Alchol for Dummies
Waking Up Heineken
Heineken goes more than 400 years. They are the world’s number 3 brewer, with $11
billion in sales yearly. Heineken is the closest there is to a global beer brand. They control 7%
of the global market share. The problem is that the $367 billion world beer market is changing.
Beer consumption is down in the United States and Europe, which accounts for 2/3 of their
profits. The beer marketplace is becoming more crowded with new brands, but the number of
players is shrinking. Heineken was one of the first European brewers to recognize the value of
cross-border deals, but is now facing the risk of falling behind more aggressive rivals. Because
of this, there is an air of change at Heineken.
This year will break a six year double digit growth for Heineken. The reasons for this
are a weak global economy, SARS, a rainy summer, and a strong Euro compared to the US
dollar. They will barely match last year’s net profit of $900 million on sales of $11.6 billion.
Over the past year, Heineken’s share price has went down 10%, to just under $37.
Heineken and its sister brand, Amstel Light, together have about 22% of the market.
They are under increasing attack as more imports and malt based drinks are available. Total beer
consumption in the US has dropped 1% since 2000, with stiffer drunk-driving laws. However,
beer imports have grown 16% as consumers are choosing quality over quantity. The top four
brewing companies have less than 1/3 of the global market. Brewing companies are acquiring
strong local brands and their distribution networks. The era of global brands is coming, and
Heineken has a head start. They were ranked second to Budweiser, in a global brand survey.
Heineken is recognized everywhere.
The CEO, Anthony Ruys, is pushing Heineken to break from its play-it-safe corporate
culture. The former CEO, Freddy Heineken, was financially conservative and held Heineken
back, even when other companies began to make big ticket acquisitions of other companies.
Heineken is realizing that no company can stand on a single product. They have begun to
acquire other brewers in various parts of the world. The new CEO spent $3 billion last year on
a dozen acquisitions. Once the $2.1 billion deal to purchase BBAG closes later this year,
Heineken will be the number one beer maker in seven countries in Eastern Europe. They won’t
recover the cost of capital until 2007 at the soonest.
Heineken is in danger of becoming a tired, reliable, unexciting brand. To counter this,
Heineken has two new targets; to widen appeal without alienating core customers. They are
trying to capture the twentysomething segment. They created a new silver and green aluminum
bottle that sells in trendy clubs and costs three times the price of Heineken on tap. The top
corporate officers have been [next page]