The Big Interview: Heineken MD David Forde

Considering he’s spent 26 years with the same company, it’s perhaps surprising how much David Forde loves making changes. The Heineken lifer took over as UK MD in February 2013, and speaking to The Grocer from its central London HQ, Forde has lined up several examples of what his “brutal regime of innovation” has produced since he took charge, including bottles of Foster’s Radler and Strongbow Dark Fruit.

Clearly, he understands the danger of standing still in the world of fast moving consumer goods, and Forde pledges there’s plenty more innovation to come. “You can’t have a sausage machine where one thing goes out and one thing drops in,” he explains. “You’ve got to front load the machine just to stand still. And we’ve got a funnel that’s stuffed because when it comes to innovation we don’t want one SKU in 300 shops. We want 40 SKUs in hundreds of thousands of shops. We are designed to innovate on a massive scale.”

He’s also got a target to hit. “If you don’t, you won’t get there. Our number was 10% [of new innovations that actually make it into production]. We hit 12% last year. In the world of Heineken, the UK is number one for innovation.”

Although Heineken bundles its UK results up with the rest of Western Europe, according to figures compiled by Nielsen for The Grocer Top Products Survey in 2013, new products contributed 52.2% to Heineken UK’s overall growth of £73m in 2013.

Scottish & Newcastle acquisition

Despite the impressive numbers, Forde admits it took time for everyone at Heineken to assimilate Scottish & Newcastle into the mindset - particularly the focus on cider.

“Our DNA is beer,” says Forde. “We started investing disproportionally into cider and getting the entire organisation aligned to that took a little time. But we’ve started to see the benefits coming through. Strongbow Dark Fruit was the number one fmcg launch last year and we did it in five months. It was a phenomenal success. We’ve launched Citrus Edge on the back of it. We have found a way to line extend Strongbow in a way that is true to the essence of the brand, while still delivering on consumers’ desire for variety, accessibility and a slightly sweeter taste profile.”

Besides, concentrating on cider doesn’t mean Forde has taken his eye off beer. Desperados, which Heineken “repatriated” from SHS Drinks in 2012, is the “fastest-growing beer in the UK”, according to Forde. “It’s gone from a standing start to 0.5% of the market and we haven’t spent a dime trying to promote it [through trade investment]. That’s rapid. I think Radler has similar potential. It feels even more innovative. In central eastern Europe, it’s done phenomenally, taking up to 4% of the market.”

Sorting out the “core” beer products has also been one of his priorities. Forde has driven Foster’s into a position where it looks set to overtake Stella Artois for the first time, which is a “fantastic achievement.” On the other hand, he doesn’t intend to start experimenting with some Heineken stalwarts. “Drinkers enjoy John Smith’s. They like stout. It would be a disaster to start messing with those.”

Forde says he “is not allowed” to reveal how much Heineken sells through each channel, short of pointing to a “healthy return from both”. But when it comes to the off-trade, where Heineken’s official share of cider is 41% and 24% of beer, Forde is most enthusiastic about the convenience channel, where he says consumers tend to be “more open” to innovation. “Over 16% of our turnover in the off-trade [last year] was on innovations that didn’t exist in 2011. So the breadth of what we offer sits very well in c-stores.”

Discount channels

The other channel rocking everyone’s world at the moment is the discounters, but although Forde has “some brands” available in Aldi, Heineken’s “heavily branded business” doesn’t always fit with the discounters’ preference for own-label products, . But he adds: “We always keep an open mind. Who knows how their business will evolve as the economy develops?”

As for the multiples, Forde isn’t concerned by talk of a price war. After all, a “vicious” battle has been taking place in the alcohol category for 20 years. “Prices offered to consumers are remarkably low. They should be fighting on consumer staples, rather than alcohol.”

Another issue that affects price is duty, which the government cut by a penny in March. It’s not enough, argues Forde, who says duty has escalated “beyond belief” in recent years. He adds that Heineken currently pays around £800m in duty every year in the UK. Add VAT into the mix and it contributes around 0.5% of UK GDP every year.

“It’s an enormous number. The relentless barrage on beer and cider needs to come to an end. Beer and cider are strong local industries, huge employers, and have given too much. We have had a 42% increase in duty over five years. Now it’s coming down, marginally, but there is a long way to go. I’d like double-digit reductions.”

Anti-alcohol campaigners have traditionally praised the duty hikes as an effective counter to alcohol abuse, but Forde has no time for that argument.

“There is a very strong anti-alcohol lobby in the UK, and there is an issue with abuse of alcohol in a minority of consumers, but nowhere in the world has increasing duty dealt with alcohol abuse. The only thing that deals with abuse is education, targeted intervention, responsible parenting and retailing, and a society that doesn’t accept it. Those things aren’t solved by putting a penny on a pint.”

Heineken is a “very responsible” brewer, adds Forde. To back up his argument he cites Heineken’s current ad campaign, which carries the strapline ‘Dance more, Drink less’; the “millions” of unit-branded glasses that Heineken has sent out into the industry every year since 2009; and Heineken’s drive to lower abv across several products.

“We are in a pretty good place. Our beers and ciders are between 4%-5% abv. Bulmers is 2.8%. Radler is 2% or 0%. We wanted to make the most pleasant-tasting product possible with 0%, which is a completely different approach to stripping the alcohol out of an existing beer, which is a difficult task. And we have achieved it.”

Lightning strikes

Forde also points to the cull of White Lightning, which was worth four market share points in cider before Heineken retired it. “It was the number one white cider. And anytime you walk away from significant business it can feel uncomfortable, but we felt it was a problem brand. We are comfortable that we are living up to the Responsibility Deal and we think our competitors should do the same. And to greater and lesser extents, they are.”

The significant activity made the disparaging comments by the government’s chief medical officer Professor Dame Sally Davies, in March, all the more galling. Davies’ remarks about the proliferation of alcohol advertising on TV, particularly on televised football matches, irked the easygoing Forde.

“The link between alcohol abuse and a TV commercial is utterly tenuous,” he bristles. “One third of our billboards at major sporting events are dedicated to responsible drinking.

“We are trying to re-educate consumers and the government should collaborate with the industry to create a coherent strategy that will address the problem. They don’t understand the issue and they don’t consider developing an integrated solution. It’s easy to blame us, but it’s not the solution.”

He accepts that a link between advertising and drinking does exist, but insists the link is between “advertising and brand choice rather than advertising and consumption”.

“It’s not driving abuse,” argues Forde. “The issue of alcohol abuse is improving. The incidents of abuse are reducing. The amount of alcohol being consumed is reducing. The prevalence for abuse among teenagers is reducing. They are the facts.”

So it’s with a clear conscience that Forde views Heineken’s extension of its rumoured £50m a year sponsorship of the Champions League, “the most premium club tournament,” for a further three years in October 2013. It’s an example of Heineken leveraging its “global scale.” And, ominously for its rivals, Forde only has plans to scale things up.

As well as a “massive” marketing office in London, he’s recently sunk £58m into Heineken’s Hereford plant to bring all its cider production under one roof to boost efficiency - and lead to even more innovation with “flavours and pack types”. And he plans to invest millions more elsewhere in the UK, including major investment in Manchester, to fill even more bottles of booze, which Forde is unashamedly proud of enjoying at the end of a long day.

“Alcohol is a fantastic category. It’s part of an absolutely healthy physical and mental lifestyle. It is refreshing and recharging. You cannot quantify the benefits of a relaxing beer or cider after a hard day’s work. It’s a simple pleasure. And it’s one of the small affordable luxuries in life. If someone can’t crack open a beer or go to the pub for a couple of pints after work then what’s it all about? Are we only here to work?”