A DUTCH CHALLENGE TO THE KING OF STOUT Heineken, the masterly European marketer of light lagers, has moved boldly into Guinness's backyard.
By - Andrew C. Brown

(FORTUNE Magazine) – IF YOU HAVE THOUGHT about it at all, you probably thought Guinness was the last word in stout -- the opaque, dark beer with the creamy white head and the sturdy, bitter taste. But Heineken, the Netherlands' master marketer of light brews, has taken on Arthur Guinness & Sons in Britain and Ireland and even thinks it can push stout into new markets. Continental Europe is almost stoutless, as is the U.S. ''Everyone has gone to lighter products,'' says a Heineken marketing executive. ''Maybe it's time for the pendulum to swing back. Someone has to take the lead. We think we're the ones to do it.'' Heineken got into the stout business almost inadvertently a few years ago when it took over the failing James J. Murphy brewery in Cork, Ireland. Murphy, a producer of stout since the 1850s, was also brewing Heineken's light lager under license. Heineken was eager to stay in Ireland, where light beers like Heineken are hot. ''This is one of those fantastic markets you want to be in,'' says Gert Jan van Soest, 41, the Dutchman put in by Heineken as Murphy's managing director. ''This country has an almost irresponsible per capita consumption of beer.'' The Irish quaff 33 gallons per person per year, compared with 24 in the U.S. Heineken also saw possibilities in stout, though the company needed sharp vision. Stout consumption is generally stable or declining in the dark brew's traditional markets of Britain, Ireland, West Africa, the Caribbean, and the Far East. Guinness controls an estimated 90% of that business. Heineken's strategy is both to take away some of Guinness's market share and to go after new stout drinkers elsewhere. To sell Murphy's Irish Stout outside Cork, Heineken had to get the quality up. ''The old Murphy brewhouse was dangerous,'' says van Soest. ''You could ship a brew into town, and the guys would come back with tears in their eyes, saying, 'Jesus, that tastes awful,' and we'd have to pull the entire brew.'' Van Soest has spent some $12 million to upgrade Murphy's dilapidated plant with the latest in brewing technology. In November, Irish Prime Minister Garret Fitzgerald pushed the button to start up Murphy's new, computer- controlled brewhouse. Out flows consistently high-quality stout brewed to be a bit less heavy and bitter than Guinness. ''We're creating our own niche,'' says van Soest. At Guinness, which sells an estimated 85% of all the beer in Ireland, the reaction is mixed. ''We're rather flattered,'' says a company spokesman. ''It shows that other people recognize that the stout business has potential.'' At the same time, Guinness is urging independent distributors of its bottled beer to stop handling kegs of competitors' draft beer. Under new management since 1981, Guinness is enjoying a turnaround. The company earned $60.5 million on sales of $821 million in 1984. Van Soest has been making the most of Guinness's defensive moves. He has been complaining to the Irish government, alleging restraint of trade and violations of Common Market rules, stirring up free advertising in the press. ''The press has been having a field day with our underdog story,'' he says. ''I enjoy a good scrap, and I'm enjoying this one tremendously.'' Meanwhile, van Soest is running his brewery at capacity and pondering expansion plans. For all the hoopla, Murphy still is small beer. Its Dutch parent, though, clearly knows how to sell suds. Heineken recently passed Japan's Kirin Brewery to become the world's third-largest brewery after American giants Anheuser- Busch and Miller Brewing. In 1984 Heineken's sales were $1.6 billion. Net income, while depressed by the company's conservative accounting practices, was $71 million. Heineken will soon begin testing Murphy's Irish Stout in the U.S. with Van Munching & Co., the New York-based distributor that made Heineken lager the top-selling imported beer in America. Guinness has been selling stout in a few U.S. markets, including the East Coast and Texas. The turf battles between Heineken and Guinness could help both by whipping up new consumer demand for stout. Says Colin Mitchell, a brewing industry analyst at the London brokerage firm of Buckmaster & Moore: ''They're very capable, very powerful forces. This may sound a bit wild, but they could start off the bandwagon to make stout the lager of the 1990s.'' If that happens, Heineken's little brewery in Cork would deserve a place in the Guinness Book of World Records.