Heineken

Gerard Adriaan Heineken’s adoption of the bottom-fermenting brewing process, in combination with the use of the best raw materials, gives Heineken pilsner a distinctive European taste that provides Americans with an alternative to the neutral light taste of the mass produced American beers. The development of Heineken’s A-yeast forms the basis for the distinctive taste and drives the company to focus on quality.Heineken’s growth and expansion into the US market was halted with the 1920 passage of Prohibition into law, which forbade the sale of any beverage containing more than 1.5 percent alcohol. Throughout the rest of the world, Heineken continued to focus on expansion.Exports, which started at the end of the nineteenth century, were energetically pursued. The enthusiasm for exports resulted in shipments of Heineken Beer to Belgium, the United Kingdom, West Africa and the West Indies. As a result, sales of Heineken continued to climb until the outbreak of the First World War.In April 1933, Prohibition is repealed, allowing for the sale of alcoholic beverages again in the US. The Heineken brand seized this opportunity to gain strength, and became the first non-American beer to re-enter the market. The first shipment of Heineken Beer was unloaded in the port of Hoboken, a mere three days after the end of Prohibition. To support the re-entry into the market, the brewery appointed Leo Van Munching as its US sales promoter and named the Boston firm, Maynard & Child of Boston, its official importer.Leo’s appointment produced immediate results, as sales of Heineken more than doubled over the last half of the decade. He became well known through the beer trade and developed a reputation as an honest, active entrepreneur. In the New York cafés, he was known as “The Dutch Baron.” Leo was seen as a true salesman and he used those abilities to convince some illustrious clients, such as the Waldorf Astoria, the Astor Hotel and New York Athletic Club, to carry Heineken.Heineken still had challenges to confront. Leo knew if Heineken was to be truly successful it would have to make a name for itself throughout the US The 1939 World Exhibition in New York offered what Leo believed was the perfect opportunity. With a $150,000 investment on the part of the brewery, and the direction of Henry Pierre Heineken, Leo opened The Heineken Pavilion at the World Exhibition. American visitors were highly enthusiastic of this little piece of Dutch glory, and ended up consuming more than 8,500 barrels of Heineken, earning the brand the title of “The Peer of Beers.”The success and momentum Heineken? earned in the 1930s was short-lived. In May 1940, during World War II, the Netherlands was occupied by German troops, who quickly put an end to the export of Heineken beer. The effect on the US market was immediate. Due to the success of the 1939 World Exhibition, Leo and the US market were struggling to keep up with the public’s demand for Heineken beer. Initially, Leo was able to obtain beer from the Heineken brewery in the Dutch West Indies, but in 1942 that supply dried up as well. With all options exhausted, Leo could only wait and hope the war would end quickly.Finally, in May 1945, the German army surrendered, and the Netherlands was free again. However, gaining Dutch freedom was only the beginning. By the end of the war, Heineken suffered from manpower and raw material shortages, as well as significant damage to its breweries. The war also left Leo and the US market struggling as well. After years without product, Heineken, along with all other imported beers, had disappeared from the US market. The challenge on both sides of the ocean was how to rebuild.Rebuilding began with the brewery appointing Leo as the exclusive importer of Heineken in the US After years in the business, Leo knew the US market like the back of his hand and had good contacts in both American and Dutch circles.While Leo worked on preparing the market, the brewery focused on production. Initial production runs found it difficult to maintain the high quality on which Heineken had built its reputation. By the spring of 1947, the production issues were resolved, and Heineken’s export director, Ben ter Haar, proclaimed that Heineken beer was “more superior to all American beers.” The power of ter Haar’s statement was evident in growing brand sales, where for the months of April and May (1947), Heineken accounted for 99 percent of all Dutch beer exports to the US.During the 1950s, sales of Heineken in the US really took off. With some of the success credited to the import status of the beer, sales were growing by 20 to 30 percent per year, focusing predominantly in better class hotels, restaurants and cafes. Although it cost 20 cents more than the average domestic beer, Heineken launched its advertising campaign under the motto “Heineken Tastes Tremendous” and sales continued to climb.The decade came to a close with Leo celebrating his 25-year role as an importer with a special silver jubilee campaign in 1958. Heineken toasted his success by giving Leo and his son a lifetime contract to serve as America’s exclusive importer of Heineken beer.Following more than a year of negotiations, Heineken and Leo van Munching concluded a new importing contract for van Munching and Company. The contract stipulated that van Munching and Company would be the exclusive U.S. importer for Heineken for the lifetimes of both Leo van Munching Sr. and Jr. Heineken, for its part, received assurances about sales trends in the U.S. During the negotiations, Heineken assumed a sales forecast of 60,000 hectoliters per year. By 1960, however, the actual sales figure was 100,000 hectoliters. But more was yet to come.Heineken's continued global expansion sets in motion events that would change the US market. In 1968, the acquisition of its chief rival in the Dutch market, Amstel, leads to the introduction of the Amstel Light brand into the US market in the early 1980s. By the year 2000, Amstel Light had become the number one selling imported light beer.By 1970, Heineken was selling 2 million hectoliters per year in the United States and the American beer industry was growing, as the Baby Boom generation was reaching the legal drinking age. The minimum age was also lowered to 18 in most states, based on the “old enough to fight, old enough to drink” rationale induced by America’s involvement in the Vietnam War.In 1972, Heineken reaches yet another milestone in the US market by achieving the status of the Number One Imported Beer.Heineken in the USA continued its substantial growth during this decade. The “conspicuous consumption” associated with this decade and interest in high-end items was of substantial benefit to Heineken. In its key market of New York, Heineken was the bar call for the high-flying investment gurus who were rewriting the face of American entrepreneurship.The dramatic increase in the light beer category in America led Heineken to a difficult decision. Get involved in a category that had no volume in its home market, or stay out of a very strong growth segment in the industry. The company came up with an innovative answer. Having purchased the Amstel brewery in 1968, the company had global rights to the Amstel trademark. The Amstel brand had not been sold in the US for a number of years and the key beer consumer, the twenty-something male, was unaware of the brand. Consequently, Heineken introduced the new product Amstel Light, which promptly became the best-selling imported light beer in the United States. The brand enjoyed particular success in the urban centers of the East, including New York, Boston and Washington, DC.This decade was the most significant for Heineken, since the entry of the brand into America in 1933. Leo van Munching, Jr. decided to sell his company to the brewery. He completed the sale in 1991, but retained management control until January 1, 1994. During 1991, van Munching obtained the rights to Murphy’s Irish Stout, the second best-selling stout in Ireland, and part of J.J. Murphy Brewery of Cork. The Irish brewery was purchased by Heineken in 1983 and was enjoying spectacular success in Ireland. Murphy’s had been in the US since the early twentieth century, but had achieved limited success through other importers.The company suffered an unusual reduction in sales in 1991, due to an important external event. The federal government, in the Budget Act of 1990, increased the federal beer excise tax by 100 percent. The industry suffered a 2% drop in volume and it was estimated that the entire beer business suffered some 60,000 job losses. Thus began a decade of weak beer sales for the industry, where the 1990 industry volume was not again reached until 2000.In the fall of 1993, Heineken appointed its first president of van Munching and Co. His name was Michael Foley and he was the managing director of Murphy’s. A native of County Wexford in Ireland, Foley had enjoyed a highly successful career at Murphy’s, starting in 1983 as finance director. In 1989, he became commercial director and, in 1991, became managing director.As 1994 began, Foley set about the task of making van Munching and Co. Part of the global Heineken family. Utilizing van Munching employees, a few ex-pats from Heineken and a number of new hires from within and without the beer industry, Foley established a more comprehensive organization that initiated a full-fledged marketing department with specific brand management resources for each brand, a human resources department, corporate affairs department and a sales organization that began to specialize, both in on- and off-premise sales, but in specific off-premise sales channels as well.In 1995, the company reached its first major milestone, the 40 million case plateau. Also in 1995, the company changed its name to Heineken USA and in April of that year, moved from Manhattan to White Plains, New York. The difference in culture from bustling New York to suburban White Plains made for a substantial change in the company’s persona.The company soon became known for innovative, intelligent and thought-provoking advertising for both its Heineken and Amstel Light brands. Volume and profit growth for the company accelerated.Together, the two brands accounted for nearly 75 percent of the growth of the import segment, which was by the late nineties, the fastest growing part of the American beer industry. From 1995 to 2000, imports doubled their market share of the industry from five to ten percent.In 1997, Heineken USA became the first beer company to establish an Internet-based order planning system. The aptly named HOPS (Heineken Order Planning System) relieved the company’s sales personnel of the burden of manual ordering by the company’s 400-plus distributors, and put it in the hands of the distributor. With twenty minutes of training on HOPS, a distributor order clerk could complete the company’s monthly beer orders for Heineken within a few minutes. This lopped four weeks off the company’s previous 10-12 week lead-time for distributor orders. It was such a success that the system received a number of awards from the e-business industry.In 1998, the company added a legal department, reflecting the increased need for comprehensive distributor contracts and the highly regulated nature of the American beer business. The company reached another milestone in 1999 by passing the 50 million case mark and celebrated the event at the company’s first national distributor conference in San Antonio in October.As the Millennium passed, Heineken USA continued to be a leader in the imported beer segment. The company garnered awards for advertising, as well as for its community involvement activities in its corporate home of Westchester County and around the nation.In 2000, the company took another great leap forward in its supply chain system by opening ten demand centers around the country. This new system allowed orders to be staged in the United States, rather than in Holland. Beer was produced to forecast in the Dutch breweries, and Heineken USA’s wholesalers received the dual benefits of a ten-day lead time on orders (the shortest in the entire American beer industry) and the ability to carry a reduced inventory, greatly improving their cash flow. This system also improved product freshness. In November of that year, the company moved to new quarters in White Plains, effectively doubling its size.Michael Foley left Heineken USA in August 2000 to return to Ireland. He was replaced by Frans van der Minne, a Dutch native and 27-year veteran of Heineken. Having held a succession of senior positions within Heineken, including general manager of Murphy’s (he was Michael Foley’s boss from 1989-1991), and export director for nine years, van der Minne was one of the world’s foremost authorities on the global beer business. It is a fact that he has sold beer on every continent on the globe except Antarctica.In 2001, two major initiatives took place. The company started a Knowledge Management department, which brought together Information Technology and Consumer Research and added a Content Management function. The objective was to provide Heineken USA employees with world class business information and to give consumers greater opportunities to communicate with the company via the Internet. Frans van der Minne left Heineken USA in 2005 to return to the parent company in Amsterdam as Group Director of Human Resources and a member of the Heineken International Executive Committee.Andy Thomas was appointed President and Chief Executive Officer of Heineken USA in October 2005, the first American to head the U.S. business unit. Thomas' appointment brought him home to Heineken USA where he started his career with Heineken in 1995 first as a marketing research manager before rising to Vice President Strategic Planning. He was recruited to join Heineken International in 2000 as Regional Export Manager of Central and South America, Caribbean, Africa and the Middle East before being promoted in 2003 to Managing Director for the Middle East/North Africa operating company, a position he held until being selected to lead Heineken USA.Thomas made several significant contributions to Heineken USA during his initial tenure with the operating company including significant changes to increase the effective shipment of Heineken from the Netherlands to the USA. He also played a major role in solidifying the structure of the Heineken USA distributor network. A first for Heineken USA driven by Thomas, was the creation of the first comprehensive contract agreement between Heineken and its distributors, which continues to be the cornerstone of the Heineken USA/Distributor relationship.In the years ahead, Heineken USA plans to continue its segment leadership in the industry and continue to gain in the American market. With closer cooperation with Heineken’s Dutch operating company through the Star Chain system, and the provision of experienced talent for the company’s pool of international employees, Heineken USA will continue to be Heineken’s shining star and the definition of quality when it comes to beer in America.