Losing its bottle

The brewing industry has its eyes fixed on Holsten – once known as the “daddy” of bottled beer – following last week’s surprise takeover bid by rival Danish brewer Carlsberg. The move comes a month after parent company Holsten Brauerei publicly abandoned its search for a buyer, despite Interbrew, SABMiller and Scottish & Newcastle (S&N) all showing initial interest.

The move marks a stark change in fortunes for the Holsten brand. In the Eighties and Nineties it became a household name, as a string of famous faces from comedian Griff Rhys Jones to actor Ray Winstone advertised the beer in a procession of instantly recognisable ads. However, the success of the ads was not reflected in the sales of the product, which has failed to keep pace with its “trendier” rivals Budweiser, Beck’s and Stella Artois, all of which have a lower alcohol content than Holsten Pils.

Given its falling sales in the UK premium packaged lager (PPL) market, the difficulty in attracting a buyer for Holsten was hardly surprising. Last year the company as a whole recorded a lamentable operating profit of only £1m (£689,000), partly exacerbated by Germany’s recent recession.

But Holsten Pils, which was introduced into the UK in 1952, has a strong pedigree. It enjoyed a free run in the PPL market until the Seventies, when other brands muscled in on the market. Despite efforts in 1992 to modify the beer to meet changing consumer tastes by making it lighter and smoother and reducing its alcohol content from 5.7 per cent to 5.5 per cent, sales continued to dip. In the UK, from 2000 to 2002 sales fell by 14.5 per cent in value to £118m, according to Mintel.

Shaking up the lager market

But Carlsberg has seemingly come to the rescue of Holsten by offering its shareholders a £1.06bn (£730m) cash bid. The Eisenbeiss family, which controls 51 per cent of the company, has already agreed to sell up and Carlsberg awaits decisions from the rest of its shareholders.

The deal, due to be completed by April following regulatory approval, will make Carlsberg the largest brewer in north Germany.

But the Danish company has yet to make its intentions clear for the Holsten Pils brand in the UK market.

Analysts are questioning the wisdom of Carlsberg buying into a market that is in decline. One City analyst says: “Holsten is quite small in the UK and has been losing brand share. Instead of investing in Holsten Pils, Carlsberg might try to use the distribution networks of Holsten to build its own brand portfolio.”

Carlsberg-Tetley UK’s portfolio includes standard lager Carlsberg, super-strength lager Export, Tetley’s and Skol.

One rival says that Holsten’s integration into Carlsberg could help the German brand take on the big boys, such as Interbrew-owned Stella Artois. “Until 1999, Holsten UK had been operated as a joint venture with S&N, but following the dissolution of the venture it was left alone to compete with the bigger brands and was unable to do so. Carlsberg could turn around the fortunes of Holsten Pils,” he says.

Holsten UK managing director Jeremy Main shares the view that the acquisition will spell good news for the brand, and hopes that it will benefit from the deep pockets of Carlsberg-Tetley. In volume terms, Carlsberg-Tetley is the second-largest brewer of lager in the UK, behind S&N, with an 18 per cent market share (Mintel, 2002).

Fall from grace

Retailers are also expecting an increase in investment in the Holsten Pils brand, which has been hit by cuts to its advertising budget, falling from £5.4m in 1999 to £436,000 last year (Nielsen Media). For a brand that was made famous by a series of high-profile advertising campaigns featuring the likes of Donald Pleasence, Griff Rhys Jones, Denis Leary, Jeff Goldblum and Ray Winstone, it has been a major blow.

Sponsorship deals have come to an end for the brand in the UK. In the late Nineties, it used music sponsorship of acts such as Manic Street Preachers and Paul Weller as part of its brand strategy. Last year it ended its £2m tie-up with football club Tottenham Hotspur.

Unwins marketing director Ian McLernon says: “Holsten has a strong brand resonance and consumers still remember it as being the first bottled beer. As a retailer I would like to think that Carlsberg will put significant resources behind the brand to resuscitate it. It is a classic example of a brand that doesn’t know what it stands for anymore. Consumers only know it as a very old brand, or for its memorable television ads.”

Waitrose beer buyer Derek Strange adds: “For too long Holsten has focused only on price promotions and heavy discounting, which has damaged the brand value. An absence of any marketing investment behind a brand makes it vulnerable to new entrants in the market and compounds declining sales,” he adds.

The ‘Daddy’ can’t compete

Apart from lack of investment, Holsten has had to contend with the arrival of alcopops and hybrid ales, which have stolen shelf space and sales.

But Holsten has tried to fight back by changing its formula to meet consumers’ changing tastes, by introducing new variants Holsten Bier and Holsten Fusion, a flavoured lager, both of which have been axed.

Such has been the change in consumer behaviour that the brand which was at one time seen as a trendy beer among 18- to 24-year-olds, is now 50 per cent more likely to be consumed by those aged between 25 and 44, according to BMRB TGI. Only eight per cent of Holsten drinkers are in the 18 to 24 age bracket, compared with 23 per cent of Budweiser, 20 per cent of Beck’s and 17 per cent of Stella drinkers.

When it was first launched, Holsten was introduced as a beer suitable for diabetics, because of a calorie content that was lower than other beers. The fact that the lager was available in a bottle when it was launched helped to distinguish it from other beers. The brand’s advertising also played a significant role in its early success. Carol Fisher, a partner of Chris Ingram Partnership and former marketing director at Holsten Pils, says: “The campaigns became so famous that the people started to consume the ads rather than the product itself.”

Cashing in on fame

In 1979, Holsten aired the first in a series of quirky TV commercials, starring Donald Pleasence. This was followed by the Griff Rhys Jones ads in the Eighties, featuring black and white remakes of famous movie scenes, then the Fast Show sketches in the mid-Nineties and then the “It’s the Daddy” campaign with Winstone, in 2001. Holsten’s campaigns were devised by Gold Greenlees Trott, which then became TBWA GGT, and finally TBWA/London.

The agency recently resigned the account, ending an association of more than 20 years (MW January 15). TBWA/London managing director Jonathan Mildenhall says that it no longer made “commercial sense” to work on the brand. The agency’s remuneration was dependent on volume sales, a method of payment that the agency moved to in 2001.

Losing its commercial fizz

“Holsten Pils created the PPL market and built it. But it failed in terms of product innovation. Because there was a reluctance to change either the formula or the packaging of the brand each time, only advertising was being re-evaluated, and the business challenges to the brand were not being tackled. Consumers cannot be fooled by clever advertising,” he adds.

Rivals will be watching with interest to see if Carlsberg’s acquisition of Holsten will unleash another round of increased competition in the lager sector.