Heineken

HeinekenHeinekenMGT 490MGT 490

Sean Maines

About Heineken

One of the leading beer brands for 140+ years

Headquartered in Amsterdam

#1 beer in Europe

#2 imported beer in USA

125 breweries in over 70 countries

Premier brands - Heineken, Amstel, Newcastle

Financial Snapshot 2010

2009 2010 Change in %

Revenue 14,701 16,133 9.7%

EBIT 1,757 2,476 40.9%

Net Profit 1,018 1,436 41.1%

Total Assets 20,180 26,549 31.6%

Free Operating Cash Flow 1,741 1,993 14.5%

Employees 55,301 65,730 19.6%*in millions (EUR)

Since 2006

EBIT

Consolidated Beer Volume

Net ProfitIn millions of Euros

In millions of Euros

In millions of hectoliters

Beverage Life Cycle

PEST ANALYSIS

FACTOR

TREND EVALUATION

IMPACT RANK

POLITICAL

- Government excises alcohol because it is addictive - Heavy taxes on emerging beer markets

- Threat

- Threat

- 2

- 34

ECONOMICAL

- Currency fluctuation with Euros- Raised costs of grain, glass, aluminum- Higher advertising costs- Raised unemployment around the globe

- Threat- Threat- Threat- Threat

- 2- 4- 3- 4

3

Political

Government has a negative view on alcohol due to the negative social and health consequences

All governments have higher taxes on emerging beer markets while exporting alcohol

Economic

• Unemployment around the world is rising

• Money for leisure spending will decrease for everyone globally

PEST ANALYSIS

FACTOR

TREND EVALUATION

IMPACT RANK

SOCIO-CULTURAL

- Women are drinking beer more- More fast paced lifestyles- USA more health conscious - Decrease in college student drinking

- Opportunity- Threat- Opp/Threat- Threat

- 4- 3- 5- 2

1

TECHNOLOGICAL - Increased information technology - Opportunity -4 2

Socio-cultural

• Beer isn’t just for men anymore. More and more women are enjoying beer for the taste

• The new lifestyle of the newest generation is face paced. This leads to less time to drink beer; at home or at a bar.

• The growing population in China leads to more leisure time for people to drink.

• The more health conscious America becomes leads to less drinking.

Technological

Every business uses some type of technology.

With Heineken increasing their technology, it becomes easier for them to communicate with all aspects of their worldwide operation.

Makes penetrating new markets easier

Industry Overview

Contributes $223.8 B/yr. to US economy

Beer industry predicted to increase steadily

Every brewers goal- to grow globally

Very concentrated industry

Michael PorterMichael PorterFive Forces of PowerFive Forces of Power

Supplier Power

Suppliers for ingredients are mainly farmers.

• Threat for supplier power is very high

Makers of green glass bottle is Heye Glass Netherland

• Had 33% stake in the past

• Since 2002, they have kept 100% stake

Buyer Power

A buyer has many different options on where to buy beer

A buyer also has many different options on what beer they want to drink

• Threat for buyer power is very high

Competitive Rivalry

The Top US Breweries include:

• Anheuser-Busch, MillerCoors, Pabst, Boston Beer

• The Top International Competition include:

• Anheuser-Busch, Carlsberg, SABMiller

• Beer industry is very saturated

• No evidence of price rivalry

• Product differentiation is very important

Threat of Substitution

• Threat of substitution is very high

• People have many different tastes and preferences

• Some aggressive mergers could help Heineken develop new products under their core brand

Threat of New Entry

Recent explosion of craft breweries in last decade

• Making industry very competitive

Threat of new entry is very high

• Heineken must focus on uniqueness and innovations to keep a competitive advantage

Five Forces Summary

FORCE DRIVERSEFFECT OF

PROFITS

SUPPLIER POWER Small suppliers, high power -

BUYER POWERHigh distributing power.

Many choices -

COMPETITIVE RIVALRYHighly concentrated, Big

Four 0

THREAT OF SUBSTITUTIONS

Growing substitutes, low switching costs -

THREAT OF NEW ENTRYIncrease in craft breweries,

Need more innovations -

Blue Ocean Strategy?

Penetrating Russia

Biggest untapped beer market

Growing economy (7-8% annually)

Growing market for alcohol

Premium beer is 50% of beer market

Conclusions

• Highly competitive and concentrated industry

• Heineken must focus on differentiation with the competitive environment

• Continue to grow globally with increased technologies

• Must develop new product innovations with rapid increase of craft breweries

competition

1. AB InBev

2. SABMiller

3. Heineken

4. Carlsburg

5. Tsingtao

6. Molson Coors

7. Grupo Modelo

8. Beijing Yanjing

9. Kirin

10. Asahi Breweries

Top Breweries Worldwide by Volume

Competition by Region (%)

AB InBev SABMiller Heineken

North America 32.4% 14% 21%

Latin America 38.6% 31% -

Western Europe

8% - 47%

Central/Eastern Europe

6.7% 19% 19%

Asia Pacific 14.3% 2% 1%

Africa - 34% 12%

Fastest predicted drink rates regions- Asia Pacific and Africa

Strategic map

BUDMILLER

HEN

SAM

COORS

SpecializationHIGHLOW

Branding Effects

HIGH

LOW

CORONA

competition

BeerAdjunc

t%

alcoholCalories Loyalty Price Target Market

Rice 4.2% 110Very High

Medium - Beer drinkers of all ages

Miller Lite

Corn Starch

4.2% 96 Medium Medium - Men in mid 20s- Health conscious

Rice 4.15% 104 Medium Medium - Heavy focus on what men like

Heineken

“Purest

Water”

5% 150 Low High - Young males- Affluent

Corona Rice 4.8% 148 Low High -Vacationers- Mexican decent

import competition

Losing Import Market Share

Brand Supplier 2005 2006 % change

CoronaGrupo Modelo

96,105 97,930 1.9

HeinekenHeineken

USA62,500 63,125 1.0

Labatt Blue

InBev 15,075 14,192 -5.9

2.25 gallon cases

Competitor Analysis

Strategy- - Volume growth through brand development- “Enjoy the moment” campaign- Grow their sponsorship portfolio

Assumptions-- Heavy sales in warmer regions- Seasonal sales drop- Growing popularity of light beverages

Objectives-- Maximize potential in high-growth markets- Penetrate Canada and other colder climate markets

Resources- - Strong brand image- Good relationship with distributors- Financially healthy

one of the best selling beers in Mexico and one of the top selling beers worldwide. The top selling import beer in

the United States

Types of rivalry

Price-based

No evidence of price wars in industry

Non price-based

Compete with product innovations

Ex- Bud Light Lime vs. Miller Chill

Product Differentiation

Ways each company brews their beer

bud light

Future strategic plans

Stay undisputed market leader

Steal loyal drinkers from other companies

Take tag lines out of campaigns

Only for loyal customers

Miller Lite


Take market share from InBev

New strategy plan against Bud Light

Better tasting beer campaign

New multi-addition hoppy process

Coors light


“What guys like” campaign

Less focus on TV campaigns

More broad adversing fields

More sponsorship in sports

Corona


Strong penetration into Facebook

Going after Canada beer drinkers

Increase sales in all seasons

Saturated summer

Who is drinking?

- one drink/week

who is drinking?Age Occupation Income

Where people are drinking

Premium beer drinkers go to bars less

Domestic beer drinkers go to bars more

Growing rate

According to Global Beer Trends Report:

Global beer consumption will increase to 2 billion hL by 2013

Global average growth by country is 2.8% per year from 2011 and 2015

Predicting very strong changes in country consumption trends

Global drinking trendsBetween years 2011 and 2015

Beer trends

Trends towards increased:

Craft beers

Malt beverages

Wine

Low calorie beers

beer trends

Huge growth in Microbreweries

More appreciation for craft beers

Hurting sales of major brewers

More attention to detail and ingredients

Social Media Influences

Budweiser steps out of there comfort zone with social media advertising.

Big Brother meets FIFA World Cup with BUDHOUSE, a reality TV show with 32 soccer fans

Also added a Facebook application where fans can paint their face with flag of favorite team

With social media, Budweiser can increase there branding with people across the world.

social media influences

Miller realized that mobile devices has become a part of everyone’s everyday life.

Take approach towards active, low-calorie life style MGD 64 promotes

Users can compete with friends and take progress on Facebook application.

Reflection

Every top beer company world-wide has a goal of:

Overcoming their competition

Sustaining global growth

Focusing on markets not yet reached

Strengthening their global position anyway possible

Companies need to make changes due to:

Shift in global beer markets

Trends in alcohol use

Increase of social media advertising

Heineken - OverviewHeineken - OverviewCorporate OverviewCorporate OverviewCorporate Headquarters Amsterdam, The Netherlands

CEO Jean-Francois van Boxmeer

# of Employees world-wide 57,557

Developing Regions Latin America, Asia, Africa

Revenue - 2010 $16,133,000

Net Profit - 2010 $1,436,000

Key BrandsHeineken, Newcastle, Strongbow, Amstel

Geographical Revenue - 2010

Western Europe- 48.9%Americas- 21.2%Central/Eastern Europe- 19.4%

Geographical Assets - 2010

Western Europe - 38.2%Americas - 32.0%Central/Eastern Europe- 17.7%

Key Figures 2006-2010

2010 2009 2008 2007 2006

Revenue 16,133 14,701 14,319 11,245 10,829

Net Profit 1,436 1,018 209 807 1,211

In mill euros

- Heineken was hit by the 2008 recession, but was able to weather it better than its competitors due to its

premium brands.

Geographical SplitREVENUE

S2010 2009 2008 2007 2006

Western Europe 7,894 8,432 7,661 5,450 5,351Eastern/Central

Europe 3,143 3,200 3,687 3,226 3,359

Africa/Middle East 1,988 1,817 1,774 1,311 1,182

Americas 3,431 1,541 1,566 1,608 1,975

Asia Pacific 206 305 279 245 560Head

Office/Eliminations

-529 -594 -648 -595 -598

Totals 16133 14701 14319 11245 11829

In mill euros

The Africa/Middle East Region is the only region not to have a decline in revenue during the 5-year period.

The Global Picture

RegionFull Yr 2010

Full Yr 2009

% Change

Western Europe $7894 $8432 -6.4%Central/Eastern Europe

$3143 $3200 -1.8%

Africa/Middle East $1988 $1817 +9.4%

Americas $3431 $1541 +123%

Asia Pacific $206 $305 -32%

Revenue - Euros (mil)

Business ModelGrowth Strategy

Role in Society

Performance

Consumer Segment

Sustainability

- Marketing excellence- Key innovations- Focusing on the changes of consumer needs- Making aggressive investments to yield huge returns

- Social Responsibility in every region they operate-Heavy training with employees on alcohol abuse- Being the World’s Greenest Brewer

- Sustain a broad successful brand portfolio (acquisitions)- Strengthen position in all regions of world’s premium beer- Focus on American and Central/Eastern Europe regions with poor economic conditions

- More focus on a younger market as a growth strategy - Acquisition spree in order to find beers that appeal to the younger drinker- Decrease in television ads because it is ineffective to successful 18-26 year old males

- “Brewing a Better Future” plan- Making a 10-year plan to create a valuable future- Creates innovative ideas and new products and services

Mission - Sustainability

• To Brew a Better Future

• Become the GREENEST international brewer in the world

• Continuously IMPROVE the environmental impact of our brands and business

• EMPOWER our people and the communities in which we operate

• Positively IMPACT the role of beer in our society

Brewing a Better FutureBrewing a Better FutureHeineken’s 10-year PlanHeineken’s 10-year Plan

Three Core Values

• Passion for Quality

• Responsible Enjoyment of the Brand

• Respect for the People, the Environment and the Society we work in

BCG Matrix

SWOT ANALYSISSTRENGTHS WEAKNESSES

1. Has brands in over 13 markets world-wide2. Global pioneer of international strategy3. Strong brand recognition4. Different dispensing instruments

1. “Play it safe” culture2. Not drank by younger beer drinkers3. Price versus top domestic beers in US

OPPORTUNITIES THREATS1. “Low-calorie” beer that helps healthier lifestyles2. Growing populations in Russia/Asia3. Growing hispanic culture in US4. Premium beer market expected to grow 84% by 2012

1. Increasing laws against DUIs2. Competitors are increasing in US market share3. Older brand lacking excitement4. All brewers are trying to increase global presence 5. Rising costs of commodities - aluminum and glass

Value Chain AnalysisPrimary Activities

Inbound LogisticsHeineken is distributed globally, with warehouses strategically placed throughout to minimize shipping costs.

OperationsHeineken was limited to buying smaller breweries but bought BBAG in 2003, making it the largest beer maker in 7 countries across Europe

- Materials handling and Inventory control

- Assembly and Packaging


Outbound LogisticsHeineken has brewers throughout the world so they can ship their finished product to local areas to minimize shipping costs

Marketing and SalesHeineken is the 5th most recognizable beer brand in the world. By steadily buying smaller breweries they can spread their name even more.

- Order processing and Deliveries

- Advertising, Sales promotions, and pricing


ServiceHeineken has ventured out to the field of non-alcoholic beverages to service a different type of consumer

- Repairs in Warehouses and Training of employees

Value Chain AnalysisSecondary Activities

General AdministrationHeineken has been the top import premium beer in the USA until Corona took over. So, Heineken pushed on its different brands to put less stress on its core brand.

Human Resource ManagementHeineken created more management positions in all five operating regions. This lead to more risk taking and boosted the level of energy within the company.

- Most popular import light beer in USA - Amstel Light

- Increased recruiting, training, and developing personnel

Technology DevelopmentHeineken increased technology to keep more detailed documents of deliveries to keep shipping more efficient.

- Product and Process development

Heineken Strategic Choice

Heineken’s strategy of Broad Differentiation has helped them be the largest premium beer in the world. The beer has a unique brewing process and they have

been able to gain new products with increasing mergers and acquisitions.

Heineken Grand Strategy

Heineken Grand Strategy FactorProduct

Development

Developing new innovations in the beer industry will make Heineken stand out from the US domestic brewers.

Market Development

Expand marketing to emerging market such as Asia, Middle East, Russia, and Africa. This will allow them to penetrate these markets first.

Market Penetration

Focus on the marketing of Stars and Question Mark brands in developing regions

Backwards Integration

Invest in more distribution channels to lower the shipping costs

Frontwards Integration

This will allow: getting closer to the customer, increase the involvement in the value chain, and increase the product offerings

Concentric Diversification

Take on a technology to help enter markets not penetrated yet. It would be useful to start with core brands first, such as Heineken, Amstel, Strongbow

Conclusions

• Heineken has a very strong brand

• Need to continue to market core brands while penetrating emerging regions

• Heineken should continue to focus on strengths while taking advantage of opportunities that are present

• Strong focus on sustainability will be key to continue to be the global leader in premium beer

Documents

Heineken