Don Blaustein is literally surrounded by innovation. The newly named head of Heineken USA (HUSA) is sitting in front of the bar that serves as an informal gathering place for employees in the company’s White Plains, N.Y. headquarters. Spread before him are a variety of the company’s HIT-worthy products. There is the Heineken Premium Light 5-liter Draughtkeg, for instance, providing an upscale, modern twist on the party keg. There is the tall and slim Heineken Premium Light 12-ounce can, which gives this recently launched brand extension a shot of upscale elegance. There are a variety of brands from Mexico’s FEMSA Cerveza group being sold in the US by Heineken under a recently extended deal.

Photography by David Neff

For Heineken: “Truly the world-class brand,” he says. “The ultimate, high-end beer brand defined by its worldliness. Very rich and full-flavored. It’s hard to find a beer drinker who has anything but positive things to say about the Heineken brand.”

For Heineken Premium Light: “The high-end light beer choice. If you want to drink a high-end light beer that has the credentials, history and heritage of the Heineken name, this is your option, this is your choice. It combines the flavor of Heineken, but with a drinkability, and a smoothness, that invites people in.”

For Amstel Light: “This is a brand that embodies strong history, heritage and flavor as well as the spirit of Amsterdam. There’s an energy, there’s a vitality, there is an excitement with this brew. It has a bit more of a classic import profile in terms of flavor, yet it is also a lighter calorie option.”

For Dos Equis: “It is aimed at a consumer who works really hard, but also likes to live life to its fullest and is constantly looking for new experiences. The liquid is a classic high-end lager, but it’s got a distinctive character that really makes it stand out.”

His passion for the brands is obvious. But can Blaustein—a beer industry veteran with more than 25 years of experience in the beverage business—help shepherd Heineken’s US arm through a time of tremendous change in the US beer industry? Not only is HUSA battling for share with the likes of Grupo Modelo (maker of the Corona brand, which dethroned brand Heineken as the nation’s top import back in the ’90s, and still holds that spot), but the beer category in general has seen a bumpy ride. There is increased competition from wine and spirits, the explosive growth of craft beers and ongoing consolidation among the major brewers.

But HUSA has been quietly positioning itself to meet these challenges, adjusting its portfolio, and even—perhaps surprisingly for a brewer whose roots date back to 1863—taking some big risks.

Luxury Light
One of the biggest was the introduction of Heineken Premium Light in 2006, the first major extension for brand Heineken in its 133-year history. Premium Light’s introduction was one of the more controversial moves the brewer has made as some feared it might cannibalize sales from Heineken and Amstel Light. While the jury on that is still out, in its first year on the market, Premium Light managed to break into the Top 10 imports in the US, landing at No. 8 with a 2.5 percent share of the import market. At the same time, Amstel Light’s decline has slowed since the introduction of Premium Light.

“It is the best of both worlds,” says Blaustein about Light. “It has Heineken’s brand name and stature, along with all the benefits of a light beer because it fits into the other consumer trend—people are drinking healthier and better. So here’s the brand that can offer you the image, stature and, at the same time, also offer you the light beer benefits.”

Heineken Premium Light is a critical component of the company’s strategy of trying to own the high-end light beer category. That segment of the trade is particularly lucrative. The lighter nature of the beer means consumers tend to drink more of it than a full-calorie beer. At the same time, consumers continue to trade up to more premium beers. And, finally, as imports, these brews tend to provide a higher ring than mainstream domestic brands.

HUSA’s strategy has been the creation of a light beer portfolio that also includes Amstel Light and the recently introduced Tecate Light. “How big could this get?,” asks Blaustein. “I can tell you that regular imports as a share of regular beer is over 30 percent. Import lights as a share of light beers is currently 3 to 4 percent. I won’t declare that it will get anywhere near the 30 percent level, but I am confident that the opportunity for growth is there as the import light segment is going to get a lot bigger than it is currently.”

Explains Brian Sudano, managing director and COO of BMC Strategic Associates (New York, N.Y.), “HUSA’s portfolio competes in all the growth areas. You look within it and you say, ‘Well, the market’s moving up, the largest segment of the beer market is light, which is more than 50 percent of the volume, and the high-end of light is underdeveloped, so it should outperform the total light beer business. Also, it’s not highly competitive, there’s not too many entrees in this space and Heineken’s competing in that space.’ So there’s a notch on both sides of the ledger—you’re light and you’re high-end, which is where the macro trend is.”

A Rich Portfolio
While HUSA has been hard at work developing the luxury light market, it also competes in the growing market for both Mexican imports and specialty beers.

HUSA recently extended its three-year agreement with FEMSA to import its brands Dos Equis, Tecate, Tecate Light, Sol, Bohemia and Carta Blanca for an additional 10 years. The move gives it more ammunition to go head-to-head with arch rival Grupo Modelo and its market-leading Corona Extra. That brand sold 116.9 million cases in the US in 2006, compared with second place brand Heineken’s 68.8 million. The FEMSA deal firms up HUSA’s roster in the top 10 imports by adding Tecate, ranked the fourth largest imported brand in 2006. “Mexican beers continue to outperform and drive in general the imported beer category,” says Sudano.

Then there is Heineken’s specialty beer division, Star Brand Imports, also based in White Plains. Through this group, the company imports Paulaner and Hacker-Pschorr from Munich, Germany; Birra Moretti from Northern Italy; Murphy’s Stout and Murphy’s Red Beer from Cork, Ireland; Zywiec from Poland; Affligem from Belgium; Edelweiss from Austria; Fischer from France and Starobrno from the Czech Republic. Sudano says these brands appeal to “experimenters,” the increasing number of beer connoiseurs. “So if you look at it,” says Sudano, “they are well-positioned in every growth segment, their portfolio is well-aligned with the macro trends. More so than anyone, quite honestly.”

Sudano says there is another good thing about HUSA’s portfolio—its diversity shores it up against the fickleness of consumer trends. “In Heineken’s case, there are several avenues in which you can look for the makeup growth if anything floats,” Sudano says.

Back at the company’s office in White Plains, Blaustein is taking it all in. “I don’t know that I could ever find a more fulfilling industry to be a part of. In many ways, the beer business is the quintessential beverage that people can enjoy responsibly with pleasure, and socially in America, and around the world,” he says. “I don’t think the special place that beer holds for adults is going away. There are people who in the past have asked, ‘Will beer move on and will other beverages take its place?’ I am glad to say that we’re not seeing that. If anything, we’re seeing that if you’ve got great beer brands with enduring values that resonate with the consumer, that the brands will succeed. High-end beer is growing, beer generally is growing, but if we create experiences and we innovate and we sell high-end products that appeal to our consumers we should see a strong beer industry for the foreseeable future.”

From Beverage World December 15, 2007