The coveted millennial consumer doesn't drink beer, and if he does grab a cold one, he opts for a craft microbrew, probably an IPA and probably in a Mason jar.
Like all musings about Generation Y, that's a huge generalization of a diverse group of humans. But tastes of younger drinkers have changed and while craft beers, wine, and spirits have seen an increase in their consumer base, sales of classic lagers have fallen. Heineken, which also markets Sol, Dos Equis, and Amstel, for example, reported a 53% drop in net profit in 2013, a stat partly attributable to a general move away from beer. In 2013 2.79 billion cases of beer were sold globally, flat compared with the 2.78 billion cases sold in 2012 and down 2.9 billion cases sold five years ago, according to Mintel. Although, Heineken USA's sales are up 3 percent over the last 12 months, according to Nielsen.
Stuck with a product that people increasingly don't have interest in drinking, what's a brand like Heineken to do? Innovate: "We think innovation is a great opportunity for us to bring in people who are not satisfied by our current lagers," Monique Acevedo, vice president of innovation at Heineken, told Fast Company.
For Heineken, that doesn't mean a new bottle, or a boozier beer. It means releasing entirely new alcoholic concoctions. Throughout the months of March and April, Heineken will roll out five new products hoping to recapture the taste buds of America: Amstel Radler, Dos-A-Rita, Dos Equis Azul, and two new variations on Strongbow cider. The overall plan is: add more flavor, and the millennials will come.
"One of the things about millennial consumers," Acevedo said, "is that they are looking for more types of tastes and different types of flavors." Millennials are an important consumer for Heineken to reach: The demographic makes up 26.1% of drinkers and 35% of beer drinkers, by volume, according to Nielsen. Boomers drink more, but millennials are the future, and also the frustrating demographic that opts for Maker's over Heineken because it is more "sophisticated."
So, the thinking goes, if millennials won't drink beer that tastes like beer, why not offer beer that tastes like not-beer?
Enter the Dos-A-Rita, a "lager margarita," which blends Dos Equis beer with "authentic margarita flavors," all in one tallboy-sized can. (It also comes in an adorable eight-ounce size.) Or, if that doesn't do it for you, try Dos Equis Azul, which the bottle explains is "beer brewed with spice, blue agave, nectar and caramel color added." The Radler, an already popular drink in England, puts lemon juice and Amstel beer in the same bottle.
These offerings didn't convince this millennial and my urban colleagues to put down the bourbon for some frankenbeer. The Dos-A-Rita smells like a frat house the day after a Cinco De Mayo party, and doesn't taste much better. The Radler and Dos Equis Azul are a bit more palatable—Azul almost tastes like beer! But Fast Company taste testers didn't choose either over the various other beer brands on offer at our informal tasting, which ranged from Red Stripe to Smuttynose.
But just because a bunch of East Coast beer snobs didn't like the brews doesn't mean Heineken has the wrong idea. "One of the things that we've really seen in the last few years is that beer lovers are demanding fuller-flavored beers," Bart Watson, an economist at the Brewers Association, told Fast Company. Based on the success of the fuller-flavored IPA—the IRI Group reported IPA sales were up 41.1% by volume in 2013—craft breweries have been experimenting with exotic ingredients like mango, chili, chocolate, and coffee. Dogfish Head, for example, has an IPA brewed with Syrah grapes. Watson didn't have specific figures to share on the trend, but assured it's a successful category. "Brewers that have figured out ways to pack more flavor punch in their beers have succeeded in the last few years," he added.
Someone who likes an experimental microbrew probably isn't going to go for a Dos-A-Rita. And yet, there's precedent that people are open to new and seemingly questionable flavor combinations. Consider flavored whisky. Despite much ridicule from whisky enthusiasts, Jack Daniel's posted record sales after it introduced its honey-flavored offering in 2011. Since then, other whisky brands have followed with their own flavor-infused creations.
It only seems logical that some of those people might grab a pack of Dos-A-Ritas. It's not like Heineken is plucking its combinations out of obscurity. The "beergarita" is an already popular drink in Mexican restaurants. It is probably (definitely) one of those things that tastes better fresh, but Acevedo is betting that some people will want to drink it pre-made, in a can. "This is behavior that we think consumers have already," she said. "It's much easier to leverage something that is a popular trend, versus creating something they have never seen before," she added. The Radler taps into the same theory. The lemon-beer drink, which originated in England, is apparently "on fire" in Europe.
And, it might not entirely matter that me and my colleagues find the beverages repulsive. Heineken isn't really trying to reach the craft beer drinker or even the beer drinker. It has already lost that battle. Instead, it's grasping for the wine and mixed-drink drinker, especially, although not exclusively, women—people like Acevedo, a cider fan. When asked, she said her favorite drink is Strongbow Gold.
"We're not developing things that are specifically designed for women," she said. "We are looking at things that have a broader footprint where we'll also be bringing in new drinkers, such as women." That's why most of the new beers don't resemble Heineken. The real innovation here is targeting consumers who otherwise wouldn't buy a Heineken branded product.
Sales, not my palate, will ultimately decide if Heineken has succeeded at innovating its way out of a slump. Anheuser-Busch claims its "a-rita" franchise is one of its most successful to date. Perhaps consumers will flock to the Dos-A-Rita, too. If not, Heineken might want to take a page out of MillerCoors's innovation playbook and just stick to the can.
This story originally said cases of Heineken had dropped over the last five years, when those numbers reflected global beer sales. This article has been updated to say Heineken USA sales are up 3 percent.