Heineken Learns an Expensive Lesson About Beer

Heineken really needs to hire me as a consultant before it makes any more purchases.

Get this. Heineken gets the brilliant idea to buy brewer Scottish & Newcastle, purveyors of Newcastle beer. The price is a little high, so they get Carlsberg to come in on the deal. Together they pay over $13 billion for Newcastle, with the agreement that Calsberg will get to sell it in Russia and Eastern Europe, and Heineken will have the U.K., Ireland and the U.S., along with a few other countries. No doubt Heineken thought is was getting the better deal with those countries.

Let’s apply some simple common sense at this point. Beer drinkers in the U.K., Ireland and a large number in the U.S. know their beer. On the other hand, until recent times, beer drinkers in Russia and Eastern Europe drank whatever the hell the government told them to drink. To say the least, that is not a region with discriminating tastes. So who is going to do better with this deal, Carlsberg or Heineken?

Surprise, surprise. The mass-produced, zero character Newcastle beer tastes pretty good to Russians, who used to drink discarded crankcase oil flavored with hops. On the other hand, people in the U.K. and Ireland (and to a lesser extent America) who know what beer should taste like, won’t drink a Newcastle on a bet. As a result, Carlsberg’s profits rose 34% as a result of the new product and markets, while Heineken’s net profits fell 74% from the prior year. That’s a loss of about 700 million euros. I would have charged Heineken far less to explain reality.

I know there are some who like Newcastle; enough that you sometimes see Newcastle tappers at bars. But always remember, Budweiser is the number one beer in the U.S., and I think we can all agree it is swill. In other words, the fact that a large number of people drink something doesn’t mean it’s any good. Like Budweiser, Newcastle has the following it has specifically because it has no character; a brown ale with training wheels. It’s not a good beer, and I have 700 million euros that say I’m right.

Posted on February 19th, 2009 by Aaron Morris
Filed under: Beer, Beer Facts, Beer History