‘If there’s a lack of innovation in a category, then people migrate’

Few people in the trade can claim to have seen it all, yet Heineken’s relatively new on-trade director Stephen Watt can attest, for the most part, to having done just that.

Starting out on Coca-Cola’s Frontline programme in his native Glasgow, Watt was one of many 18 to 20-year-olds accepted on the work-as-you-learn scheme where students gain a business degree while in the employment of the company. However, he soon moved on and gained a wealth of experience in various roles at other blue chip and large companies, including Mars, Inter Brew (now owned by AB InBev), Pernod Ricard and then meat processor Vion to name a few of his professional conquests.

But after years of off-trade-focused experience focusing on the off-trade, Watt’s career path led him to Heineken’s door where he joined as a trading director in the north of the UK.

After a year in the role, which covered everywhere between Sheffield and Shetland – with seven reports – former on-trade boss Chris Jowsey left and Watt threw his hat into the ring for the job.

Cider category

This leads us nicely to the present day – and to Star Pubs & Bars site the Gun in Spitalfields, east London – where Watt is firmly in the role of on-trade director and eager to talk about current state of the trade.

Currently, at least, the two big conversations for Watt are about cider and also promoting the producer’s other brands through supporting large, mainstream events like the European Championships. “We’re fully committed to the cider category in terms of the supply chain and passionate about the industry,” he says of the first big focus.

“The cider category took a dip last year because of the weather, but where growth has come from in previous years is innovation like when Magners came to the scene with its over ice serve and then pear cider, followed by fruit cider. But there hasn’t been anything brand new for years now.”

And this is part of the trouble with the cider category; new and interesting flavours really struck a chord with punters and producers ran with it. But the question is, how many flavours can a company come up with before consumers get bored? In terms of Strongbow, Heineken’s and the UK’s biggest-selling cider, low innovation hasn’t been an issue.

In fact, the brand has only launched one new product into the portfolio in recent years – the increasingly popular Dark Fruits – which has stood the test of time with sales rising 21%. Strongbow Rosé will soon be launched into the off-trade, with trials in the on-trade afterwards.

The brand is also stepping in to the low and no alcohol category with a 0.5% ABV version.

Euro football interests

Such innovations have been driven by wider market trends, Watt continues: “There’s an interesting dynamic if you look at the likes of pink gin and gin in general, which has taken a lot of the drinkers away from other categories. If there’s a lack of innovation in a category, then people migrate. We’re all in on cider it’s got the cues to appeal to those shoppers drinking in other categories. So we’re focusing on what consumers are looking for now, which is refreshing and good quality.”

There is also, believes Watt, still a big opportunity for pubs to tap into premium cider, which has, he claims, so far been held back in the past by outlets having only one tap on their bar for cider which, usually, would be taken by a popular mainstream brand, meaning a premium one wouldn’t get a look in.

“Up until two years ago, all we had was that offer but now we have more space. We tell our sales guys that we want to see a draught apple and premium cider on the bar.”

That’s not to say there isn’t space for mainstream products, as Watt explains: “During the past three or four years, Strongbow Dark Fruits has added people to the cider category rather than taking away. Sales on the dual font increase sales of both variants, and Dark Fruit brings a younger demographic into the category – and we don’t see much cannibalisation.”

So, cider is a big focus for Heineken in the UK over the coming year, but so too are the company’s beer brands, especially its flagship and namesake lager. The company saw positive sales following its sponsorship of the Rugby World Cup and so has committed to working again in a similar way this year.

“The second focus is we’re sponsoring the Euro Championships this year with Heineken and expecting to deliver the biggest year on the brand. We’ve got the new Bond movie coming out and then we move into the Euros and essential from now until the end of the summer Heineken marketing activity will always be ‘on’.

“This is all going to be backed up in outlet by support such as PoS and other kits because one of the biggest issues pub and bar owners face is how to get people in the pub when the off-trade is cheaper.

“We’ve got a lot of work going on in digital and we’ve been trialling a couple of things with social media in terms of sending targeted ads to people, directing them to a pub,” he continues.

“There’s nothing with money off discounts driving people to that pub but, because we run our own pubs, we can check to data and turnover moves up between 4% and 6% after these targeted ads.”

Looking after the core range

This year, he believes, will be a big one for the company and its brands, following the significant sum it is spending on promotion as well as on-trade support.

Such confidence in future performance, in Watt’s mind, will unlikely be hampered by consistently declining mainstream lager sales.

“Mainstream lagers still represent over half of draught lager sales in the UK and it’s still dramatically important,” he explains.

“We’ve maybe taken our eye off the ball in terms of Foster’s and John Smith’s, but we recognise the importance of those brands and we’re seeing a shift back in terms of looking after our core. The decline isn’t as steep as it was, but the growth is in premium and craft.”

That’s not to say there are no challenges in the sector, with Watt highlighting the usual culprits as threats to the pub trade’s further success. “It’s the perennial challenges of duty. We don’t know what’s going to happen there and we lobby the Government hard as a company. And minimum pricing has been introduced in Scotland and the jury is out on whether that’s going to come to England.”

The other elephant in the room, the dreaded B word, is still an area of stress for many in the trade. Despite the decision to leave the EU being made, a significant amount of uncertainty around how it will affect businesses remains. Heineken, says Watt, was prepared for a ‘no deal’ and stockpiled a lot of materials for brewing during the debacle. Even post-Brexit, there is an air of confidence because 95% of Heineken’s beer is made in the UK. But not every business in the on-trade has such a luxury, Watt agrees.

“I speak to a lot of publicans and hotel owners who may not be investing in their businesses because of uncertainty around Brexit,” he says, but remains optimistic that things will be resolved in the coming months, with the hope that confidence will be restored.

No more gas shortages

And, speaking of restoring confidence, Heineken has worked hard to ensure there will be no repeat of 2018’s CO2 shortage, which saw much of the UK’s lager and soft drink sales suffer during the summer months.

“A lot has been done since then. We were impacted and we have sent millions of pounds putting CO2 recovery plants in place and maturation tanks,” he says. “We had CO2 in the network but you have to get the right trucks and vessels to bring that into the country and we’ve got a lot more storage capacity for that. A lot has been done in all of or sites.”

It is clear Watt’s experience from his previous roles, although none were in the on-trade, has prepared him well for the upper echelons of Heineken’s pub-focused business.