Belgian speciality Heineken’s unlikely giant killer
The Affligem brewery lies just 20km west of Brussels in a heartland of Trappist breweries, but its prime location does little to boost its chances in its domestic market.
Its competitor Interbrew has a stranglehold on Belgian beer drinkers, controlling 56% of the domestic market through brands such as Leffe, Jupiler, Hoegaarden and Hougaerdse Das - as well as the old favourites Stella Artois and Beck's.
Affligem's production of 92,000 hectolitres last year was miniscule compared to Interbrew's yearly Belgian output of 6.4m hectolitres. And the beer Affligem does brew has to fight every inch to reach the Belgian consumer as Interbrew's muscle dictates wholesale and retail distribution channels.
But the times could be changing for this Abbey beer. Heineken bought a 95% stake in Affligem in mid-2000 for an undisclosed sum, and has since earmarked the brand for international distribution as a speciality beer to fight Leffe, arguably the most famous of the Trappist brews.
The Dutch brewer is investing a million euros a year for the next three years increasing the brewery's capacity to 180,000 hectolitres per year. In 2002 brewing output is projected at 115,000 hectolitres. And most of this will be exported.
France is already the largest market for Affligem; 50,000 hectolitres were drunk there in 2001 compared with 30,000 hectolitres in Belgium. The other 12,000 hectolitres went to the Netherlands, Spain, the US and UK.
Although volumes are modest, a snapshot of the UK market illustrates Heineken's ambitious growth targets for the brand. It's planning to export 2,400 hectolitres to the UK this year from a standing start and then triple that to 7,000 hectolitres in 2003. It's hoping to secure distribution in 150 London style bars and gastro pubs this year and draught Affligem is already available in 30 London bars. An on-trade roll-out of the bottled version has been pencilled in for June and off-trade listings are expected to be secured in May.
"Consumers are looking for more choice and they're looking for quality. Price isn't an issue if the taste and image are right. This is exactly the sort of premium beer that's taking off because it links well with food," said Dick Humphries, sales director of Turnkey Drinks, the company that's developing Affligem in the UK on behalf of Heineken.
Heineken dropped the ABV of Affligem Blonde down to 6% for the UK market. In Belgium, it's a 6.8% ABV beer and the most popular Blonde version is partnered by the 7% ABV brown beer Affligem Dubbel. On top of this there is a head-spinning 8.5% ABV version, Affligem Tripel, which has won awards in several international brewing competitions.
"We've always focused on quality and always brewed top-fermented ales," said Theo Vervloet, General Manager of Affligem Brewery and a 50% shareholder before the Heineken takeover.
He believes the brand's heritage holds international appeal. The Abbey of Affligem dates from 1074, and although the monastery no longer actually brews the beer, it is still produced to the original recipe.
"The Affligem brand is owned by the Abbey and Heineken has bought the licence to brew it. The product licence says Affligem must be brewed locally, so it will always be an authentic Abbey beer," said Vervloet.
The Heineken takeover was a logical progression as the Dutch brewer had handled selected international distribution since 1989. If the deal had not been struck, the Affligem brand would have been in grave danger.
"Heineken are working on their own master plan for the brewery, but without that master plan we would have struggled," said Vervloet. "Before we did the deal, I got a call from Interbrew. They were offering to buy the business, but only on the basis that the brewery would be closed immediately. They wanted to kill a competitor."
But Heineken has its reasons for breathing life into Affligem.
"By developing our speciality beers we're implementing a defensive strategy that's there to block the competition as well as getting a fair share of the sector ourselves," said Arjen Evenhuis, international brand manager for specialities at Heineken. "We recognise that more and more markets are getting into speciality beers because standard lagers are under pressure."
Heineken has built a limited portfolio of speciality brands, alongside Affligem the line-up includes the Dutch wheat beer Wiekse Witte, Vos - another Dutch beer and the RTDs Desperados and Kreska. In fact Heineken owns over 80 brands worldwide, but the company is the first to admit that its speciality brands have a lot of catching up.
"In most markets we're still only a small player in terms of specialities," said Evenhuis. "It's not like Interbrew, where speciality beers are fully integrated into the company. It's clear that Interbrew has implemented a portfolio strategy and Heineken has not. Heineken has always been about pushing the major brand. But now we're looking to try something new."
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