Today we are with Floris Cobelens from Heineken Italy. Floris is the Marketing Director of Heineken Italy, and he's had experience in many different jobs in Heineken in the last ten years. Today, we are going to cover some different topics in the beer industry. Floris, let's start from, I'm very interested in one of this, the beer industry is a very global one, however, the most drunk beers in each country are local ones. What is the main reason for this? >> The main reason is that all of the beers, they have a tremendous heritage. So, most of the beers you know today, they all started very small, in a small brewery, in a small city. So, they have all this heritage. They did a lot of things for the village or for the region they were produced in, and this grew over time. So still today, many beers are still strongly rooted in the society, whether that means a small village, a region or even a country. So this heritage plays a tremendous role in our industry. And this is also the reason why the majority, also in Italy, of our portfolio, for example, still the majority is what we call local beers being really local local, or national local so to say, yeah. And what about the tastes? How are tastes for beer different in different countries? Because when we talk about beer, we talk about “beer.” It seems like one single product. No. That's not the case. So, for this reason, you also have a lot of events that select the best beers and in that sense, it's very interesting to see what's going on at the moment. Because for a long time, the majority of the beers was indeed what we call lagers. To be honest, there's a clear differences between lagers. But for a lot of consumers, lagers in general taste very, very similar. Although, this is, if you have it tasted by experts, is not the case. But what you see is the trend where also brewers start more experimenting and that's what we call also the specialty segments. Where the profiles are really different from what the lagers are. So higher alcohol, or a completely different way of producing the beer creates a completely different product from these lagers. Yes. And usually, these segments are transversal across the countries, or maybe in some continents, taste is more similar than different than other continents? How does it work? Yeah, so there are some differences in continents, so there are cultures where bitterness is not perceived as something which is very common in the culture and very much liked. So, for example, in Asia, very bitter beers is often a bit more difficult than countries that have that heritage. For example, a great example is Germany in that sense, in Europe. So they vary country by country indeed. The more peculiar the taste becomes for sure, the more often also specific it is for a certain region. In Italy, just going back to Italy for example, we don't see huge differences. However, there is some difference, just to give you one example is, if you look at wheat beer, so that's what's called Weizenbier. It's consumed more often in the north of Italy, which is close to Germany and Swiss, which have also a bit of this culture. So this is a product you typically will not find in the south of Italy. So even in a relatively small country, you will see diversity in taste and availability of products. If we move on to supply side, the beer industry is in the hands of very few global players. What is the reason for this? Why do global players play in different countries which are very local in terms of taste? How do they do it, basically? Yeah, so reason is that there is an advantage of skill. If you look at the beer market and the consolidation that has taken place in the last 10, 15 years, that has been tremendous. Because going back more far in time, the beer market was really a diverse market with a lot of local players as we just discussed. Today it’s driven also by skill. Skill from so to say, both the supply side, meaning for sure there is an advantage if you buy, for example, bottles of glass on a mass scale. There is a cost advantage from that side. But also, not only on the supply side, also for example, the marketing side, there is an advantage. I mean, if we talk today for example, to Facebook as Heineken, it's really different as I would do that as a Marketing Director for Heineken Italy. So, there are many aspects of the company that are huge advantages of skill and this is why in the end, this consolidation has taken place over the last 10 to 15 years. One way these big global players have in competing in these countries to have huge brand portfolios. Yeah. What is the reason for having these huge, broad brand portfolios? Yeah. Now the main reason why we have brands and different brands in our portfolio is simply because each brand has a different purpose, so to say. So the way we look at this is what we call in, indeed, building a winning portfolio. That's the internal title, so to say, which means that we have to position our brands accordingly to two things. One, consumer needs, and the second is consumer occasions. So, this is a diagram of which we plotted the sale of our brands, and we tried to cover as much of the needs and occasions of consumers also in the Italian market. And often, one brand cannot do that. I mean, one brand cannot be at the same time the best beer consumed in our case with a pizza, and at the same time being the coolest brand in the market. So, consumers are different, needs of consumers are different, occasions when our product is consumed are different, and we try to find the right mix of brands in order to make sure that we serve as many consumers as possible. The brands, I remember, are quite different in different countries, although there are some of your brands which compete in many different countries. My point would be the architecture, the structure of the portfolio of Heineken all over the different countries where Heineken competes is it the same, or in different countries, is the structure different? Are you talking about the Heineken brand or the Heineken portfolio to be clear? Heineken portfolio brands, you have brands with different roles and is this same all over the country? Yes. The way we are set up is in the way that we have a couple of brands which we call global or international brands. That means that these brands are available and we sell these brands in more than one country. And often, basically, in all the regions throughout the world. They are strongly centralized. That means that what the brand stands for and the whole architecture of the brand is strongly set up from the center. And we try to be consistent in our presence towards consumers throughout all these different regions and countries. However, on top of that, you have the local portfolio. Because, as we said earlier, there is relevancy of having a local portfolio, because of its heritage. So what we often try to do, and also this is the case in Italy. We try to find the right combination between, these global brands and at the same time, these local players that have been already in the market for many, many years. With this portfolio, we use it in our route to market and to optimize it because if you have a lot of brands, you can use your sales people in a very efficient way. Well, as you mention before, scale is a very important competitive advantage in the beer industry. So my question will be, is it possible to be small in the beer industry because one of the trends in the last year has been the craft beers? And craft beers are usually small breweries competing locally. So it seems there is a trend for the small size. But is it really a trend? Is it a trend all over the world? And how does Heineken react to this trend? Yeah. So, that's a lot of questions. Yeah. I try to see if I can cover all of them. Small depends in the end, you can perfectly survive, so to say, in this world being small. It's simply depends on what your ambition is, so being big or being small, you can perfectly make some good income if you're a small brewer. The interesting thing is that we also used to be a small brewer, back in the time, and all the brands in our portfolio. You will find fantastic pictures and stories about when we started with all the brands we have today in the portfolio. And they all started exactly the same way as these local, craft beers are doing today. Meaning, with a small group of people, full of passion, trying to brew a beautiful product. Over the year, the market has consolidated. Yes, companies like Heineken, we wanted to be more ambitious. And we said okay, if people like our products, then we need to export our products. Today, you have some craft brewers that used to be craft brewers have that same ambition. So you see already craft brewers exporting the product also to Italy, for example. And some good examples are already there. So it's a kind of trend that is returning. I think it's a very, very exciting trend because it's good that new, young, and small players come into the market and challenge a bit, the big players. Challenging in different tastes, in different bottles, in the way they do marketing which is not the big advertising that it used to be in the past. So it's good that they shake up the market I think is very exciting. I think the market in itself will benefit from it and make the category very appealing. And the challenge for us is to find the right answers. And to benefit from this renewed interest. I’ll come back in a second how we do this. But, final question you ask, is do we see this trend everywhere? It's mainly a trend, at the moment, in the western markets. So in the more developed markets you see this trend of interest in products and their origin, where they come from, how they are produced, etc. So, it's mainly a trend in the more western market. The US, for sure, leading, but also in the UK, and also in Italy. What about the reaction of Heineken? Yeah, so it's all in development. And what we have said, there is no one answer to this. I mean, so it's also a development. So we try to find answers and we have a couple of them. Just to give you three examples how we answer, is we also have these fantastic products in our portfolio with a fantastic history. I’ll just give you one example. We have not been very active with a brand which is called Affligem which is 1,000 year old brand, brewed in Belgium. And for a long time, we had not clear in mind what we wanted to do with this brand. And today, we see consumers picking up and they like brands that have this fantastic history that are produced in very small abbey, in our case, so it's really a beautiful story with monks and knights, etc. And now we, indeed, get a bit more active, by also putting this brand in very selected outlets throughout Europe and throughout the world to be honest. Another one is, if you look at, directly at Italian markets, we used to have brands in our portfolio, or we even have brands in our portfolio which never got any support. Because we thought they were very small, and they were only relevant in that certain region in the south of Italy and it was a small brand. Today, what we see is without doing anything, without having any clever marketer there for the last ten years, it pays off. Meaning, these products are really growing and we tap into this trend. And a third thing we're doing is, even with what I would call the mainstream brands, you can learn from what is going on in craft beer and you can become more local. Just to give you an example, you can start working with local ingredients instead of maybe ingredient sourcing from all over the planet. So, there is a kind of awareness also impacting on the bigger brands that this whole craft movement and being local, etc, and we can use that, even applying that for the bigger brands. Listening to what you were saying, another question came to mind which is how important is the country? Because when we talk about beer, especially in Europe, we have some countries in mind. Germany, the Netherlands, the UK maybe, But there are some countries like Mexico, and I'm thinking of Corona, and you have another beer which is Desperado. So what is the role of the country? Is it a differentiating point? Can it be a differentiating point? Yeah. Well, for sure it can be a differentiating point. Indeed, I think the example of Corona you gave is a fantastic example where the country you come from can be the differentiating and deciding factor. In a country like Italy, it can even be the region where you come from. I mean, so heritage in general, where you come from, whether it is a country. But what we call it is localism, so to say, can definitely play a distinctive role and a differentiating role in our category. We do the same now for Birra Moretti which is a mainstream brand in our portfolio. Where we work with ingredients from different regions and so we have a range of products. So heritage, localism can be a differentiating factor. When you have such a broad portfolio of brands, how can you avoid cannibalization? I mean you have so many brands in one single market. And so one of the risks you make is internal competition. Yeah. how can you avoid which are the main-? No, to challenge the question a bit, is cannibalization a bad thing? Which it’s not per se. I mean cannibalization can be a fantastic thing because sometimes we cannibalize but we make, in the end, more profit, so to say, on what we are cannibalizing upon. And I also believe if you cannot cannibalize, if you do not cannibalize, your competitor will attack you. So sometimes, it's better to cannibalize than not. But yes, you need to differentiate the brand properly. That is indeed fundamental. So really understanding that who your consumer is and what your occasion is you want to reach out to. And making products that are really very specific in that prevents, to a certain extent, that the cannibalization is huge. But it's always a challenge. We have just launched a new phenomenon in the beer market is, for example, where you mix beer with soft drinks, it's called Radler. And we have different brands with Radler propositions. So the challenge is very much, okay, how do you make that really differentiating? Because the product is very similar and the idea is very similar. Now, in our case, we have decided that for one brand, we tap into this trend of vintage soft drinks. So, instead of using always the same soft drinks, you can tap with one brand into the vintage. So, you go back in time and say hey, what soft drinks used to be popular in this market and let's combine that with beer. With another brand, you say, what are the main global soft drink flavors? Let's use that for another brand. So, once again, it's understanding consumers very well, occasion, and then tapping into that in the best possible way, and also being creative in that sense. Okay Floris, than you so much for all the information. Okay, thank you.