Before April 30, Heineken USA was the exclusive importer for FEMSA, a Mexican brewer noted for a portfolio of popular beers. At that point the company’s Dutch parent, Heineken, officially acquired FEMSA, thereby becoming the owner of the portfolio and its crown jewel: Dos Equis, one of the hottest imports in the beverage world. Spurred by the beer’s “Most Interesting Man in the World” commercials, monthly sales of the brew have risen 20% to 30% compared with a year ago, according to Dan Sullivan, Heineken USA’s chief financial and operating officer.
But the beer’s popularity posed a problem for Heineken USA. The Cinco de Mayo holiday was approaching on May 5, a Wednesday, and the company’s future sales indicators were showing that it might not have enough product to supply what was likely to be a huge number of beer drinkers on that day. Although Cinco de Mayo is a minor holiday in Mexico, it has become a major occasion for beer consumption north of the border. “Our concern was: there simply wasn’t enough inventory in the trade,” says Sullivan.
To make sure that there was enough, the company had to scramble to get cases of Dos Equis — as well as Carta Blanca, Tecate, and other brands — to wholesalers in time for them to get the beer to vendors by Cinco de Mayo. During the Saturday and Sunday before the holiday, FEMSA pushed about four days of normal shipments across the border in two days.
On May 6, Sullivan sat down with CFO editors to talk about the Cinco de Mayo “crisis,” as he calls it, and other challenges he faces as a finance chief. An edited version of the interview follows.
Why were U.S. beer sellers short on Dos Equis headed into Cinco de Mayo?
We had two issues to deal with: the issue of growing demand as the Dos Equis brand took off, and importing brands out of Mexico. Dealing with the border crossing in Mexico is a huge challenge. In the month of April, as we’re getting ready for Cinco de Mayo in the United States, it’s produce season in Mexico. When truck drivers picking up beer in Mexico get to the border, they realize they can make twice as much if they take the produce because it goes bad quickly. So they’ll drop the beer and pick up the produce. The beer just sits there until we can get someone else in to pick it up. We were experiencing as much as 70% order drops, meaning they get to the border and drop it.
Why doesn’t the company have dedicated truckers?
It’s quite expensive. In the United States, unlike Mexico, you’re actually better served outsourcing that. You’ve got reliable third-party entities that are good at what they do. But dealing with getting the beer from production facility to the border and across the border into the United States was a challenge. We were able to mitigate that through forecasting tools and better commercial projections. We’ve gotten much more targeted in projecting our demand. We don’t just produce everything and ship it all and hope to God it all works out. Even then you’re still subject to human nature, that individual truck driver.