Heineken serves beer with lemonade to boost sales

The company this year offered a line of radler drinks, a blend of lemon soda and lager, to 23 markets in its biggest product introduction. It’s hoping that the drink, sweeter and less alcoholic than beer, will win over the ever-elusive female drinker as well as young men who prefer wines or spirits.

Brewers are pushing up their efforts to adapt beer as customer preferences are changing. Market leader Anheuser-Busch InBev NV has produced a lime-flavored variety of its Bud Light brand, while Heineken has added tequila to beer to create Desperados. Heineken is reducing its reliance on the global brand after six years of beer market declines in western Europe, to which it has a greater exposure than peers.

“Beer’s losing out to other beverages,” said for Bloomberg Ian Shackleton, an analyst at Nomura in London. “You could argue that’s because brewers haven’t been as innovative. The question is: how do you innovate in lager? It’s all a bit samey.”

Radler is the cornerstone of Heineken’s strategy to get 6% of sales a year from new products. Last year, the company got 5.3% of revenue from newly introduced drinks, or about 1 billion euros ($1.3 billion).

New products such as Anheuser-Busch InBev’s Bud Light Lime, Lime-A-Rita and Platinum, which have helped boost Bud Light’s market share in the U.S., show consumers are willing to try the new kind of beer. Heineken’s Desperados increased sales 15% in 2012 compared with 5.3% growth for the Heineken brand.

Mixing beer with lemon reduces the strength of the drink. The Foster’s-branded radler produced by Heineken in the U.K. contains just 2% alcohol by volume and may appeal as a drink for consumption after sporting activities, Francois-Xavier Mahot, senior director for global innovation said to Bloomberg.

Low-alcohol drinks are also profit-boosting for brewers, who pay less tax on them than for stronger brands. Heineken’s radlers can cost as much as 20% more than straight beer.
The company’s shares trade at 18.5 times analysts’ estimates of full-year earnings, less than SABMiller’s 18.9 times and AB InBev’s 20.3 times. Heineken may report a 2% decline in operating profit in the first half of the year, according to the median of five estimates.

Heineken shares fell 28 cents, or 0.5% to 55.55 euros at 9:13 a.m. in Amsterdam today. The stock has gained about 10% this year.