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Heineken Looks to Dos Equis to Capture U.S. Market

JERSEY CITY, N.J. -- Heineken NV is looking to an import from Mexico to help the company win back some of the ground it has lost in the United States.

In an interview with Bloomberg, John Nicolson, head of the company's Americas unit, said Dos Equis is "our shining star."

Heineken entered the U.S. market in 1933. Lately, it has been attempting to regain lost ground with a new global marketing campaign. The Americas, including the United States and Brazil, is Heineken's second-largest market after Western Europe, accounting for 23 percent of the brewer's 8.36 billion-euro ($10.9 billion) first-half sales, the news outlet reported.

The Amsterdam-based beer company acquired Dos Equis in 2010, and the Mexican favorite has been on roll since then. Sales of the brand rose 17 percent for the quarter ended in October, compared with Heineken's 1-percent sales decline and industrywide declines of about 2 percent, according to research by Sanford C. Bernstein analyst Trevor Stirling.

Nicolson pointed to a successful marketing campaign as a key driver behind Dos Equis' success. One popular marketing effort has been the "Most Interesting Man in the World" ad campaign, featuring the tales of one worldly man's experiences -- and the catchphrase, "I don't always drink beer, but when I do, I prefer Dos Equis."

Dos Equis represents 0.6 percent of the U.S. beer market by volume, compared with Heineken's 2.2 percent in 2011, Euromonitor, a London-based consumer-research company, estimated. Heineken acquired the brand when it bought Fomento Economico Mexicano SAB's beer unit in a takeover valued at 5.4 billion euros, according to Bloomberg.

Dos Equis is an "awesome brand," said Anthony Bucalo, an analyst at Banco Santander SA. Its "very broad consumer base" may aid the brand's popularity, he added. "It's not limited to hipsters in Vermont drinking microbrews, or blue-collar workers drinking Bud."

Dos Equis' popularity alone may not be enough to help Heineken rise to the top, however. The Heineken brand's U.S. market share slid from 2.6 percent in 2006 to 2.3 percent in 2010, according to Euromonitor data. The company has been scaling back some distribution outlets in the United States after becoming "too ubiquitous" during the early 1990s, Nicolson said.

Heineken, which accounted for 18 percent of the consolidated volume of beer sold last year globally, is also benefiting from some effective repositioning and marketing. "We've got some momentum back" for the Heineken brand, Nicolson told the news outlet. "Our marketing got lost, and we changed tack too many times."

The Heineken brand grew 3.9 percent in volume in the four weeks ended Nov. 26, Ian Shackleton, an analyst at Nomura, said in a note, citing AC Nielsen data. Dos Equis Especial increased 25 percent.

Still, Bucalo at Santander is skeptical that Heineken will show much improvement. "A lot of the big macro brands have about 25-year life cycles where they start to peak out, and start declining," he said. Heineken "hit that point in the middle of the last decade," he noted.

"They really let Heineken go and they're paying the price for it," he said. "They can stabilize the business, but the future of Heineken USA is in the Dos Equis brand."


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