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This Euro Brew's For You

Marketing: Brewers

This Euro Brew's for You

Can giant Interbrew beef up Labatt and Rolling Rock and make U.S. inroads with its specialty brands?

It's a hot, muggy summer day in the Belgian city of Leuven. Inside the wood-paneled De Lantaarn cafe on Vaartstraat, residents are cooling off with the favorite local drink--beer. One customer gulps a cold Stella Artois lager. Another sips a creamy wheat beer called Hoegaarden, while his companion downs a rich amber brew called Abbaye de Leffe. Yet another enjoys a bright red cherry-flavored concoction called Belle-Vue.

Such labels convey the richness of Belgium's centuries-old beer heritage, providing enough variety to satisfy even the most demanding beer drinker. Every one is produced by a single company: Leuven's Interbrew. "They supply me with all the brands I need," says cafe manager Marina Walters.NEWBIE. As the owner of more than 200 brands, Interbrew is ubiquitous in Europe and it products are gaining popularity in Asia and America, even though few customers have ever heard the parent's name. In the past five years, Interbrew has made 17 acquisitions in 11 countries, most recently British alemaker Bass PLC. Along the way, it has remade itself from a small, family-owned company into the world's second-largest brewer. Only Anheuser-Busch Cos. is bigger. Interbrew's 1999 revenues rose 20%, to $3.1 billion, while profits were up 21%, to $220 million. And it's hoping for an initial public offering later this year.

Now, Interbrew CEO Hugo Powell, who holds both Canadian and British citizenship, has set his sights on the U.S., where imported beer consumption is on the rise. Although the sales of domestic microbrews have slowed in recent years, imports have more than taken up the slack--in what analysts call the super-premium market. High-margin import labels, in fact, are growing at about a 10% clip, compared with 3% for beer in general. "Super-premium beers are pulling consumers from wine and spirits," explains Michael Branca, who follows beer companies for Lehman Brothers Inc. Says Powell: "We are hitting the market's sweet spot."

To crack the U.S. market, Interbrew is adapting its tried-and-true European strategy: buy up local brewers, keep those brands, and use their distributor to sell high-margin specialty labels such as Stella and Leffe. The push began quietly in 1995 when Interbrew purchased Canadian brewer Labatt, where Powell was an executive. He and others set about revamping Labatt's Rolling Rock label with new ads that made much of the brewery's homespun origins in rural Latrobe, Pa., and began distributing it more aggressively than its former owner. The strategy worked. Last year, sales rose 4%, compared with a 5% drop for other domestic specialty beers.MORE SUDS. If Powell has his way, Rolling Rock will be just the beginning. Powell brings a decade of North American marketing experience to Interbrew. And he has hired a team of North American-trained executives to carry out the push. He plans to attack not only fellow importers such as Heineken but also to try to take share from marginal domestic players such as Pabst, Stroh, and Lone Star. In the next few years, he plans to boost distribution of Interbrew's Labatt and Stella labels, perhaps in a deal that would share distributor networks with Anheuser-Busch or another big U.S. brewer. "We have a giant opportunity," Powell says.

But building a name in the land of light suds won't be easy. Anheuser-Busch, Miller, and Coors control 80% of the market. And instead of having one flagship brand, Interbrew will sell multiple labels, making its strategy more complex. Even importers tend to stick to one big brand. And although imported beers are popular in the U.S., experts wonder how many more mini-labels the market will be able to support. Many of Interbrew's brands, moreover, contain more alcohol and tend to be heavier than domestic brews. "You can't drink a 12-pack of Bass or Leffe," says Mitch Meyers, a beer marketing consultant at Zipatoni Co. in St. Louis.

Still, U.S. beermakers are watching Interbrew's invasion with a mixture of anxiety and respect. "They are very competent marketers," says C. James Koch, founder of Boston Beer Co., maker of Samuel Adams, a beer brand that will likely go head to head with Interbrew's quirky lineup. Koch predicts that expansion by the European brewer will help wrest market share from light-beer makers. "Good marketing educates drinkers to choices," he says.

Smart marketing has been an Interbrew strong point since the company was created 13 years ago from the merger of two regional Belgian brewers, Jupiter and Stella Artois. Its first big scores were in France, where Abbaye de Leffe became and remains the No. 1 import, and in Britain, where Stella soared thanks to its snobbish slogan "Reassuringly Expensive." "Stella is a textbook example of premium marketing," says Alex Batchelor, a managing director at consultancy Interbrand.

Elitism, though, can be a tougher sell in the U.S. Still, Interbrew has stealthily moved in the U.S. beer market with early success. Now Powell's goal is to turn Miller time into Interbrew time.By William Echikson in Leuven, BelgiumReturn to top

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