Heineken eyes growing East Africa premium beer market
In the last 10 years, the beer market in East Africa has recorded tremendous growth. This is predicted to go even higher with the prospects of better economic growth, higher population, changing urban trends and stiff competition among brewers. Global brewers see the region as a high potential frontier to grow their volumes and are lining up their brands.
Dutch company, Heineken, one of the top three largest global brewers has been strategically penetrating the regional market since last year. Through its flagship premium beer brand, Heineken, has been selling in the market in the past years in limited locations and amounts, the brewer opened an operating company in Kenya and two more in Tanzania and Uganda. The company has also catered for infrastructure to serve South Sudan, Djibouti, Madagascar, Comoros, Seychelles , Eritrea and Somalia markets from Nairobi.
Like other beer brands in the market, Heineken has to keep up with the changing trends which have been pointing to the premium beers segment and exploit the positive economic outlook. It also has to deal with some changing regulatory policies and a unique Kenyan consumer. Six months after its full force entry in the market, KOEN MORSHUIS, the General Manager of HEINEKEN East Africa, talks about the company’s experience so far and the way forward.
Before last year, Heineken was present in the market through a distributor, what made it decide to open full subsidiaries in East Africa?
In the past we had a distributor who was handling everything from import, logistics, marketing, sales in East Africa with focus on Kenya Uganda, Tanzania, with someone in Amsterdam overseeing the activities at arm’s length. We reached a point where we had to move in based on the natural growth that we were seeing of the Heineken brand. This was coupled with some global indicators that told us to take a closer look at EA and revise our business case because there was something out here that we could tap into.
What did your research on the market show?
We had an extensive research starting from late 2010 to Q3 2011 that all together made us extremely confident about the e opportunities of the brand here. From a macro economic perspective we saw (as many companies) an emerging middle class with an increasing spending power which is an important sign for a premium brand like we are. There is also some political stability that for us is an important indicator that in the long term this middle class is capable of emerging further. The consumer research that we conducted extensively revealed that consumers appreciate our brand and its quality, but could not find it as much as they wanted- and that was a very strong signal for us. The distributor in Kenya did a fantastic job which was as in line with our request at that time to be in Nairobi, but as soon as the consumers travelled out of Nairobi it became difficult to find us.
So based on that what is Heineken’s strategy going forward?
We have identified some touch points that the Heineken brand has with the consumers in Kenya, Tanzania and Uganda. Going by our trade research we identified key urban centers in Kenya where we believe our brand has very good potential in Kenya. The UEFA Champions League is also a very important touch point for us; it brought us awareness long before this operation. We built on that when we brought the trophy to our consumers in Kenya and Tanzania. Going forward we are working on our visibility but in a subtle way. As a brand, we seek to build a unique and engaging relationship with the consumer.
How would you define the Kenyan beer consumer?
Loyal; Kenyan consumers really appreciate a brand that they have known for years which I find to be a good thing in the sense that if I am persuading them to come to my brand I know that once they do this person is going to be loyal. Another typical thing about Kenyan consumers is that they are dynamic as evidenced from their consumption trends. You will find one Kenyan consumer drinking at a premium high-end bar or a five star hotel today but tomorrow find the same consumer in a completely different outlet, a simple nyama choma bar in another location. On one hand this is very different from many parts of the world where I have worked, but it also makes it quite challenging in terms of targeting your consumer and knowing where to find him.
How have are you dealing with the unique Kenya consumers in trying to penetrate this market?
By ensuring that we build a connection with this consumer in all the places that he is likely to patron. Increasing visibility and engaging them in a unique and different way through our activations.
Among these unique Kenyans, who is your target?
Our core target is what we like to refer to as ‘the man of the world'. This is a man between 25 and 35 years, affluent, well-travelled, wants to make something out of his life, the natural leader of the group but not arrogant or over ambitious. That’s the consumer that we are after.
In a market where regional inflation rates last year averaged 8.6 per cent and beer is an indulgence commodity, is your target consumer affected by this and is this likely to affect your sales volume?
The impact would be very hard to measure for us at this time because we are relatively new; we are experiencing a dramatic growth of the Heineken brand at this moment. We are outperforming the market at the moment, which indicates that we are doing a couple of things right. But at this moment we are not concerned about volume as it may take a few years, but we are more concerned about growing the brand’s profile.
What do you think about your competition in this market? How is it like coming to a market where other brands have already built their brands and already enjoy massive consumer following?
The beautiful thing for us is that there is no other brand like Heineken in this market. We operate in what we what we call the International premium beer segment. In the global market, we compete with brands such as Carlsberg, Becks, and Stella Artois. In this market it is a niche we are trying to create among the middle class, an upper layer that can actually afford the premium because to be honest we are more expensive. So our drinkers do not necessarily come from other beers, we are creating our own niche and that’s why comparing ourselves with the other brands available in the market is not feasible. We will create a segment that is new in this market.
The other brewers have put in the market more than one brand, and continue to introduce more ranges, why have you only brought a single brand and isn’t this going to be a disadvantage for the company?
The global parent company, Heineken International, has over 200 brands like Desperados, Strongbow, Amstel and Sol. We could have come in with five different brands which might seem tempting at some point as research has shown there are brands that might do well. But we decided that instead of a portfolio of brands, we should lay focus on this one brand that has the most potential in the market.
Where is the beer consumed locally produced? Any plans to open up production in the region?
The beer consumed locally is produced in Amsterdam and then shipped in. For the next couple of years, we are comfortable with this as it makes business sense for us at the moment. If you are to start building a brewery you need critical volumes to support that, maybe somewhere in the future that may come, but for the next couple of years we will be importing.
Kenya Revenue Authority [KRA] has announced plans to widen tax collection by targeting beer and cigarettes, is this likely to affect your business revenues?
Increasing prices will always have some effect on the overall consumption. The experience though learns us that lower end priced beers normally will be effected more by price increases. This is due to the fact that the groups of consumer that consume these low end priced beers are more prices sensitive.
Where do you see the beer market going in future?
The Kenyan beer market is going to change, there is competition that is coming in right now, with us, and there is SAB Miller versus a very dominant player that is EABL. But most importantly, the consumer is going to be the overall winner with a much wider variety of choice and wider range of experiences.