InBev's Steve Kitching is bringing his off-trade experience to the fight to get customers out of their living rooms and back into pubs. Adam Withrington reports.
A declining on-trade beer market; supermarkets selling 24 cans of booze for the price of a Coldplay CD; questions over the quality of service in the nation's pubs. Such issues have been vexing many in the trade for some time and are certainly on the radar of InBev UK's recently appointed on-trade managing director Steve Kitching.
Not that he's unduly daunted by the industry's major challenges. Perhaps he's inherited a bit of the spirit of Conan the Barbarian, a film he admires.
Still, whether it's talking about films or one of his favourite bands - the Arctic Monkeys - the breadth of his conversation suggests Steve would be a decent enough bloke to go down the pub with.
Which is just as well, given his responsibility to persuade more of us to heave ourselves off our sofas - where we might be quaffing a few tinnies while watching a 1980s "B" movie starring the now governor of California - and instead visit our local pub. Given that he has spent the bulk of his career in the off-trade side of the business, if anyone is in a position to know about how to tackle the former, it is he.
How does he intend to confront the big on-trade brewing challenge for the next ten years - declining beer sales in pubs? Will his approach be to target the pricing strategies of the supermarkets? Steve believes that this is too negative a tactic.
"It's not about how you stop the off-trade, it's about how you optimise and develop the on-trade," he says.
"You have got one beer market with lots of different occasions going on. You can talk about an on-trade decline and a switch to off-trade, but if you looked at it in respect of value rather than volume then you might think there were opportunities."
One such opportunity is to improve the in-pub experience for consumers. Steve's passion on the subject is clear.
Service quality isn't anywhere near good enough, in his view, and this has become a major factor regarding the tough environment the on-trade finds itself in.
"In the on-trade you have to ensure the customer gets real value for the money they are spending. If you specify what the perfect beer experience looks like (regarding correct temperature, glassware etc), how many pubs would hit the right standard? Our experience is that it's about three in 10," he says.
He argues that a major part of the problem of pubs not delivering the right experience is what is going on underneath the bar.
"We are putting a lot of pressure on the infrastructure through our desire to bring temperature of beer dispense down — and there is only so much you can do with the pythons that are already in there," he says.
Steve adds that, in some cases, the installation of extra cold systems may have an adverse effect on the dispense of beers further down the python.
Growing through innovation
Quality of dispense is clearly a huge focus for InBev as it moves forward. There have been worrying signs for the brewer with regard to the performance of Stella Artois, with competition coming in the form of imported speciality beers. InBev has taken this onboard, setting its stall out to lead the way in innovation of its own speciality beers.
Hoegaarden and Leffe have been big successes in terms of growing sales but, more importantly, they have gone some way in changing consumer views of beer.
Ten, perhaps even five, years ago would we really have believed we would be going into pubs drinking from "bowl" glasses or, indeed, thick hexagonal glasses?
But Steve dismisses the suggestion that consumers have been won over by speciality beers, stressing that a huge number of pubs are not equipped from a dispense perspective to cope with speciality beers - and are missing out as a result.
"The battle has not been won at all," he says. "My personal view is that Hoegaarden and Leffe are still 'innovation' because so few people out there have had the opportunity to enjoy the full experience with these two beers. What an opportunity for beer if, five years from now, you could see speciality beer well presented and well kept in as many outlets as you see a stout. That's the something that will make people reappraise beer."
However, he hopes in the short term that brands such as Leffe, through bottles and branded glassware, will be able to make an impact on those pubs that are technically not yet up to the mark.
Image problems
And what of Stella? The performance of the "reassuringly expensive" brand must be a concern for InBev. Smaller competitors like Heineken are eating into its market share, and the brand may be experiencing certain "image problems".
However, Steve says he is puzzled by the talk of Stella being a brand under pressure.
"This is a really strange one. I will accept that when a brand with all of the imagery that Stella Artois has becomes broader in distribution you have to work hard on your equity, and that consumers can potentially reappraise it.
"In the off-trade we had a 20 per cent premium over standard lager - which is greater than the premium we have in the on-trade. You can argue with what is said mathematically, but that doesn't change the perception and the stories."
Talking of challenges, Steve arrived back in the UK business last October, after heading up the InBev business in Holland, just as InBev UK president Colin Pedrick had introduced Project Neptune, a cost-cutting and efficiency drive across the business. Was he not concerned at re-entering a business where a swathe was being cut through the company's cost base?
"The two key words with InBev are diversity and discipline. If you are disciplined and save costs then you can reinvest that into the diversity part of your business model. That is what motivates me. I couldn't get excited in the morning if my job was all about cost," he says.
"The InBev model is about growth; about growing beer, about driving innovation of beer and bringing new brands to market. But to get the investment to drive the sort of agenda where we can do that you have got to rigorously control your costs."
Nothing but positive
The InBev model is, one assumes, a relatively new concept. It has now been 18 months since the merger of Interbrew and AmBev to form InBev, and Steve insists the integration has been nothing but a positive experience.
"It is interesting and exciting to be able to merge two cultures of thinking together. There was no one better at cost than AmBev and there was probably no one more interested in the consumer and diversity than Interbrew. It is fantastic to make a company that you would never have been on your own. It is a challenging but really exciting place to be."
The corporate structure of the new-look business has led to suggestions that it is AmBev, not Interbrew, that has become the senior partner in this merger, with AmBev personnel taking the big positions of authority. One need only look at the replacement of InBev chief executive and former Interbrew man John Brock by former Ambev chief executive Carlos Brito to see this.
Steve is unimpressed by this point. "You can't do a tick box analysis of who is sitting in what seat - the world doesn't work like that."
It seems that the harsh end of Neptune has been undertaken - although the ramifications have yet to be revealed - as InBev has suddenly busied itself again with brand innovation.
Not only has the market seen the launch of Bock and extra cold options for Castlemaine XXXX and Boddington's, but there has been the surprising sight of the unveiling of a four per cent draught form of Beck's - Beck's Vier.
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