Heineken's Draft Pick
Tapping a keg is an activity more associated with the beer-pong set than with fondue lovers—more Old School than Thirtysomething. But Dutch brewer Heineken (HINKY) and German appliance maker Krups are trying to give home-tapped beer an upscale makeover. The two companies have launched a home draft-beer dispenser called the BeerTender, a machine that looks more cappuccino maker than kegenator.
The product is made by Krups, and it holds Heineken DraughtKegs, the $20, 5-liter minikegs it rolled out in the U.S. last summer. The two companies are co-marketing the BeerTender; Krups will make the money on sales of the machine, while Heineken USA Chief Executive Don Blaustein says the company's goal is to drive more DraughtKeg sales.
The beer industry has taken lumps for slacking on innovation, especially as wine and spirits have captured drinkers' imaginations over the past decade. In terms of volume, shipments of beer continued to decline slightly in 2006, according to Standard & Poor's, while both wine and spirits ticked higher.
Beer industry observers say the BeerTender strikes back at that problem. It has an upscale appeal (even down to the keg's European spelling of draught) and is made to be used during the same occasions—smaller, at-home gatherings—at which one might otherwise pop open a bottle of Chianti. Indeed, the BeerTender, with its chrome and black exterior, was designed explicitly to look at home on a modern kitchen countertop. "The beermakers took a little while to get around to it," says Eric Shepard, executive editor at Beer Marketer's Insights.
Heineken and Krups are pushing a high-end image for the machine. Prior to its wide release on Apr. 1, the companies have given first dibs on sales during the month of March to upscale kitchenware store Williams-Sonoma (WSM), where it sells for $299.95. "[Krups] knows how to market and sell a beautiful, high-end machine," says Blaustein.
There was a very clear consumer in mind during the design of the BeerTender: "Male, about 30 to 35 years of age, mainly urban in lifestyle and outlook," says Steve Jones, marketing director for Krups, which is owned by French appliance conglomerate Groupe SEB (SK). The target user, says Jones, is probably in a relationship and more likely to entertain at home—with something more sophisticated than a party ball, anyway. That slice of the population dovetails fairly neatly for Krups and Heineken, whose core consumers tend to be slightly older than drinkers of the best-selling beers, Budweiser's (BUD) Bud Light, Molson Coors Brewing's (TAP) Coors Light, and SABMiller's (SBMRY) Miller Lite.
"Theater and Experience"
Krups has sold an at-home tap system in Europe for the past few years, but this is its first foray into the U.S. with such a product. The concept isn't totally unfamiliar—indeed, frequent fliers may recognize similar types of machines from SkyMall catalogs. The difference, points out Jones, is that the BeerTender will work only with Heineken's DraughtKegs, which operate differently than traditional 5-liter minikegs.
The kegs, which can be tapped with or without the BeerTender, stay fresh for about 30 days, says Shane Hoyne, senior brand director at Heineken USA. "The minikeg segment has been characterized by volume rather than quality," says Hoyne. For now the only DraughtKegs come in Heineken or Heineken Light. But Hoyne doesn't rule out offering minikegs of other beer brands in Heineken's portfolio, which includes Amstel Light, Dos Equis, and Tecate.
Heineken says the DraughtKeg is doing better than expected. According to Chicago-based retail analyst Information Resources, the minikeg's sales have increased steadily since the product's introduction. "Anecdotally, they keep running out [of DraughtKegs]," says Harry Schuhmacher, who edits Beer Business Daily. The Heineken Light brand, as well, has been picking up steam. Since its debut in spring, 2006, Heineken Light has become the No. 8 import brand in the U.S., estimates Manhattan-based Beverage Marketing.
Despite launching an expensive discretionary product right into the teeth of a downturn, Blaustein doesn't sound worried about BeerTender sales. "If you've got a product offering that resonates with consumers, they will buy them," he says. After all, beer has a reputation for being a recession-proof expenditure. What's more, "as the economy slides, people tend to do more at home," says Tom Hose, a vice-president for business development at Krups. "This is something that provides not only good beer but a little theater and experience in it."