LONDON – When a stagnant European economy and picky consumers gave Heineken lemons, the worlds third-largest brewer decided to mix them with beer.
The company this year rolled out a line of radler drinks, a blend of lemon soda and lager, to 23 markets in its biggest product introduction. Its venturing that the drink, sweeter and less alcoholic than beer, will win over the ever-elusive female drinker as well as young men who prefer wines or spirits.
Brewers are stepping up efforts to find alternatives to beer amid changing customer preferences. Market leader Anheuser-Busch InBev has produced a lime-flavored variety of its Bud Light brand, while Heineken has added tequila to beer to create Desperados. Heineken is reducing its reliance on its eponymous global brand after six years of beer market declines in western Europe, to which it has a greater exposure than peers.
Beers losing out to other beverages, said Ian Shackleton, an analyst at Nomura in London. You could argue thats because brewers havent been as innovative. The question is: How do you innovate in lager? Its all a bit samey.
Radler is the cornerstone of Heinekens strategy to get 6 percent of sales a year from new products. Last year, the company got 5.3 percent of revenue from newly introduced drinks, or about $1.3 billion.
Heinekens journey to find the next big thing in beer has taken the company back almost a century. Invented in Germany in 1922 to cater to sportsmen seeking a halfway house between a beer and a soft drink, the radler gained popularity in the country and central Europe in bars and restaurants. Drinkers may also have tried a similar tipple by asking for a panache in Paris, or a shandy in a British pub.
Heinekens formalized what was being mixed by a barman, said Trevor Stirling, an analyst at Sanford C. Bernstein in London, referring to a drink that contains about equal quantities of beer and soda. Consumers love it, so I dont know why someone didnt give it to them beforehand.
Radler drinks had a very strong performance in the first half of the year, Francois-Xavier Mahot, senior director for global innovation at Amsterdam-based Heineken, said June 28. Thats just as well: Heineken will tomorrow report a 6.6 percent decline in first-half beer volume in Western Europe, according to the median estimate of four analysts surveyed by Bloomberg.
New products such as Anheuser-Busch InBevs Bud Light Lime Lime-A-Rita and Platinum, which have helped boost Bud Lights market share in the U.S., show consumers are keen for a new skew on beer. Heinekens Desperados increased sales 15 percent in 2012 compared with 5.3 percent growth for the Heineken brand.
Heinekens been rolling out radler in countries from Britain to the Democratic Republic of Congo. Its not alone, as Carlsberg and SABMiller are also pushing lemon-and-beer drinks, though Heineken says its leading the pack.
Without divulging internal data, Mahot said Heinekens new radlers are outperforming traditional beer mixes and lagers across Europe.
A heat wave in July may have helped the drink gain traction – radler sales are more skewed to hot weather, when drinkers seek a more thirst-quenching beverage, Mahot said.
While the drinks packaging and advertising isnt skewed toward either gender – the advertising shoutline is doubly refreshing – Mahot says more women are gravitating toward it, enticed by the sweeter citrus taste.
Women are the holy grail for brewers seeking to reinvigorate interest in beer, he said.
Cutting beer with lemon reduces the strength of the drink – the Fosters-branded radler produced by Heineken in Britain contains just 2 percent alcohol by volume – and may appeal as a drink for consumption after sporting activities, Mahot said. That sets radlers aside from other citrus-flavoured beer drinks.