Heineken Case Study

It is hard to think back to a time when beer was not around, unless memories of the decade known as the “Roaring Twenties” when Prohibition was in effect are recalled.  Of course, Prohibition has long since faded away into a time where beer and other alcoholic beverages are mass-produced the world over and are extremely popular.  Sales of beer are driven almost exclusively by the desire for leisure activities, including, but not limited to: sporting events, parties, and holidays.  According to Hoover’s, approximately 2 billion hectoliters of beer are produced annually around the world in countries such as: the United States, China, Brazil, Germany, and Mexico.  Currently, there exists rather fierce competition in the beer industry.  The major companies in this industry are typically those that have merged with other beer makers to become manufacturers of such size they are hard to compete with.  These breweries are: Anhueser-Busch Inbev, SAB Miller, Heineken, and Molson Coors, among others.  Although these breweries are quite impressive, Heineken will be discussed here.

Started in 1864 by the Heineken family, Heineken is now one of the world’s largest and most successful breweries.  According to Hoover’s, they actually operate more than 160 breweries in over 70 countries. They have found success in expanding their offerings from just their flagship brew, Heineken, to other globally known brands that include Amstel, Affligem, Sol, and Desperados.  They have even gone an additional step and have proceeded to offer approximately 250 regional and specialty brands.  And like other competitors in the beer industry, Heineken, although worldwide, still has room to grow, as they look toward other areas of the world, including areas of Asia, particularly China, where the market is currently going into an upswing of demand.

Heineken has adopted a Multidomestic Strategy as its international strategy.  A Multidomestic Strategy requires adapting and offering different products with the intention of attracting varying global consumers based on the specific culture preference of a region.  Heineken has aggressively acquired many breweries and firms across the globe in order to gain local cultural advantages as well as efficiencies in operations.

Heineken's original success came as a differentiated product that was popular because of^[a] its originality and the international availability of a reputable, premium tasting beer bestowed on the European beer culture.  But original Heineken was only attractive to a certain consumer and not popular among all market segments; and this collided with the company’s thirst for growth.  The firm’s aggressive goals for expansion has embedded a strategy of horizontal integration and differentiation through acquisitions of regional breweries in order to bypass roadblocks to market entry.  Heineken’s pursuit and acquisition of breweries throughout the globe gave it regional differentiation for a global business.

        According to The Beer Store’s website, an average case of Heineken costs almost $50.00, which compared next to domestic choice is quite expensive. A single can or bottle of Heineken can cost around $4.00, around twice that of other domestic choices. The price point of this beer targets older consumers, as college students and young adults do not spend money on expensive beer.  Heineken representatives note on their website that their brand vision is to remain aggressive, and stay in front of the market.  The brand image of the company is a premium, sophisticated beer that is not meant as a casual encounter beverage, but as more of a luxury.  This type of stigma increases the cost and value of the product, as long as consumers continue to pay for it.