Hard seltzers, a Michelob Ultra challenger and a strong push for cans were among the key takeaways from Heineken USA’s national sales meeting held virtually Thursday across three regions.
Heineken USA (HUSA) CEO Maggie Timoney opened the meeting thanking the company’s wholesalers for their work during the pandemic. She laid out the headwinds from the year, including COVID-19 derailing the company’s innovation plans and shuttering production facilities in Mexico as beer manufacturing was deemed a non-essential activity.
But Timoney also struck a more positive tone, noting how nimbly the company pivoted and temporarily transferred production of import brands Tecate and Dos Equis to the Netherlands.
“So you can cry over spilt milk, or you can take opportunities,” she said. “And Heineken USA is taking opportunities, and we are moving faster, and we are going to move at scale.”
Those big picture opportunities include e-commerce and cans. Timoney pointed out that a third of consumers have purchased food or beverages online this year — and 40% of those consumers are new online shoppers, an acceleration forced by the pandemic. She also noted that online beer sales are up 250%, albeit off a small base.
“We will go there, we will lean in there,” she said of e-commerce, “because that behavior is sticking and that behavior will not change.”
Timoney also noted the increase in the convenience channel, and although she admitted that HUSA under indexes in convenience and cans, there is runway for growth.
“So I’m going to marry convenience with cans, and we will have a big push towards ‘canvenience,’” she said. “And we’re going to ask you to lean in there with us and get our business back in convenience and in cans above where we are.”
Despite the challenges presented by the pandemic, HUSA, like many large brewers, has improved its off-premise trends year-to-date through September 26, chief sales officer Jim Sloan said, citing data from market research firm Nielsen. Company-wide sales are up 4% year-to-date, with the Heineken brand family up 10% and Dos Equis up 8%. Tecate declined 11%, which was driven by out of stocks.
Heineken and Dos Equis trends have also accelerated over the last three months. The company’s off-premise trends have accelerated though over the last three months, with portfolio-wide trends up 5% over the last three months and up 9% in the last month, according to Nielsen. The Heineken family is up 16% in both the last three months and last month, while Dos Equis is up 12% over the last three months and 19% over the last month. Tecate remains challenged (-19% over the last three months and -12% over the last month).
“Perspective wise, we have some momentum,” Sloan said.
HUSA executives walked their wholesalers and retailers through plans for the back half of the year and on into 2021. Here are the highlights.
Tecate Alta set to Challenge Michelob Ultra
Although Molson Coors came at the new king of beers, Anheuser-Busch’s Michelob Ultra, and missed — with the now hibernating Saint Archer Gold — HUSA is taking its shot with Tecate Alta (4% ABV) starting in the first quarter of 2021. The 4% ABV beer has just 85 calories and 2.4 grams of carbs.
“This beats Michelob Ultra in terms of function, but it has Mexican soul,” HUSA chief marketing officer Jonnie Cahill said. “A brand that is loved by Mexican Americans, loved in the Sun Belt, known in the Sun Belt, with everything that Ultra gives you, but with a heart, a soul, and a Mexican perspective on the world.”
The feedback from consumers during the test period has been positive, and Cahill said the company sees Alta as an opportunity to win back market share from Ultra. The brand will initially launch in the company’s stronghold markets in slim can 12-packs before receiving a wider release.
AriZona SunRise Hard Seltzer a 2021 Priority
Timoney and other executives admitted that HUSA’s partnership with AriZona Beverage’s Hornell Brewing on a hard seltzer brand, announced Wednesday evening, was among the worst kept secrets in the industry.
“This will be a big success,” Timoney said. “We look forward to working closely together with you to drive the hell out of that innovation, together with our core brands and our other innovations.”
Cahill addressed the question some wholesalers with books crammed with well-performing seltzers may be wondering: Why do I need another hard seltzer brand?
Cahill argued that SunRise Hard Seltzer is an opportunity to reach incremental consumers. He pointed out that one-in-eight Hispanics drink seltzer, while only one-in-16 Black Americans drink seltzer. Compare that to the one-in-six caucasians who drink seltzer.
“We’re missing a whole bunch of people out there,” Cahill said.
Cahill ticked off the reasons those consumers aren’t drinking seltzer, whether it’s not knowing the brands, believing they don’t have any flavor or wanting beverages with “just a little more punch and flavor.”
“There are a lot of these people out there,” he said. “Over 50% of the U.S. population of Gen Z and Millennials are non-caucasian people who love AriZona, people who don’t yet love seltzer, and we are bringing those two things together.”
Cahill acknowledged that HUSA is late to a party with dominant brands (Mark Anthony Brands’ White Claw and Boston Beer Company’s Truly), but he said there remains an opportunity to “change the game by bringing realness and flavor to that world.” He pointed to non-alcoholic seltzer where Spindrift, Bubly and Aha have cut into LaCroix’s market dominance.
“That’s what we are planning to do,” he said. “We will bring all of the benefits of hard seltzer, and we will fuse it with the magic of the AriZona brand. You know how strong that brand is in convenience, for example. This is a killer proposition: 100 calories, two to four grams of carbs depending on the flavor, a splash of real fruit and a splash of real color, because we have never seen a clear mango or a clear black cherry.”
And gluten free.
Citing a test from January, the company found that 65% of general market shoppers said they would purchase SunRise at the same level as White Claw; 78% of Black and Hispanic consumers said they would buy it; and 66% of Black and Hispanic consumers in the test said they’d buy it over White Claw.
The brand is expected to be in warehouses by early February. The price point is expected to be in line with the leading brands.
“I don’t think we’re getting into this business to give it away,” Cahill said. “Absolutely not.”
Updates: Canijilla and Bask Hard Seltzers, Merchant’s Lemonade and Tea
Cahill provided a look at the company’s other innovations, most of which were announced last year at this time.
- The Canijilla Mexican-inspired hard seltzer line is in two test markets currently — McAllen, Texas, and San Bernardino, California.
- Bask, an IPA-style hard seltzer brand, is currently available in Boston and San Diego. The 5% ABV seltzer comes in three flavors — Original Hops, Lemon and Blood Orange.
- And the Merchant’s Hard Lemonade and Peach Tea line is expected to roll out in Connecticut and Charlotte, North Carolina, the week of November 1.
“We’re not going to ask you to trust us, we’re going to prove to you that these propositions work, and then give you things that we know have traction,” Cahill said.
“The learnings are coming in, and we’re going to be ready to scale up, and we already see signs of success,” he added.
Look for Part 2 on Monday.