Heineken Moves to Become a Digital Lighthouse in the Beverage Industry

Søren Hagh is the managing director for Heineken Italia. He joined the company in 2013 as the executive director of global marketing. Under Hagh’s leadership, Heineken increased its digital spending from 9% of the marketing budget to 25% in just two years. In 2015, the company received the Creative Marketer of the Year award at the Cannes Lions International Festival of Creativity—for the second time. Before joining Heineken, Hagh held various positions at the L’Oréal Group, including marketing director in the company’s UK business unit; general manager in both the UK and Germany; and general manager for the Lancôme business unit in Europe, the Middle East, and Africa. Earlier in his career, Hagh served as the global marketing director for the LEGO Group.

The Boston Consulting Group has partnered with IBM and the Electronic Business Group, a leading French think tank, to interview digital leaders and C-suite executives on the topic of digital transformation. Hagh recently sat down with Claude Czechowski, a senior advisor to BCG’s Technology Advantage practice, to discuss Heineken’s ambition to become a digital leader in the beverage industry. Edited excerpts from their conversation follow.

In terms of digital transformation, what are the most important things you’re doing at Heineken?

We believe that we are in the early stages of unlocking the digital opportunities within our organization. We have no doubt at all that digital will affect the commercial side of our business—sales and marketing; but it will also have a profound impact on the way we operate internally, the way our production operates, and so on. Digital transformation is going to provide new opportunities and new challenges for our organization at all levels and across all functions.

We have decided to place a disproportionate focus on the commercial side of digital transformation over the next three years, particularly in the areas of marketing and sales. We have an ambition to become the recognized leader of the beverage industry in the area of digital—or the digital lighthouse—by 2020.

What are some of the digital innovations that you expect to bring to the beverage industry?

If you look at the consumer side, there are a couple of very big opportunities. The most immediate one is in precision marketing. Precision marketing allows us to move from a generalized way of communicating with our consumers to a much more targeted and interactive way of building relationships with consumers. That sounds very simple, but the truth is it has a fundamental impact on how we organize and how we deal with agencies.

In the past 18 months, we have put in place a structure that will allow us to build all our future marketing on data. We believe that the future of marketing will be based on the quality of our data, so we have created a strategy for how we collect data, we have set up data management platforms for our key subsidiaries to store data, and we are completely revamping the way we operate in terms of working with data. While you need the right data quality, you also have to deal up front with all the legal and reputational risks that are in data. That’s been absolutely key.

We have another bucket that we are working with, which is the Internet of Things. We own a lot of hardware out there in the world: bottles, bar taps, millions of refrigerators. We need to start using that hardware in a much more integrated, interactive way when communicating with consumers. We have quite a few projects happening at the moment around that. There are some very exciting things going on in that space.

What changes are you making in your interactions with customers?

In terms of customers, we are focused on three big things: changing the way we work with our existing customers, moving interactions with our smaller customers onto digital platforms, and establishing new routes to market.

In changing the way we work with existing customers, we are providing integrated experiences inside and outside of the stores. Here we have some very strong properties, like the UEFA Champions League, for example, that are very relevant to many retailers and that we can leverage in quite an interesting way when we start using CART data together with the data we have for our customers.

Then we have the ambition of moving a lot of our interactions with our smaller customers onto digital platforms. There are a lot of opportunities for automating and optimizing the way we deal with smaller customers by using digital ordering, digital incentive systems, and so on, which have many efficiency implications at all levels of our organization.

The last big one is new routes to market. We are partnering with established third parties, both pure players and vendors, and truly becoming world class in the digital space. We have also identified some very specific opportunities for our own direct-to-consumer channels. We think it’s interesting to look at areas where we can add a disproportionate value. We have a distribution system called the Heineken Sub, for example, which is a home draft solution. The ambition there is to make the Sub to beer what the Kindle is to books.

How do you manage digital transformation within the legacy organization?

We started the digital transformation about 18 months ago, and the big advantage we have is that our board of directors and our CEO are driving this agenda. Quite early, they identified this as a significant opportunity for Heineken. We believe in the idea of a coalition of the willing and using the momentum you create in this coalition to showcase to the rest of the organization what “great” looks like.

Heineken is a very decentralized organization, where many decisions happen at the market level; therefore, our CEO urged regional presidents to carry forward digital projects within their own markets. We created very clear KPIs and a roadmap in terms of what the digital transformation looks like and where different parts of the organization can contribute. When we started the project, it was very clear that digital transformation is not a process that has a specific end point. It’s a moving target, and by its very definition that target is going to keep changing. We created clear milestones, but we knew they would evolve as we worked.

Are your KPIs focused on the commercial aspect of the business, or do they also focus on cultural and organization goals?

They are very much integrated, because you cannot deliver a digital transformation in a commercial organization without first beginning with a massive cultural change. It starts very simply, with the senior leaders understanding and communicating why this is important. And much of the past 12 months has been about capability building.

So where are you with the change effort across different markets?

Heineken operates in very diverse environments. We have a big business in Europe and North America, but some of our other big business units are in Vietnam, Nigeria, and Democratic Republic of the Congo. In some of these places, no infrastructure is in place to create the same kind of automated buying, automated content, and so on. So we are trying to become very granular about this and group different types of markets in different types of stages.

If you go to Nigeria, for example, you have about 120 million mobile phones. But only about 8 million of them are smartphones, and they still have a relatively small penetration of Facebook; I think Facebook has about 16 million users in Nigeria. But with 120 million phones, you have an enormous opportunity for actually communicating in a space where otherwise communication is not very efficient. That’s one we’re trying to crack at the moment with the Nigerian team.

Do you also work with any VCs, open labs, or incubators?

Yes, we work with a company called KITE Solutions, based in San Francisco. They’ve been helping us to identify new potential partners. With the Internet of Things, for example, they have been very helpful in pushing our thinking and opening a world that otherwise we wouldn’t have had the right access to.