heineken to change both the message and the target of its advertising. Until the end of the ’40s Heineken ads pointed to the beer’s popularity in bars with the slogan ‘Heineken, het meest getapt’ (‘Heineken, the most tapped beer’). But throughout the ’50s and ’60s former advertising managers estimate that about 80 percent of the brewery’s budget was invested to encourage home consumption, with the slogan ‘Gezellige mensen halen Heineken in huis!’ (‘Friendly people have Heineken at home!’). Since market research had shown that women did most of the buying, the campaign’s target was predominantly female. Its underlying message was that housewives would create a welcoming atmosphere in their homes and keep their husbands happy by purchasing Heineken. No doubt the resulting print ads would have infuriated even the least fervent of feminists in later years: they showed docile housewives presenting a bottle of Heineken to their husband as he settled down in his armchair to read the newspaper, and neat couples sharing a beer with neighbours, the women crouching at their husbands’ feet. The early television commercials reinforced this message – and were equally patronising. Women with little pearl necklaces and neatly pinned-up hair showed exactly how to serve a bottled beer. ‘Hold the glass sideways and pour gently’, it advised. Such commercials were much more costly than the print ads of the previous years, which worked in the favour of the larger brewers.

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