Dive Brief:
- Heineken said it plans to cut 8,000 jobs, or about 10% of it workforce, as the beer giant continues to suffer from a drop in sales at bars, restaurants and other establishments due to the pandemic, the company said in a statement.
- The world’s second-largest brewer behind AB InBev also said it would aim to save 2 billion euros ($2.43 billion) over the three years through 2023 in an effort to improve margins. Savings will be achieved by redesigning the company's structure to be more efficient and effective; reducing the complexity and number of SKUs; and cutting spending that is the least effective. Heineken also said it plans to focus more on premium products, nonalcoholic offerings and move beyond beer.
- The beer industry is struggling as Americans drink less alcohol or skip it altogether, and when they do, they're more likely to turn to spirits, craft beers or ready-to-drink products like hard seltzer. A big win for Heineken in recent years has been in the nonalcoholic space with the introduction of Heineken 0.0 in 2017.
Dive Insight:
As the beer industry looks to reestablish itself amid a changing consumer palate and fewer consumers venturing outdoors, Heineken is moving aggressively to make sure its business doesn't get left behind. The beer giant is aiming to restore margins to 17% by 2023, a level Bloomberg noted would be inline with levels achieved before the pandemic. Sales last year fell 11.9% on an organic basis, topping analyst expectations.
Heineken, which makes its namesake beer along with Tiger, Sol and Amstel Light, also vowed to not only innovate in its core brews but move beyond beer. It didn't specify what those targets might be, but last year Heineken USA and Hornell Brewing Company, affiliated with Arizona Beverages, announced plans to introduce Arizona Sunrise Hard Seltzer early this year.
A growing number of large beer giants, including AB InBev and Molson Coors, have been aggressively rolling out hard seltzers, nonalcoholic brews or moving outside of beer altogether in a bid to grow revenue. Molson Coors, for example, has rolled out a slew of products during the last year including ZOA, a nonalcoholic energy drink made with better-for-you, natural ingredients; a full-flavored seltzer with added probiotics; a plant-based diet soda; and a grain-based milk alternative packed with protein and nutrients. Molson Coors also announced in 2019 it would cut between 400 and 500 jobs as the beer maker struggles with lower demand for its brews.
Heineken also said it would juice growth by pushing more premium brands and nonalcoholic beer, the latter a segment the company noted has a lot of potential for growth. The nonalcoholic beer market remains outsized compared to the $43 billion in retail sales racked up across the total beer category, according to IRI, but it's expanding quickly.
For the latest 52 weeks ending Nov. 1, the market research firm found nonalcoholic beer sales rose 38% to $181 million compared to the same period a year ago. Heineken, which has seen its dominance in the nonalcoholic space soar with the successful introduction of Heineken 0.0 in 2017, accounted for $51.7 million, or 29% of sales, followed by O'Doul's with roughly 25% and Busch NA at 17%.