Mon. 11/11 - "Heineken"

Using insights from Chapter 7 and my lecture, discuss the combination of global strategies adopted by Heineken for its diverse portfolio of brands. Explain how van Boxmeer's recent actions will help the firm deal with recent global challenges and suggest one or two other actions he could consider.

13. Abchon, Reed. 2000. The first family of soup. feeling the squeeze. PA. Reportan Reports. 2013 Packaged food in the US. April, www Should it sell or try to go it alone? New Jirk Times, July 30. www. reportanreport.com/reports/150486-packaged-food inthe-us html. CASES nytimes.com/2000/07/30/buninew/first-familysoupfeeling-squeeze- . Ibid. should it selltry goitalone .html'pagewanted5all &arc5pm. 14. Campbell Soup Co. 2008. 2007 annual report. 6. Graves, T. and Kwon, E. Y. 2009. Standard and Poor's foods and 15. Campbell Soup Co. 2011. 2010 annual report. nonalcoholic beverages industry report. July. 27. Hoovers. Undatal. Company profiles Nestle. www.hoovers 16. Press release. 2007. The Coca Cola Company, Campbell Soup com/company information/cs/company-profile NestM CASE 16 Company and Coca Cola Enterprises sign agreement for distribution of Campbell's beverage portfolio. investorshareholder.com/campbell SA. 671982710 6be6/1.html accessed April 2013. releasedetail .cfm?ReleaseID5247903. 28. Hoovers. Undatal. Company profiles: General Milk. www.hoover's HEINEKEN* 17. Campbell Soup Co. 2011. 2010 annual report. com/compa my information/cs/company-profile General_Mills_Inc. accessed Ap Dutch brewer Heineken was expanding its presence around At the same time, Heineken maintained its leading posi- 18. Ibid. Hoovers. Undatal. Company profiles Kraft Foods. www.hoo the globe in response to the merger of Anheuser-Busch tion across Europe. It had made a high profile acquisition 19. Goudreau, op. cit com/compa my information/cs/company-profile.Krall_Foods_Che cup_ InBev with SAB Miller giving the combined firm a com- 20. Ibid. Inc.43a fled4bdse 5142.html accessed April 2013. in 2008 of Scottish-based brewer Scottish & Newcastle, the 21. Katz, Jonathan. 2010. Campbell Soup cooking up Hoovers. Undatal. Company profiles: H. J. Heinz Company. www manding 30 percent of global beer sales. Heineken was in brewer of well-known brands such as Newcastle Brown Ale a new recipe? Industry Work, December 15. ww hoovers.com/company information/cs/company profile.H_J_Heinz talks to buy the Brazilian unit of Kirin, which the Japanese and Kronenbourg 1664. Although the purchase had been industryweek.com/companies ampexecutives/ Company. 16964227518| d38.html accessed April 20 13. parent was planning to sell. The addition of Kirin beer made in partnership with Carlsberg, Heineken was able to iw-50-profile-campbellsoup-cookingnew.recipe 31. Campbell Soup Co. 20 16 annual report. would double Heineken's share in Brazil to 20 percent. The gain control of Scottish & Newcastle's operations in several 22. Campbell Soup Co. 2017 anmaal report. 32. Ibid. firm was also planning to launch Bintang, its biggest selling crucial European markets such as the United Kingdom. 23. PRNewswire. 2012 U.S. Packaged Food Market-Consumers seek 33. News release. 2010. Campbell Soup company named to Dow Jones Sustainability beer brand in Indonesia, into the UK and select European Ireland, Portugal, Finland, and Belgium. out ethnic & bold flawurs-new industry report. IRENewswire mpany.com/phoenix March 12, www.prnewswire.comewsreleases/us packaged-food. zhtml'e58 8650& pSix olnewsArticle& ID514711 59 markets. An industry spokesman was positive about the These decisions to acquire brewers that operate in dif- market-consumersseek outethnic-boldflavours-now-industry 34. Campbell Soup Co. 2013. 2012 annual report. move: "There is clearly significant demand for premium ferent parts of the world have been a part of a series of report- 142292805.html. as. Ibid. world beers. We believe Bintang is perfectly suited to meet changes that the Dutch brewer has been making to raise this demand." These moves came on the heels of acquisitions and its stature in the various markets and to respond to grow ing consolidation within the industry and changes that are capacity investments that Heineken had been making in occurring in the global market for beer. Even as sales of other developing markets. In 2013, the firm had strength- ened its position as the world's third largest brewer by tak- beer have stagnated in the U.S. and Europe, demand has been growing elsewhere, especially in developing countries. ing full ownership of Asian Pacific Breweries, the owner of This has led the largest brewers to expand across the globe Tiger, Bintang, and other popular Asian beer brands. With through acquisitions of smaller regional and national play- this deal, Heineken added 30 breweries across several count tries in the Asia Pacific region. A few years earlier, the firm ers ( see Exhibits I and 2). The need for change was clearly reflected in the appoint- had acquired Mexican brewer FEMSA Cervesa, producer of Dos Equis, Sol, and Tecate beers, to become a stronger. ment in October 2005 of Jean-Francois van Boxmeer as more competitive player in Latin America. Heineken's first non-Dutch CEO. He was brought in to replace Thorny Ruys, who had decided to resign because of his failure to show much improvement in performance. "Case prepared by Jamal Shamsic, Michigan State Unhersity, with the Prior to the appointment of Ruys in 2002, Heineken had of Professor Alan B. Eisner, Pace University. Material has been been run by three generations of Heineken ancestors, whose drawn from published sources to be used for parposes of class discussion. portraits still adorn the dark paneled office of the CEO Copyright @ 2017 Jamal Shamsic and Alan B. Eisner. in its Amsterdam headquarters. Like Ruys, van Boxmeer EXHIBIT 1 Income Statement (millions of 2016 20 15 2014 2013 euros) Revenue 0,792 20.511 9.257 19,203 EBIT 2,993 2,785 2,814 2,484 Net profit 1,540 1,892 1,516 1.364 Source: Heineken. EXHIBIT 2 Balance Sheet (millions of 2016 2015 2014 2013 2012 euros Assets 39,321 40, 122 34,830 33,337 35,979 Liabilities 24,748 25.05 2 17,869 17.797 9.260 Equity 14,573 15.070 13,452 12,356 12,805 Scarce Heineken CASE 15 :: CAMPBELL: HOW TO KEEP THE SOUP SIMMERING C101 C102 CASE 16 = HEINEKENfaced the challenge of preserving the firm's family-driven traditions, while trying to deal with threats Heineken had 190 breweries in over 70 countries, claiming about 10 per- EXHIBIT 5 Leading Brewers never faced before. cent of the global market for beer (see Exhibits 3 and 4). Global Brewers (2016 Market Share The firm's flagship Heineken brand ranked second only market share based on annual sales, millions 1. Anheuser-Busch InBev, Leuven, Belgium, 21% Confronting a Globalizing Industry to Budweiser in a global brand survey jointly undertaken by Business Week and Interbrand. The premier brand has of US dollars) 2. SAB Miller, London, UK,' 11 Heineken was one of the pioneers of an international strat- achieved worldwide recognition according to Kevin Baker. 3. Heineken, Amsterdam, Netherlands, 10 gy, using cross-border deals to expand its distribution of its director of alcoholic beverages at British market researcher Heineken, Amstel, and about 175 other beer brands in more Canadean Lid. When a U.S. wholesaler asked a group of 4. Carlsberg, Copenhagen, Denmark, than 100 countries around the globe. For years, it had been marketing students to identify an assortment of beer bot- picking up small brewers from various countries to add more brands and to get better access to new markets. From its ies that had been stripped of their labels, the stubby green 5. China Resources Enterprise, China, Heineken bottle was the only one instantly recognized. To be merged with Anheuser Busch Inlev. roots on the outskirts of Amsterdam, the firm had evolved The beer industry has been undergoing significant Source: Beverage World into one of the world's largest brewers, operating more than change in a furious wave of consolidation. Most of the bigger brewers have been acquiring or merging with their heir, Charlene de Carvalho, who has insisted on having a 2016 20 15 EXHIBIT 3 Geographical competitors in foreign markets in order to become global say in all of the major decisions. players. Ownership of local brands has propelled them into Western Europe 10, 112 10.227 Breakdown of Sales Family members, however, were behind some of changes dominant positions in various markets around the world. that were announced at the time of van Boxmeer's appoint- Americas 5.203 5.159 (millions of euros) Beyond this, they hope acquisitions of foreign brewers can ment to support the firm's next phase of growth as a global Africa, Middle East, & Eastern Europe provide them with the manufacturing and distribution capa- organization. As part of the plan, dubbed Fit 2 Fight, the 3.203 3,263 pilities to develop a few global brands. "The era of global Executive Board was cut down from five members to just Asia Pacific 2.894 2.483 brands is coming, " said Alan Clark, Budapest-based manag- CEO van Boxmeer and Chief Financial Officer Rene Hooft ng director of SABMiller Europe ( see Exhibit 5)." Graafland. The change was made to centralize control at the Source: Heineken Over the past decade, South African Breweries Pic has top of the firm to better enable a global strategy. The idea acquired U.S.-based Miller Brewing to become a major behind the global strategy is to win over younger customers Markets Brands EXHIBIT 4 Significant Heineken global brewer. They have acquired Fosters, the largest across different markets whose tastes are still developing. U.S. Heineken, Amstel Light, Paulaner," Morets Brands In Various Australian brewer. U.S-based Coors linked with Canadian- based Molson in 2005, with their combined operations Heineken has created management positions respond Markets sible for five different operating regions and several dif- Netherlands Heineken, Amstel, Lingen's Blond, Murphy's Irish Red giving them a leading position among the world's biggest ferent functional areas. These positions were created to France Heineken, Amstel, Buckler? Desperados' brewers. In 2008, Belgium's Interbrew, Brazil's AmBev, and more clearly define different spheres of responsibility, Van U.S-based Anheuser Busch merged to become the largest Boxmeer has argued that the new structure provides incen- Italy Heineken, Amstel, Birra Moretti global brewer with operations across most of the conti- lives for people to be accountable for their performance: Spain Heineken, Amstel, Cruzcampo, Buckler ments. Finally, Anheuser Busch InBev acquired SAB Miller "There is more pressure for results, for achievement." He to become an even more dominant player in the industry. claims the new structure has already encouraged more risk Poland Heineken, Krolewskie, Kujawiak, Zywiec Since its acquisition of Anheuser Busch, InBev has been taking and boosted the level of energy within the firm. attempting to develop not only Budweiser but also Stella The Executive Committee of Heineken was cut down from China Heineken, Tiger, Reeb Artois, Brahma, and Becks as global flagship brands. Each of 36 to 12 members in order to speed up the decision- making Singapore Heineken, Tiger, Anchor, Baron's these brands originated in different locations, with Budweiser process. Besides the two members of the Executive Board. this management group consists of the managers who are India coming from the U.S., Stella Artois coming from Belgium. Heineken, Arlem, Kingfisher Brahma from Brazil, and Becks from Germany. Similarly. responsible for the different operating regions and several of Indonesia Heineken, Bintang, Guinness SAB Miller has been attempting to develop the Czech brand the key functional areas. Van Boxmeer hopes that the reduc- Kazakhstan Pilsner Urquell into a global brand. Exports of this pilsner tion in the size of this group will allow the firm to combat the Heineken, Amstel, Tian Shan doubled shortly after SAB acquired it in 1999, but sales have cumbersome consensus culture that has made it difficult for Egypt Heineken, Birell, Meister, Fayrouz? since plateaued. John Brock, the CEO of InBev, commented: Heineken to respond swiftly to various challenges even as its "Global brands sell at significantly higher prices, and the industry has been experiencing considerable change. Israel Heineken, Maccabee, Gold Star margins are much better than with local beers." Finally, all of the activities of Heineken are overseen Nigeria Heineken, Star, Maltina, Gulder Wrestling with Change by a Supervisory Board, which currently consists of 10 members. Individuals that make up this board are drawn South Africa Heineken, Amstel, Windhoek. Strongbow Although the management of Heineken has moved away from different countries and own a wide range of expertise Panama Heineken, Soberana, Crystal, Panama from the family for the first time, they have been well aware and experience. The Board sets policies for making major of the longstanding and well-established family traditions decisions in the firm's overall operations, Men Chile Heineken, Cristal, Escudo, Royal that are difficult to change. Even with the appointment of Supervisory Board are rotated on a regular basis Minority interest nonfamily members to manage the firm, a little over half of What bear the shares of Heineken are still owned by a holding com. Developing a Global Presence Nonalcoholic boer pany which is controlled by the family. With the death of Van Boxmeer is well aware of the need for Hein Toquilla-flavored boe Freddy Heineken in 2002, the last family member to head its brands to build upon its existing stature at Source Heineken the Dutch brewer, control has passed to his only child and markets. Yet in spite of its formidable presence CASE 16 = HEINEKEN C103 C104 CASE 16 = HEINEKENaround the world with its flagship Heineken brand, the firm John A. Quelch, a professor at Harvard Business School has been reluctant to match the recent moves of formidable who has studied the beer industry, said of Heineken: "It's in will continue." are positive that the momentum in the company and trends has proved it is the right concept," he stated about the cur competitors such as Belgium's InBev and UK's SABMiller. which have grown significantly through mega-acquisitions. danger of becoming a tired, reliable, but unexciting brand." The firm has therefore worked hard to increase awareness Since taking over the helm at Heineken, van Boxmeer has rent ownership structure. "The whole business about family restraint on us is absolutely untrue. Without its spirit and committed himself to accelerating the speed of decision mak- guidance, the company would not have been able to build a For many years. Heineken limited itself to snapping up of their flagship brand among younger drinkers. Heineken small national brewers such as Italy's Moretti and Spain's also introduced a light beer. Heineken Premium Light, to ing. There has been some expectation both inside and outside world leader." Cruzcampo that have provided it with small, but profitable the firm that the new management would try to break loose avenues for growth. In 1996. Heineken acquired Fischer. target the growing market for such beers in the U.S. The a small French brewer, whose Desperados brand has been Firm has managed to reduce the average age of the Heineken from the conservative style of the family. Instead, the affable quite successful in niche markets. Similarly, Paulaner, a drinker from about 40 years old to about 30 years old. 46-year-old Belgian has indicated that he is trying to stream- ENDNOTES line the firm's decision-making process rather than to make 1. Olly Wehring. Heineken Readies Europewide Launch of Indonesia's At the same time, Heineken has pushed its other brands wheat beer that the firm picked up in Germany a few years to reduce its reliance on its core Heineken brand. It has any drastic shifts in the company's existing culture. Bintang Beet. Just drinks global news, January 17, 2017. 2. Jack Ewing & Gerry Khermouch. Waking Up Heineken ago, has been making inroads into the U.S. market. achieved considerable success with Amstel Light, which Van Boxmeer's devotion to the firm is evident. Heineken's first non-Dutch CEO spent 20 years working Business Work, September 8, 2003, p. 68. But as other brewers reached out to make acquisitions Richard Tomlinson. The New King of Beers. Mytune, October 18. 2004. p. 238. all over the globe. Heineken risked falling behind its more has become the leading imported light beer in the U.S. and his way up within the firm. He sports cufflinks that are sil- aggressive rivals. To deal with this growing challenge, the has been selling well in many other countries. Owing to its ver miniatures of a Heineken bottle top and opener. "We Ian Bickerton & Jenny Wiggins. Change Is Brewing at Heineken. Financial Tunes, May 9, 2006. p. 12. firm broke out of its play it-safe corporate culture to make acquisitions of smaller breweries around the globe, it has managed to develop a relatively small but loyal base of con- are in the logical flow of history." he explained. "Every time you have a new leader you have a new kind of vision. It 5. Business Work, September 8, 2003, p. 69 a few big deals. In 2003, Heineken spent $2.1 billion to 6. Andrew Kaplan. Border Crossings. Beverage World, July 15, 2004. p. 6. acquire BBAG, a family-owned company based in Linz. sumers for its strong local brands-specialty brands such as Austria. Because of BBAG's extensive presence in Central Murphy's Irish Red and Moretti. is not radically different, because you are defined by what For Hispanics, who account for one-quarter of U.S. your company is and what your brands are." 7. Christopher C. Williams. Heineken Seeing Green. Barren & September IR. 2006. p. 19. Europe. Heineken has become the biggest beer maker in Furthermore, van Boxmeer seems comfortable working seven countries across Eastern Europe. The acquisition sales, Heineken developed specific marketing campaigns. and added popular Mexican beers Tecate, Dos Equis, and within the family-controlled structure. "Since 1952 history R. Financial Times, May 9. 2006. p. 12. 9. Thid. of Scottish & Newcastle in 2008 similarly reinforced the firm's dominance in Western Europe. others. For years, these had been marketed and distributed Heineken's acquisitions in Ethiopia, Singapore, and by Heineken in the U.S. under a license from FEMSA Mexico have allowed it to build its position in these grow- Cervesa. In 2010, they acquired the firm, giving them full control over all of their brands. Benj Steinman, publisher ing markets. The firm has made an aggressive push into Russia with the acquisition of mid-sized brewing con- and editor of newsletter Beer Marketer's Insight believed cerns. Through several acquisitions since 2002, Russia their relationship with FEMSA had been quite beneficial: has become one of Heineken's largest markets by volume. "This gives Heineken a commanding share of the U.S. Heineken now ranks as the third-largest brewer in Russia. import business and . . . gives them a bigger presence in the Southwest . . . and better access to Hispanic c onsumers," behind Sweden's Baltic Beverages Holding and InBev. The he stated." firm has also pounced on brewers in far-flung places like Above all, Heineken wants to maintain its leadership in Belarus, Panama, Egypt, and Kazakhstan. In Egypt. Ruys bought a majority stake in Al Ahram Beverages Co. and has the premium beer industry, which represents the most prof been using the Cairo-based brewer's fruit-flavored, nonalco- itable segment of the beer business. In this category, the holic malts as an avenue into other Muslim countries. Rene Firm's brands face competition in the U.S. from domestic Hooft Graafland, the company's Chief Financial Officer. veers such as Anheuser's Budweiser Select and imported has stated that Heineken will continue to participate in the beers such as InBev's Stella Artois. Premium brews often consolidation of the $460 billion global retail beer industry have slightly higher alcohol content than standard beers. by targeting many different markets around the world. and they are developed through a more exclusive position- ing of the brand. This allows a firm to charge a higher Maintaining a Premium Position price for their premium brands. The flagship Heineken brand remains positioned as a premium beer. A six-pack For decades, Heineken was able to rely on the success of of Heineken, for example, costs $9, versus around $6 for its flagship Heineken brand, which enjoyed a leading posi- a six-pack of Budweiser. Just-drinks.com, a London-based tion among premium beers in many markets around the online research service, estimates that the market for pre- world. It was the best-selling imported beer in the U.S. for mium beer will continue to expand over the next decade. several decades, giving it a steady source of revenues and profits from the world's biggest market. But by the late Building on Its Past 1990s. Heineken had lost its 65-year-old leadership among imported beers in the U.S. to Grupo Modelo's Corona. The acquisitions in different parts of the world-Asia. The Mexican beer appeals to a certain segment of younger Africa, Latin America and Europe-represent an import tant step in Heineken's quest to build on its global stature. American beer drinkers, and more importantly, to the grow- ing number of Hispanic Americans who represent one of Most analysts expect that van Boxmeer and his team will the fastest growing segments of beer drinkers in the U.S. continue to build Heineken into a powerful global competi- The firm was concerned that Heineken was perceived as tor. Without providing any specific details, Graafland, the stodgy or even an obsolete brand by many young drinkers. Firm's CFO. makes it clear that the firm's management will take initiatives to drive long-term growth. In his words: "We CASE 16 = HEINEKEN C105 Of 8 6106 CASE 16 = HEINEKEN