Heineken USA CEO Maggie Timoney opened the company’s sales meeting stressing that its underlying business “is really, really strong” despite supply chain headaches and out of stocks.
“If it wasn’t for out of stocks, we would have gained share through March,” she said.
Nevertheless, Timoney said HUSA’s strategic pillars — putting the consumer first, growing the core, and innovating for the future — remain unchanged. She thanked the company’s wholesalers for their patience regarding supply chain issues, calling the company’s struggles to obtain ocean freight from the Netherlands its “biggest mountain.”
“We can’t get enough containers,” she said. “And when we do get containers, and they get across the ocean, there’s a lot of bunching and port congestion. Getting unloaded at the port is difficult as there’s labor shortages. There’s some materials shortages.”
Timoney said the company is doing “everything we can to get product to market,” and acknowledged the situation hasn’t been easy for its wholesalers.
“It’s very painful as we struggle in some weeks to get stock into the U.S.,” she said.
During a question-and-answer session, Timoney was asked when the freight issues might let up. She said there is no clear answer. However, some relief appears on the way. Last week, she said the company unloaded a record number of containers — more than a thousand.
“We need more weeks and months like that,” Timoney said.
Supply chain issues facing the Dos Equis brand include a shortage of green glass and cardboard that were coupled with orders above plan, Timoney said.
“We saw that spike end of January, and we ordered additional product, additional production in Mexico at mid-Feb, so in the next few weeks, that additional production will hit as we got additional bottles from our sister company in Monterey,” she said.
Looking Back at 2021 and Recapping Q1 2022
Jim Sloan, chief sales officer, set the stage by recapping 2021, which he called a strong year for brand Heineken, growing overall case volumes +3.7%, with Original (+1.6%) and non-alc Heineken 0.0 (+29.2%) both growing case volumes year-over-year, despite declines in Heineken Light (-8.5%).
“We gained market share last year in every quarter,” he said. “We’re real happy with where the brand is going.”
Sloan added that the company believes it will get incremental growth on Heineken slim cans, which were tested in Florida last year, and Heineken 0.0 12-pack cans, with “a huge opportunity” in Walmart stores.
Meanwhile, Dos Equis brand family case volumes grew across the board (+16.6%), including double-digit growth for Lager (+10.5%) and Ambar (+17.3%) while picking up an incremental 1 million cases on line extensions Lime & Salt, Lime & Salt variety pack and Ranch Water, Sloan said. Much of the innovation growth came on limited distribution, which will change as those offerings go national this year.
“This brand is doing, really, really well,” Sloan said. “We got to get out of the core markets where it’s flying and move to the rest of the country. And that’s on the plans for this year.”
In particular, Sloan said he sees upside for Dos Equis on the East Coast, where Lime & Salt is rolling out.
As for Tecate, the overall brand family continued to decline (-12.9%), with double-digit declines for Original (-12%) and Light (-16.6%). Sloan called line extension Alta a “light at the end of the tunnel,” helping improve the brand’s performance this year.
Moving ahead to 2022, HUSA depletions are down mid-single digits year-to-date through March, with Heineken and Tecate declines only partially offset by Dos Equis (up mid-single digits). Driving those negative numbers is out of stocks, as the company started slow in January (-4 basis points of share), rebounded in February (+4 bps), but took a big hit in March (-23 bps), Sloan said.
According to Sloan, 24 oz. cans make up “a majority of the share loss.” He added that the company believes the brand and consumer proposition are strong, the company just needs to work through the supply chain “pain points.”
Timoney later said it’s unclear when Heineken 24 oz. cans will go off allocation, but relief will be coming by mid-June.
With spring resets, Heineken will gain 15,000 points of distribution (PODs) on its core innovations, with 2,500 for Heineken 0.0, 1,750 for the Dos Equis Lime & Salt variety pack, 5,000 for Dos Equis Lime & Salt, 4,000 for Dos Equis Ranch Water, and 1,750 for Tecate Alta.
“These are mandates,” Sloan said. “These are not licenses to hunt.”
Sloan stressed the importance of executing on these mandates, which have been a pain point in the past. Although execution numbers have improved to the low-80s on most brands, Sloan said they need to improve to the 90s, mid-90s. “That’s really where we should be,” he said, while acknowledging the company’s out-of-stock issues.
Opportunities Ahead: Slim Cans, Dos Equis Margarita
Heineken USA CMO Jonnie Cahill stressed continuing to focus on what’s working. For starters, Heineken slim cans that will now roll out nationally this summer. Cahill also pointed to HUSA’s sponsorships, including Coachella, the UBS Arena, 15 Major League Soccer franchises, the U.S. Open and Formula 1, which is “exploding” in popularity.” Those partnerships will also include a focus on supporting women in sports and responsible drinking.
On Heineken 0.0, Cahill said the company has delivered 7 million samples annually since it launched in 2018 and there’s “limitless upside” to the brand. “People who try Heineken 0.0, love Heineken 0.0,” he said.
As COVID restrictions have fallen by the wayside, Heineken can ”step up our sampling efforts to recruit more people to the brand.” Cahill added that the company has taken advantage of other sampling opportunities, such as inserting 0.0 into HelloFresh meal kit boxes.
“This can be as big as we choose,” he said of 0.0. “The No. 1 driver of scaling this business is to get after the 12-pack. Its rate of sale is high, it rotates, it’s not too big of a pack size, it’s in fact the fundamental pack size of non-alcoholic beer in cans.”
As for Dos Equis, Cahill said “there’s a real upside” of driving the brand into new markets. The company is “doubling down” on college football and “has the teams that we need,” such as Georgia, Alabama, Tennessee, and Texas A&M, many of which are adding beer to their concession stands. The company is again partnering with Fox Sports Big Noon Kickoff pregame show.
Cahill offered a peek at Dos Equis Margarita, the 10% ABV spirit-based, ready-to-drink canned cocktail that will launch in slim can 4-packs in mid-June in 10 states. With the addition of Margarita, the Dos Equis brand can cover several occasions while bringing more younger consumers, women and people in new geographies into the franchise.
“This is new moments, new occasions, new drinkers, new revenue for all of us,” he said.
Asked when the RTD would be available in Texas, Sloan said “eventually” but it’s complicated for spirits. For now, the company is holding off until it has more learnings.