Heineken NV Company Profile - written for FNV Mondiaal by Food World Research & Consultancy /Paul Elshof
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Heineken NV
Company Profile
written for FNV Mondiaal by
Food World Research & Consultancy
/Paul Elshof
Amsterdam, January/May 2005Colofon Heineken NV Company Profile written for FNV Mondiaal by Food World Research & Consultancy / Paul Elshof as part of the FNV Company Monitor Project Edited & published by: Stichting Onderzoek Multinationale Ondernemingen (SOMO) Centre for Research on Multinational Corporations Copyright © 2005 January 2005 (annex 7 May 2005) SOMO, Amsterdam Contact information SOMO Keizersgracht 132 1015 CW Amsterdam Phone: +31 (0)20 6391291 e-mail: info@somo.nl Food World Research & Consultancy Phone: +31 (0)20 6393645 e-mail: foodwrc@xs4all.nl www.companymonitor.org Heineken NV Company Profile 2
Table of contents
1. General characteristics .......................................................................................... 4
1.1. Name of the holding company .................................................................................. 4
1.2. Communication data ................................................................................................. 4
1.3. Ownership structure .................................................................................................. 4
1.4. Composition of the Board.......................................................................................... 5
1.5. Basic financial data : Turnover, profits, financial position ......................................... 5
1.6. Main activities............................................................................................................ 5
1.7. Main competitors ....................................................................................................... 6
1.8. Products and brands ................................................................................................. 6
2. Production and production policies...................................................................... 8
2.1. Geographical distribution of production and employment ......................................... 8
2.2. Sales and production development of Heinekens leading brands ............................ 9
2.3. The policy to capture markets ................................................................................... 10
3. History and strategy ............................................................................................... 11
3.1. A young, but well integrated company ...................................................................... 11
3.2. Strategy..................................................................................................................... 13
3.3. Actual positions in Asia, Latin America and Africa .................................................... 14
3.4. Employment development......................................................................................... 17
3.5. Development of volumes brewed & sold and employment figures .......................... 18
4. Labour relations ...................................................................................................... 19
4.1. Strong trade union presence..................................................................................... 19
4.2. Employee representation at different levels .............................................................. 20
4.3. Labour relations ........................................................................................................ 21
5. HR Management and management styles ............................................................ 23
6. Corporate norms, standards and codes ............................................................... 25
6.1. Sustainable corporate behaviour patterns. ............................................................... 25
6.2. Work in progress ....................................................................................................... 26
6.3. Social-economic rights .............................................................................................. 28
Annex to the Heineken Company Profile ........................................................................... 29
Smaller Board ............................................................................................................ 29
New executive committee.......................................................................................... 30
Heineken Code of Business Conduct........................................................................ 31
Heineken NV Company Profile 31. General characteristics
1.1. Name of the holding company
Heineken NV
1.2. Communication data
Heineken NV
Tweede Weteringplantsoen 21 PO Box 28
1017 ZD Amsterdam 1000 AA Amsterdam
Netherlands Netherlands
Tel.: +31 20 5239239
Fax.: +31 20 6263503
Website: www.heinekeninternational.com (Corporate Communications Department)
Email : responsibility@Heineken.com (Corporate Affairs Department)
1.3. Ownership structure
Shares are traded on the Euronext Stock Exchange Amsterdam.
Heineken NV is controlled by Heineken Holding NV . This Holding has a 50,005 % share in Heineken
NV. And Heineken Holding NV on its turn is controlled by L`Arche Holding S.A., a Swiss company.
L´Arche Holding owns 50,005 shares in Heineken Holding NV.
L´Arche Holding is a society owned by the Heineken family. This has long been Freddy Heineken, the
third generation owner . Since his death in 2003 this ownership belongs to his daughter Mrs. C.de
Carvalho Heineken and her husband M.R.de Carvalho. Mr de Carvalho has a seat in the supervisory
Board.
To sum up: the Heineken family controls with a 25,0010 share in Heineken NV de facto the Heineken
Group.
On 31 December 2003 there were 391,979,675 shares, with a nominal price of €2.00, but traded at
1
€30,19. At that date Heineken was valued at € 11.8 billion.
Heineken Holding NV has no operational activities. Its one and only aim is to safeguard the long-term
continuity, independence and stability of Heineken´s activities.
Also Heineken Holding NV is traded at the Euronext Amsterdam stock exchange.
1 Heineken NV Annual Report 2003, p.87
Heineken NV Company Profile 41.4. Composition of the Board
Recently, in the period 2000 to 2003 the composition of the Executive Board has been changed
completely. The Executive Board consists of 4 persons, since May 2004 5 persons.
Chairman of the Executive Board is Tony Ruys, member of the Board since 1993 and appointed as
chairman in 2002.
Ruys is responsible amongst others for Corporate Affairs, Human Resources & Organisation
Development, and the Asia/Pacific region.
All other members have been elected in the Board in 2001 and 2002.
M.Bolland is responsible for amongst others corporate brands, commercial affairs , North and
South America, Southern Europe
J.van Boxmeer is responsible amongst others for Corporate Production, Policy and Control,
Heineken Technical Services, Central and Eastern Europe ( until May 2004), North-West
Europe and Sub Saharan Africa.
D.Hooft Graafland is Heineken´s Chief Financial Officer.
K.Büche has been appointed from 1 May 2004
Ruys has 58 years, just as Büche, but the 3 others are quite young: 43 to 50 years.
All have the Dutch nationality except van Boxmeer who is Belgian. And since May 2004 the Austrian
K.Büche has been appointed as an extra member of the Board, with first responsibility for Brau Union ,
which means Heineken’s Central and Eastern European activities.
The Supervisory Board has 7 persons, all of Dutch nationality, except Mr. Carvalho, the husband of
Mrs Carvalho, Freddy Heinekens daughter. He has the British nationality.
1.5. Basic financial data : Turnover, profits, financial position2
Net turnover Operating profit Net profit Net profit as %
(in mln € ) (in mln €) Of shareholders
equity
1999 9,255 1,222 798 25,4
2000 8,482 1,282 795 30,1
2001 7,637 1,125 767 25,9
2002 6,766 921 621 25,9
2003 5,973 799 516 19,7
At the end of 2003 total group equity was € 3,899 million and provisions amounted to € 1,367
million. Liabilities were at their highest level in the history of Heineken NV : € 5,631 million. This
resulted in a ratio of Group equity to borrowed capital of 0,56 end 2003. The lowest level in
Heinekens history, but still high compared with many other companies. Heineken has a tradition of
being very conservative in financing its business; until 1999 the ratio group equity to borrowed capital
was around 0,90.
1.6. Main activities
The Heineken Group belongs to the 4 major brewery-companies in the world and has been for a long
time one of the most international breweries. Some others like Interbrew and South African Breweries
2 Heineken NV, Anuual report 2003, p. 90
Heineken NV Company Profile 5(S.A.B.) acquired more aggressive than Heineken other breweries during the last decade. So they
developed also in widely spread international brewing companies. But the Heineken brand is by far the
brand name most spread over the world.
Heineken has sales activities in 170 countries worldwide. It operates about 115 breweries in 65
countries, spread over all continents with the exclusion of North America.
In 2003 about 110 million hectolitres of beer were brewed. Apart from its brewery activities Heineken
operates some soft drink companies in Europe and Africa and it owns a major maltery in
Belgium/Europe. With a capacity of 250,000 tons this malthouse is one of the biggest and most
modern in the world: it supplies about 40 of Heineken´s breweries
Of the total turnover of € 9,2 billion in 2003 € 7,3 billion was beer related turnover, € 1,0 billion was
soft drinks, € 0,6 billion was wine and spirits.
3
Total employment was about 60,000 at the end of 2003.
1.7. Main competitors
Heineken ranks nr 4 in the worldwide brewery-sector when measured on production volumes at the
end of 2004. But during the last two years this ranking changes every half year due to mega-
acquisitions or mergers.
The major competitors are:
InBev April 2004 merger in of Interbrew (Belgium) and AmBev ( Brasil) 190 mln hl.
Anheuser Busch USA 160 mln hl
SAB-Miller UK-South Africa-USA 125 mln hl
Heineken Netherlands 110 mln hl
Carlsberg Denmark 90 mln hl
Heineken has an 8% share of the world wide beer market. It is represented in all continents, but its
4
stronghold is in Europe, where it has a 15% marketshare . In Europe Heineken is market leader in its
home country, the Netherlands, and in all countries surrounding the Mediterranean Sea, above all
Southern Europe, and in all Central and Eastern European countries excepted Czech Republic and
Russia.
1.8. Products and brands
As said, the Heineken brand is the most widely spread beer brand in the world. In 2003 a total of 22,1
million hectolitre has been consumed worldwide. All over the world the Heineken brand is positioned
as a premium brand, apart from the Netherlands where it has been always a high priced standard
beer.
In the European beer market Heineken is the biggest brand measured in volume and value.
Third in Europe is the second important brand name of the Heineken Group, Amstel. It has a high
position in the standard beers, the big middle segment of the beer market between premium and low
priced beers.
Heinekens strategy is to be present in each market with a complete portfolio of brands,from low priced
to premium and the brand Heineken also in the premium spot.
3 Heineken NV, Annual Report 2003, p.9
4 Paul Elshof, Zukunft der Brauwirtschaft, Internationalisierungsstrategien der Braukonzerne in Europa und ihre Auswirkungen,
edition Hans Böckler Stiftung, 2004, p.17
Heineken NV Company Profile 6The base is mostly a number of local or regional brands, who together cover the whole spectrum from
low priced beers to premium beers. Included are special beers, light beers and alcohol free beers.
5
The most important brands Heineken owns in the last groups of beers are:
Stout Murphy´s Irish Stout
White beer Paulaner
Alcoholfree Buckler
Mixdrink Desperados
Strong beers Affligem
A new development has been announced recently. In 2002 Heineken acquired Al Ahram Beverage in
Egypt, the national leading brewery with a nearly 100% market control in the Egyptian market. One
very interesting element for Heineken was that Al Ahram Beverage has an alcoholfree beer that is well
known in Egypt under the brandname Fayrouz. Recently Heineken announced that it is considering
the option to introduce this beer under its Arabian brand name in Europe as a beer for the moslim
population in Europe, who is not allowed to drink the normal alcoholic beers.
5 idem, p.43
Heineken NV Company Profile 72. Production and production policies
2.1. Geographical distribution of production and employment
Heineken started its process of internationalisation long before the other brewery companies.
Already in the 50-ies of last century Heineken owned breweries in other continents and it had
established itself as the most important import premium beer in the USA, what delivered very
attractive profits. But over the years more than half of the total beer volume was always produced in
Europe. This continent was considered by Heineken as its home market. And its acquisition policy was
aimed at building commanding positions in a number of national markets, first of all in Southern
Europe. In the period between 1970 and 1990 the emphasis was laid upon acquisitions to gain strong
positions in France, Italy, Spain and Greece.
In the 90-ies the emphasis was shifted to Eastern Europe and Asia.
And since 2000 Heineken first of all aimed to acquire leading positions in the two major national
markets in Europe, Germany and Russia.
The consequence of this acquisition policy is visible in a regional break down of production based on
volumes ( hectolitres of beer produced.)
6
Geographical distribution of Heineken´s beer production ( in mln hectolitres)
Total Western Central/ N. and S. Africa & Asia/
volume Europe Eastern America Middle East Pacific
Europe
1999 90,9 6,6 8,8 7,0
2000 97,9 7,4 9,2 7,5
2001 105,1 7,8 9,9 7,8
2002 108,9 42,2 15,6 8,4 10,6 8,0
2003 109,0 44,7 20,6 12,5 12,7 8,4
The great importance of Southern and Eastern European markets becomes clear when the Heineken
7
sales volumes in national markets are shown .
Turnover by volume in mln hl of Heineken Group in national markets according to size
Spain 10,8 million hl Netherlands 6,0 million hl
Poland 9,4 `` `` Greece 3,4 ´´ ´´
Germany 8,0 `` `` Russia 3,3 ´´ ´´
France 7,4 `` `´ Slovakia 2,1 ´´ ´´
Italy 6,0 `` `´ Bulgaria 1,3 ´´ ´´
A restriction on these figures has to be made. They include the sales figures of Brau Union AG, the
Austrian brewery company acquired by Heineken in 2003 from 1 Oct. 2003.
Total turnover of Brau Union amounted in 2002 to 13 million hl. The full consolidation of this volume
will lift the total volume in Europe with an extra 9 million hl. And this will change the ranking in this list.
6 Heineken NV, Annual Report , p.17-46
7
idem . p. 27
Heineken NV Company Profile 88
Geographical distribution of employment at the end of 2003
Netherlands 5,526 Africa/Middle East 11,941
Western Europe ( excl. Netherlands) 18,024 North and South America 5,435
Central/Eastern Europe 15,791 Asia/Pacific 4,824
The total employment figure end 2003 was 61,271
2.2. Sales and production development of Heinekens leading
brands
The Heineken brand is the best sold premium beer internationally.
The second important brand name within the Heineken Group is Amstel. Both brands are international
brands and the marketing policy for these brands is made at corporate level.
In 2003 the place of these two brands in Heineken´s brand portfolio was:
Heineken 20,3 %
Amstel 10,1 %
Other brands 69,9 %
Development of Heineken sales9 Development of Amstel sales10
20,4 mln hl 1999 10,5 mln hl
21,6 ´´ ´´ 2000 10,8 ´´ ´´
22,4 ´´ ´´ 2001 10,8 ´´ ´´
22,9 ´´ ´´ 2002 10,8 ´´ ´´
22,1 ´´ ´´ 2003 11,0 ´´ ´´
For these two brands guidelines and standards for brand style, brand value and development are set
and maintained at central corporate level.
Central support and benchmarking programmes are used to improve local marketing, sales and
distribution policies.
It is a cornerstone of Heinekens policy to develop local or national breweries in such a way that they
can start as soon as possible also the production of the Heineken brand according to the standards
set at corporate level. It saves the company a lot of money in terms of import duties and transport.
In 2003 local production of the Heineken brand has been started in Russia at the subsidiary Bravo
International, in 2004 local production started in China and Indonesia.
In these markets Heineken wants to grow the share of its major brand in the premium segment.
The only market where the Heineken brand is sold as a standard brand is the home market in the
Netherlands. In this market sales of Heineken are going down, in the same rhythm as the whole beer
market is slowly going down.
8 Heineken NV, Anuual Report 2003, p. 23
9 idem, p. 16
10 idem, p. 19
Heineken NV Company Profile 92.3. The policy to capture markets
Heineken basic policy is to try to acquire through a string of acquisitions a major share of a national
market. It tries to take over local or national breweries with strong national standard brands and at
best some speciality brands.
By building a network of breweries that covers a national area and give it a lot of scale in distribution, it
can build a platform that enables it to introduce its international brands such as Heineken, Amstel or
the international specialities such as the white beer Paulaner or the abbey beer Afflighem.
To reach this position Heineken works along two lines:
the acquisition of a number of breweries who together give a good coverage of a national or
regional market
the acquisition of beer & soft drink wholesalers, to create a strong distribution platform to boast
all brands owned by the company.
In those countries where Heineken has a long history, it constructed this kind of distribution platforms:
the Netherlands, France, Poland and Italy.
In the two major European national markets, Germany and Russia, Heineken is just starting to build a
11
strong presence .
In Germany it started in 2001 a joint venture with the Schorghuber group: Bayerische Brauholding
International in which Heineken has a 49,9% participation. BBI is operating in Bayern and during the
last two years it acquired a few extra breweries in Southern Germany. It seems as if Heineken
contends itself to become one of the strongest groups in the Southern and Western part of Germany,
leaving the Northern part to Carlsberg (after its acquisition of Holsten in Hamburg) and the central part
of Germany to Interbrew.
In Russia Heinekens follows a similar policy. It acquired in 2002 first Bravo International in
St.Petersburg. And in 2004 it took over 3 breweries in the Ural region of Russia, where these
breweries have very strong positions in regional markets. These regions show the fastest rise of beer
consumption per capita.
This policy of acquiring breweries that together cover a certain regional area or create the possibilities
for nationwide distribution is a policy that implies a string of acquisitions over a number of years and
consequently later on a long process of integration, restructuring and consolidation of production in a
smaller number of brewery sites.
11
Paul Elshof, Zukunft der Brauwirtschaft, o.c. p.26-27
Heineken NV Company Profile 103. History and strategy
3.1. A young, but well integrated company
Compared with many other brewery companies Heineken has a short tradition. In the sector there are
many breweries with more than 300 years of history. Beer has been for a number of centuries the
preferred drink in Western Europe: purer than drinking water, which was mostly contaminated, and
less expensive than other drinks like wine.
The history of the Heineken Company goes back to 1864, when Gerard Adriaan Heineken bought an
existing brewery, named ´De Hooyberg´ in Amsterdam. The origins of this brewery go back to 1592.
From 1864 onwards started the growth of the Heineken Company in three generations of the
Heineken family into one of the world leaders in the branch.
The successor to Gerard was Henry Heineken. He started the expansion overseas in the 1920-ies
with exports to the USA, Far East and Caribbean.
At the end of the 1940-ies the third generation took over in the person of Freddy Heineken. He
presided the company until 1989. During his presidency the company developed the international
production infrastructure, which made Heineken a predecessor in the industry.
When in 1968 Allied Breweries (UK) took over the Oranjeboom Brewery in Breda ( the southern part of
the Netherlands) , Heineken immediately acted to acquire Amstel, one of the other leading Dutch
12
brewery companies. This combination had 60% of the Dutch beer market. The danger of a foreign
domination of the Dutch beer market was prevented.
After the acquisition of Amstel Heineken had 3 brewery sites in the Netherlands, 2 in Amsterdam and
1 in Rotterdam. It started the construction of a greenfield brewery in Zoeterwoude at the beginning of
the 70-ies, still one of the biggest in the world. In 1975 this site started production and it made possible
the closure of two sites, the Rotterdam and former Amstel-site in Amsterdam. The production of this
site was in 2002 about 10 million hectolitre and it is the major productionsite that exports Heineken
beer to the USA.
In 1972 Heineken acquired a first French brewery in the Straatsburg, the Elzas region. More
acquisitions followed, first in France, slightly later in Italy and Spain. These were the starting steps of
Heineken in the offensive strategy to make Europe a kind of home market for the Heineken company
such as Anheuser Busch, the world brewery leader, saw the USA as its home market.
This offensive in Europe started in 1972, more than 20 years before the other breweries who dominate
the worldwide sector such as Interbrew , South African Breweries and Scottish & Newcastle started
their internationalisation. Around 1990 Heineken controlled the market already in many markets or had
at least strong nr. 2 positions. It prevented by being very early that Carlsberg or BSN ( Kronenbourg)
or eventually Stella Artois ( later Interbrew) would acquire major positions all over Europe. In 1972
Heineken had only a market share of 3% in Europe whereas the Heineken brand was sold worldwide,
13
from New York to Singapore.
12 Barbara Smit, Heineken, een leven in de brouwerij, SUN, Nijmegen , 1996 , p. 56 vv
13 ibid. , p. 166
Heineken NV Company Profile 11In 2004 Heineken has a European market share of about 15%, a figure that will grow to 20% when it
continues to expand its positions in Germany and Russia.
14
In Central and Eastern Europe Heineken acquired between 1991 and 2003 a market share of 27%.
This process started with first acquisitions in Hungary (1991 and 1994), Poland and Bulgaria (both
1994). The major step came in 2003 when Heineken acquired the Austrian market leader Brau Union
AG, which had expanded in the years before in surrounding Eastern European countries. The
acquisition of Brau Union created a perfect fit in Eastern Europe: where Heineken was weak, Brau
Union was strong, and vice versa. The combination led to a situation where the enlarged Heineken is
market leader in 8 of the 13 countries involved: in Poland, Austria, Rumania, Hungary, Slovakia,
Bulgaria, Macedonia, and Albania.
The acquisition of Brau Union AG in 2003 was the biggest one in Heineken’s history: about €1 billion
was paid. Before the biggest one had been the acquisition of Cruzcampo in 2000 in Spain to
consolidate Heineken leadings position in that country: the price than was about Fl. 1 billion, about €
450 million.
Compared with other major consolidators in the sector such as Interbrew and South African Breweries
Heineken is rather conservative and cautious in financial terms. This has two major reasons.
The long international presence makes that Heineken has internally a well developed policy of
standardized rules and procedures. Over the years it could develop a policy of Heinekenisation of all
its operations. This relates to styles of reporting, standards of production/productivity, marketing
methods and styles. One of the preconditions to make this possible is to prefer a string of acquisitions
of medium sized companies that can be integrated into this Heineken culture in a relatively short time
compared to the take over of or merger with big companies that would make this process uncertain.
The second reason is the ownership structure. The factual control of the company by the Heineken
family (although now under the name Carvalho) with a minimal majority (50,005 % in Heineken
Holding which owns 50,005% in Heineken NV) and the wish to keep that control makes it impossible
to make much bigger acquisitions without watering down this control.
The consequence of both elements is that Heineken developed over the decades into a well
integrated company with clear strategies regarding production policies and brand c.q. marketing
strategies. And while it could support over many decades its major brands Heineken and Amstel it has
a strong advantage compared to Interbrew and South African Breweries who have to grow their
brands worldwide from a much lower base.
Interbrew has Beck’s as its international premium beer: in 2003 about 3 million hl was sold worldwide.
And SAB promotes its Czech beer Pillsner Urquell as its international premium beer. It just jumped the
1 million hl export threshold in 2003.
The years ahead will see the unfolding of Heinekens presence in Asia/Pacific, mainly China,
in Latin America, Africa, in Russia and in Germany.
The consolidation of its position as market leader in Europe will imply that Heineken has to build a
stronger position in the future in Germany and also in the UK. But the background in Europe is one of
gradual declines of beer consumption, at least in Western Europe. This is partially compensated by
growth in Central and Eastern Europe. In general growth based on rising consumption levels of beer is
mainly expected in Asia, Latin America and Africa. In these regions Heineken will try to expand its
positions in the coming decade.
14 Paul Elshof, o.c., p.34-35
Heineken NV Company Profile 123.2. Strategy
Heineken’s strategy is well defined in its Annual Report on 2003 at page 2: “The goal is at all times to
defend and strengthen its leading global market position and preserve its independence”.
To strategy to obtain this goal is:
“Achieve levels of sales and profitability which make it one of world’s largest and financially
best-performing brewing groups
maintain a strong portfolio of beer brands, with Heineken as the leading international premium
beer
maintain strong local market positions, a good sales mix and an efficient cost structure by
combining the sale and distribution of the international Heineken premium brand with that of
strong local brands
fullfill its corporate social responsibility, particularly with regard to policy on alcohol abuse,
social and environmental issues”.
In 2002 Heineken started a restructuring program at its corporate centre that had implications on all
levels in the company. The restructuring got the name: Taking Heineken to the next level.
The crucial issue in this program was the aim to make the company more entrepreneurial by changing
the structure of the corporate centre, bringing down the operational responsibility on a number of
issues, while maintaining centrally set policies and standards.
For the first time a central department for acquisitions was formed. The aim was clearly set: Heineken
wants to be one of the 3 major brewing companies.
This step was made in a period that Heineken got a lot of criticism from the financial press and
analysts. It lacked the aggressivity that was necessary to maintain its place in the topleague.
Compared with Interbrew and SAB, Heineken seemed to them to much in the defensive. One of their
central aims, preservation of its independence, could also be read as ‘preservation of the family
control of this company’.
The start with this new acquisition department can help to combine both elements: continue the
permanent expansion in such a way that the control of the Heineken family will stay intact.
The other part of the restructuring program is the decentralisation into the operational companies of a
number of responsibilities. Not in setting the standards but in the implementation of centrally defined
standards in regional or local policies.
The structure of the company has been designed in a new way: a new configuration of operating
companies has been designed. The new configuration will make for example in Europe forms of
international restructuring easier. National boundaries are made subordinate on the new defined
boundaries of operating companies.
A new phenomenon has been the way Brau Union has been integrated in last years. The headoffice of
Brau Union in Linz, Austria, has been defined as the head office of all Heineken’s activities in Central
and Eastern Europe. Probably this decision has helped Heineken to get the cooperation of Brau Union
management and of the owner families to obtain full control of Brau Union.
Heineken integrated its substantial existing interests in Central and Eastern Europe into the existing
Brau Union structure.
Heineken NV Company Profile 13The CEO of Brau Union, mr. K.Büche, has been appointed member of the Executive Board of
Heineken from 1 May 2004.
3.3. Actual positions in Asia, Latin America and Africa
As has been said, Heineken has been for decades the most international brewer, a position that has
been overtaken recently by Inbev ( the company merged out of Interbrew from Belgium and Ambev
from Brazil) and SABMiller ( the combination of South African Breweries and Miller from the USA).
Heineken followed the last years a double strategy in terms of regional presence: it wanted above all
to maintain and expand its market leadership in Europe and at the same time it sought to acquire
important positions in growth market in the other continents.
In the coming years there will be a gradual shift of emphasis into a policy whereby in Europe most
energy will be spend on consolidation of the position and operations ( against the background of
stable or stagnating consumption patters) whereas the emphasis in the other continents will be on
further expansion. When string positions have been build in national markets, also there consolidation
will follow. This could be a matter of decades.
It makes sense to see where Heineken stands now. In general one could say that Heineken operates
in various ways to penetrate markets. Sometimes it starts with 100% acquisitions. In many cases it
prefers (or is sometimes just allowed) to acquire a minority interest in a company: mostly about 20%.
And sometimes Heineken starts with an alliance with another brewing company, by offering the other
one a licence to sell and sometimes to produce and sell Heineken beers.
When the start is a minority interest, we see in most cases that after a couple of years (sometimes
decades) this interest is expanded into a majority interest of let’s say 60 or 70%. In those cases family
owners sell their share-packages to Heineken. And then Heineken offers the remaining shareholders
to buy also the rest in order to acquire 100% full control and have the opportunity to integrate the
company completely into the Heineken structure.
This pattern has been executed many times: amongst others in France, in Poland, in China, in Israel,
in Kazakhstan.
The Annual Reports shows where Heineken has its production operations. The different levels of
participation are always mentioned. Here are listed the participations according to the data in the
15
Annual Report 2003
15 Heineken NV Annual Report 2003, p.93-95
Heineken NV Company Profile 14Latin America
Country Name of the company Location Brands
and level of
participation
Argentina Companias Cervecerias Salta , Santa fe Heineken, Budweiser,
Unidas Argentina SA Schneider,Salta, Santa
(CCU) 24,6 % Fe, Cordoba, Rosario
Bahamas Commonwealth Brewery Nassau Heineken, Kalik,
53,2 % Guinness, Vitamalt
Brazil Cervejarias Kaiser Brasil Feira de Santana, Heineken, Kaiser, Santa
SA 20 % Jacarei, Gravatal, Ponta Cerva, Bavaria, Summer,
Grossa, Queimados, Xingu
Pacatuba, Araraguara,
Manaus, Preto, Cuiaba,
Ribeira
Chile Companias Cervecerias Stiago, Temuco, Heken, Christal, Escudo
Unidas SA 30,8% Antofagasta
Costa Rica Cerveceria Costa Rica San Jose Heineken, Imperial,
25% Pilsen, Bavaria, Rock Ice
Dominican Republic Cerveceria Nacional Santo Domingo Heineken, Presidente
Dominicana 9,3%
Haiti Brasserie Nationale Port-au-Prince Prestige, Guinness, Malta
d´Haiti 22,5%
Jamaica Desnoes & Geddes Kingston Heineken, Red Stripe,
15,5% Dragon Stout, Guinness
Martinique Brasserie Lorraine Lamentin Lorraine, Porter, Malta
83,1%
Neth. Antilles Antilliaanse Brouwerij Willemstad Amstel, Amstel Bright,
56,3% Coral, Malta
Panama Cervecerias Baru- Panama City,David Pama, Soberana, Cristal,
Panama 74,5% Guinness
St. Lucia Windward & Leeward Vieux Fort Heineken, Piton,
Brewery 72,7% Guinness
Surinam Surinaamse Brouwerij Paramaribo Parbo
76,1%
Africa / Middle East
Country Name of the company Location Brands
and level of
participation
Angola Nocal 27,1% Luanda Nocal
Angola EKA 45,8% Dondo EKA
Burundi Brarudi 59,3% Bujumbara, Gitega Amstel, Primus
Cameroon Brasseries du Cameroun Bafoussam, Douala, Amstel, Mützig
8,8% Garoua, Yaounde
Chad Brasseries du Logone Moundou Gala, Chari, Maltina
100%
Congo Brasseries du Congo Brazzaville, Pointe Noire Amstel, Mützig, Primus,
50% Guinness, Ngok, Maltina,
Turboking
Democratic Republic of Bralima 93% Boma, Bukavu, Kinshasa, Amstel, Mützig, Primus,
Congo Kisangani, Mbandaka, Guinness, Maltina,
Lubumbashi Turboking
Heineken NV Company Profile 15Egypt Al Ahram Beverages El Obour, Sharka, Badr, Heineken, Stella, Birell,
Company 99,9% Gianaris Fayrouz, Sakara, Meister
Ghana Ghana Breweries 75,6% Kumasi, Accra Amstel Malta, Star,
Gulder, ABC Stout,
ABC Golden Bubra,
ABC Golden Lager
Israel Tempo Beer Industries Netanya Heineken, Maccabee,
17,8% Gold Star, Nesher, Malt
Star
Jordan General Investment Zerka Amstel
10,8%
Lebanon Almaza 67% Beirut Amstel, Almaza, Laziza
Morocco Brasseries du Maroc Casablanca, Fes, Tanger Heineken
2,2%
Namibia Namibia Breweries 14,5% Windhoek, Swakopmund Windhoek, Guinness
Nigeria Nigerian Breweries Aba, Enugu, Ibadan, Amstel Malta, Maltina,
54,2% Kaduna, Lagos Star, Gulder, Legend,
Consolidated Breweries Jjebu Ode, Owe ´´33´´Export, Hi-malt
24,8% Omamma
Reunion Brasserie du Bourbon Saint Denis Bourbon, Dynamalt, 974
85,6%
Rwanda Bralirwa Gisenyi, Kigali Amstel, Primus, Mützig,
Guinness
Sierra Leone Sierra Leone Brewery Freetown Heineken, Star, Guinness,
42,5% Maltina
South Africa SAB-Miller (licence) Cape Town, Durban , Amstel
Johannesburg
Asia/Pacific
Country Name of the company Location Brands
and level of
participation
Cambodia Cambodia Brewery Phnom Penh Tiger, Anchor,
33,7% Gold Crown, ABC Stout
China Shanghai Asia Pacific Shanghai Tiger, Reeb
40,9%
China Hainan Asia Pacific Haikou Tiger, Anchor, Aoke
42,2%
China Guangdong Brewery Shenzhen Kingway
21%
Indonesia Multi Bintang Indonesia Tangerang, Sampang Bintang, Guinness
84,5% Agung
Japan Kirin (licence) Tokyo Heineken, Buckler
Malaysia Guinness Anchor Berhad Kuala Lumpur Heineken, Tiger,
10,7% Guinness, Anchor Ice,
Baron´s, Kilkenny
New Caledonia Grande Brasserie de Noumea Number One, Havannah
Nouvelle Caledonie
87,3%
New Zealand DB Breweries Greymouth, Heineken, DB Draft, Tui,
32,5% Mangatainoka, Otahuhu, Amstel, Murphy´s
Timaru IrishStout, Export Gold,
Export Dry, Monteith´s
Heineken NV Company Profile 16Papua New Guinea SP Brewery Port Moresby, Lae SP Lager, South Pacific
31,9% Export Lager, Niugini Ice
Singapore Asia Pacific Breweries Singapore Heineken, Tiger, Anchor,
42,2% ABC Stout, Baron´s
Tahiti Brasserie de Tahiti Papeete Heineken
(licence)
Thailand Thai Asia Pacific Brewery Bangkok Heineken
14,8%
Vietnam Vietnam Brewery Ho Chi Minh City Heineken, Tiger, Bivina
25,3%
Vietnam Hatay Brewery Hatay Heineken, Tiger, Anchor
42,2% Draft
From this impressing list a few important issues become clear:
most participations are minority participations. Heineken delivers the technical and brewing
expertise and secures in this way the possibility to (let) brew its own brands in order to avoid
import taxes. Eventually these minority interests can be enlarged to majority participations. But
this works not always. In 2002 Heineken was surprised when Quilmes, the leading brewery
company in Argentina and some surrounding countries, was sold to Ambev, although
Heineken had a 20% participation and expected to expand it further.
In some cases Heineken licences important competitors to brew its beers ( Heineken and
Amstel) : Kirin in Japan, South African Breweries-Miller in South Africa. But recently Heineken
decided to take the commercialisation in its own hands by starting sales offices.
In South Africa it made in 2003 one step furhter: together with Diageo ( the owner of
Guinness) it bought Namibian Breweries to brew its own beers and compete with SAB Miller in
South Africa.
In many countries Heineken has a close alliance with Guinness/Diageo. About 10 years ago it
even pooled its interests with Guinness in Malaysia.Heineken sold its Kuala Lumpur brewery
to Guinness, while it owned already a brewery in Singapore. In January 2005 it announced
that ot would start the production of Guinness in the St.Petersburg Bravo brewery for the
16
Russian market.
In the Asia Pacific region Heineken has a long time partnership with Frazer and Neave, named
Asia Pacific Breweries. This joint venture is Heinekens vehicle to expand in the Asia Pacific
region.
In many regions Heineken builded over the decades very strong regional brands:
In Western Africa with Star and Gulder, in the Asia Pacific with Tiger and Anchor. When
consumption levels rise in the future these brands can become very important also in terms of
volumes.
3.4. Employment development
It is interesting to see how volumes and employment numbers developed over the years.
16 Financieel Dagblad, 21 January 2005
Heineken NV Company Profile 173.5. Development of volumes brewed & sold and employment
figures17
Year Volumes brewed & sold Total employment
In mln hectoliters Average figures for the years
1996 71 31,682
1997 73,8 32.421
1998 83,1 33,511
1999 90,9 36,733
2000 97,9 37,857
2001 105,1 40,025
2002 108,9 48,237
2003 109 61,271
Both figures are rising continuously, but this masks the fact that over the years there is a shift in the
balance of numbers of employees employed in production and those employed in marketing, sales
and other indirect positions. This is a general trend in the brewery industry.
Backed by Heineken Technical Services, the corporate engineering department, brewery operations in
all countries are everywhere gradually brought to standards required by Heineken in a double sense:
as far as product quality is concerned and also regarding productivity. Investments in modern brewing
technologies always imply higher output per worker. In most developing countries this tendancy
doesn´t necessarily lead to lower employment levels, while rising consumption and volumes probably
lead to an expansion of the number of shifts to work. But when more breweries in the same country
are under Heinekens control the policy will be to consolidate production in a smaller number of
breweryplants.
This policy is most clear in Europe where the consolidation takes place against a background of stable
or declining consumption. In most other regions this policy will become more clear cut in the nearby
future.
17 Heineken NV Annual Reports
Heineken NV Company Profile 184. Labour relations
4.1. Strong trade union presence
Heineken has just as is the case in most other brewing companies a workforce that can be
characterized as highly loyal to the company and at the same time with a high level of trade union
membership.
This is a historical phenomenon: the brewery industry is very old, has strong traditions and is in a
certain sense quite conservative. While the product is very visible and beer has a conno-tation of
enjoying a good atmosphere amongst friends, working in such a company creates proud and loyalty
with its employees.
The brewery sites also have a long tradition of trade union membership. This is due to the fact that
brewing has been a craft for many centuries. In the late middle ages the brewery guilds belonged to
the most important guilds in many cities. See for example the beautiful building of the brewery guild at
the Central Market in Brussels.
The self confidence of the brewers could be combined with the big numbers of the unskilled or lower
skilled workers at the bottling lines and in expedition and distribution to create strong trade unions.
In its first Report on Sustainability “Path to Sustainability” 2002-2003, Heineken gives a figure on the
18
level of unionisation in its operations. The average level of membership of all employees worldwide
is 38%. In different regions different levels of union membership exist:
Europe 40%
North / South America 60%
Africa/Middle East 37%
Asia/Pacific 13%
This figure relates to the 51.986 employees who are Heineken employees and doesn’t count the
employees who work at minority shareholdings, such as is the case for the German operations. Not
yet included are also the figures on Brau Union. In both cases the levels of unionisation will be high. In
Austria for example, where 2,618 employees were employed by Brau Union, 100% of all employees in
production and distribution are union member, and about 90% of the employees in the clerical staff.
In its home country, the Netherlands, about 5,525 employees worked in 2003 for Heineken. Of this
group about 3,800 work in the subsidiaries for the Dutch market and about 1,700 work in corporate
departments such as head office, HTS ( Heineken Technical Services: the central engineering
department), marketing and export departments.
Of the 3,800 working for the Dutch market most work under conditions governed by a Collective
Agreement; all employees in production and the lower ranks in clerical staff. This group is 80%
unionized.
18 Koers op Duurzaam , Duurzaamheidsverslag 2002-2003, Heineken, Sept. 2004, p.47. In a later chapter more
will be said about this Sustainability Report and Heineken’s policy regarding sustainability.
Heineken NV Company Profile 19Whereas the strong presence of unions is already a wide spread reality in the company, Heineken
says also that it wants to endorse alls its employees to make themselves represented by works
19
councils and trade unions .
4.2. Employee representation at different levels
This strong level of union membership of course influences also the way employee represen-tation
functions at subsidiary level. Seats in most works councils are occupied by trade union members and
in many countries works councils and unions coordinate their positions and policies.
In many European countries workers representation is regulated by national laws. This is the case in
most Western European countries and in some Eastern European. In those countries where no works
councils exist trade union bodies are the employee representative bodies that negotiate and discuss
with management.
On an international level Heineken has since 1997 a European Works council (EWC). The way this
European Works Council was founded is a good illustration of how labour relations normally work.
In the period 1992-1996 Heineken union members from various EU countries could meet regularly on
an international level. These meetings were made possible through a programme funded by the
European Parliament to prepare the implementation of international information and consultation
practices within multinational companies in the EU.
This group of about 20-25 employee representatives met each year to exchange information on
national developments within Heineken and to prepare the negotiations with Heineken management
on the coming European Works Council. The group was coordinated by the full time union officer of
FNV Bondgenoten, the most important trade union in the Netherlands, where Heineken’s head office
is located. This union coordinated at behalf of EFFAT, the European trade union secretariat for the
Food and Agricultural Workers unions.
Several times in 1995 and 1995 this group offered to Heineken management to start negotiations. In
vain, while Heineken wanted to start negotiations only when legislation on European level and its
implementation in national laws was finished (the last happened only in 1996), but also while some
senior managers wanted to bypass the trade unions in these negotiations. They considered the
necessary start of the negotiations for a EWC as the moment to structure this body without the
involvement of the unions. The high level of unionisation made this attempt to a failure. Employees
expressed clearly their position: there is only one way to negotiate a EWC, that is with the unions.
In the period 1996 until the end of 1997 the negotiations were effectively coordinated by FNV
Bondgenoten, the Dutch trade union. The content of and provisions in the EWC Agreement indicate
20
the strength of the unions within the company.
A few elements make this Agreement a strong one compared to many others. They are:
two 3 day meetings per year
one extra 2 day meeting a year for training the works council members
19 Ibid. p. 47
20 Paul Elshof , o.c. , p. 101 vv. The way the EWC’s function within Heineken, Interbrew, Carlslberg and
Scottish & Newcastle has been compared. The Heineken one clearly stands out because of its stronger
agreement and greater continuity.
Heineken NV Company Profile 20the participation from the beginning of representatives from Eastern European countries
although they were at that time aspirant members of the EU. This was the case for Poland,
Hungary and Slovakia.
The two meetings per year rotate always in a fixed pattern: the spring meeting always in
Amsterdam to enable Board members to participate when Annual results and future plans are
presented and discussed. The autumn meeting always rorating at different locations in
Europe to enable local employee representatives and national management to participate and
raise in this way the awareness of an international perspective by all.
In the European Works Council 28 representatives from 14 countries participate and one quality seat
is reserved for the FNV Bondgenoten trade union officer who coordinates at behalf of EFFAT, the
European trade secretariat for the union from the food and agriculture sectors.
These 28 members represent the employee structures in the respective countries, mostly elected by
the works council structures, sometimes by the union bodies. They are all trade union members.
4.3. Labour relations
At national level Heineken has in a few countries an elaborate structure of labour relations. If we take
the two countries that could be considered since recently as the two home markets of Heineken, the
Netherlands and Austria, there is a structure that could serve as a possible structure for more
countries where Heineken operates several breweries.
In both countries national laws exist for many decades on employee representation by works councils.
The normal pattern in these two countries is that each brewery plant has its own works council, as is
the case for headquarters, technical departments as Heineken technical Services and sometimes also
for the export offices and distribution activities.
In both countries these works councils have regular meetings with their management. Rights and
tasks are regulated by law.
In the Netherlands 10 works councils exist at local level. The three brewery sites have a Groups
Works Council consisting of members elected out of the works councils of the 3 brewery sites. And on
national level a Central Works Council exists, with members elected by the 10 local works councils.
All local councils have at least 6 internal meetings a year, where employee representatives discuss all
relevant matters. At least 6 times a year they meet with the respective management representatives.
This brings a total of at least 12 meetings a year.
The Central Works Council has the same pattern of meetings, the Group Council meets 4 times a year
on its own and 4 times with management.
In Austria 8 local works councils meet also at least once per month, and 4 times a year they meet with
local management. Also here exists a Central Works Council that meets once a month and 4 times per
year with management.
In both countries these councils coordinate closely with the unions. Unions and works councils have
their division of tasks and responsibilities. The negotiations on labour conditions, working times,
pension provisions, social plans/redundancy packages in times of restructuring are typically the task of
the unions, whereas the works councils have the lead as far as it regards the information on the daily
Heineken NV Company Profile 21business development, investments, and they are the bodies to negotiate with management the
detailed implementation of conditions negotiated by the unions.
In general the works councils and unions in these countries regard the relation they have with
management as good. But it seems that sometimes this relation has to be tested.
In the Netherlands the unions organized their first strike since a very long time in 1990. Before there
never was a need to start an open conflict. In 1990 Heineken started a process to restructure its
operations in the Netherlands announcing job losses for 700 employees.
Background was the first experience of Heineken with a declining market share and declining
volumes. The workers and their unions were furious that a high number of them were victimized for
waht was considered to be the result of short sighted manamenet policies in the years before: the
arrogance of a marketleader for many years.
Quite soon Heineken management withdrew its plans and had to prepare new plans that had a
complete different content.
The unions had shown their strong position and that made it necessary for heineken to negotiate
changes.
When a couple of years later a wide-ranging modernisation process was announced this resulted in
the negotiation of an social agreement to deal with the social consequences of this process. The main
elemnts were:
No redundancies as a result of this process and the investments involved
The modernized organisation will be manned with existing employees: they have the right of
precedence before new employees are hired.
Connected with this a high priority on training and further education of all employees
Those workers who loose their actual jobs are replaced to other jobs and receive the training
they need
No outsourcing of activities to third parties to keep jobs in house for redeployment of workers
When needed already outsourced work will be taken back to organize sufficient jobs for all
actualy employed workers.
This agreement should cover the period 1994-1998. While the whole process of modernization took
more time the agreement was first extended for a secind periode of 4 years: 1998-2002. And recently
it was again extended for 2 years (2003-2004) with some minor changes in the content.
As far is known there have rarely been labour conflicts in Heineken operations in other parts of the
world. But this could also be an opinion based on lack of communication or of not informing unions in
the Netherlands when conflictsd took place.
The national studies that will be carried out in the context of the Monitor project will maybe shed
another light on this issue.
As has been said earlier, Heineken annnounced in its first report ´´Path to Sustainability`` that at
average the level of unionization in Heineken worldwide is 38%. The highest levels are in Europe and
Latin America, and the lowest ones in Asia/Pacific.
In this report Heineken says : `` Heineken promotes that employees are represented by works
councils or trade unions. Heineken guarantees the freedom of trade unions and offers employees the
right to be represented by these unions as parners in the negotiations on labour conditions. If
Heineken NV Company Profile 22employees make use of this right, is quite different per region. Local conditions, traditions and cultural
21
habits play a big role``
5. HR Management and management
styles
Heineken has been for a long time a company with a quite hierarchical structure and this heirarchical
attitude was translated also in the way relations with employees were conducted.
But since 1990 this pattern is changing. In the early 1990-ies Heineken started a project to modernize
its operations and their attitude to employees.
Several causes played a role. It was partly due to a generational change in management. The most
important cause was the policy to make the brewery-operations more efficient. It meant the
introduction of new technologies, a higher level of automation, more computer controlled processes in
brewing, bottling, packaging and wharehousing. This meant that a high number of employees had to
be higher skilled and prepared to new functions and contents of old functions and new tasks.
A lot of manual labour that had been executed for decades under difficult work conditions was
automated. And the start was made by a complete automation of the breweryhouses. Brewers had to
be trained to operate the brewing houses from central control rooms by computers. Those workers
that had difficulties in acquiring the new skills were reemployed on the bottling lines and in the
wharehousing or expedition departments. But also in these departments started the process of the
introdution of more computerized operations some years later.
The consequence was the development of a training program for all workers. The specific conditions
and modalities were negotiated with the trade unions and works councils.
This happened in any case in most European countries.
In 1994 Heinekens Corporate Department ´Production and Policy Control´ conducted an internal
benchmarking study to measure and compare production, production costs and productivity in all of its
fully owned brewery sites.
This internal benchamrking study was followed by an external benchmarking study in 1995 whereby
about 40 brewery sites worldwide were compaed with heinekens operations. These studies were
collected in a handbook: ´Competitor best Practices` and was edited in july 1995.
It was made available to all senior managers and gave them an idea where there sites stood
compared with other Heineken breweries and with competitors.
The most important lessons Heineken drew from these studies that a higher level of efficiency in a
more competitive market place could be best gained by changing the ways operations were organized
and not necessarily by more investments in machinery.
Management teams were invited to come forward with plans to improve their operations. And in most
European countries the highest priority was laid upon training of employees and the introduction of the
team-concept.
21 ´´Path to sustainability``2002-2003 , p.47
Heineken NV Company Profile 23It meant that a lot of tasks and responsibilities were shifted from different managament levels to teams of operators, that had to be prepared for these tasks. From 1997 onwards a lot of energy, money and time has been spend on these training projects. And gradually these benchmarking operations were transformed in operational methods to give local management and teams, first of all the teamleaders, a say in the preparation of targets for the coming years. ´Future vision´ was the name given to the operational translation into setting targets for the coming years. The aim was to develop a kind of sustainable cost leadership, as compared with competitors in the sector. This process is an ongoing process and undoutedly brewerysites all over the world have been starting with this process in one kind or another. Compared with most other brewery companies Heineken is advanced in rolling out this methodology over all its sites. This is due to the fact that the growth of Heineken by acquisitions has been done in smaller and better manageable steps, as compared to for example SAB or Interbrew, who expanded by much bigger acquisitions or mergers. This policy supposes a modernization of the relations between management and employees: the old hierarchical patterns are counterproductive when the daily operations are controlles and planned by higher skilled employees than has been the case during the last decades. The numbers of employees in production , wharehousing and distribution will go down. But those who stay will have higher qualifications and will undoubtedly have a strong say in how daily operations are planned and executed. New kinds of tensions between managers and operators or teams could well play a role in the coming years and a new type of negotiations will probably be necessary to find a new equilibrium in the power positions between managment and employees. Heineken NV Company Profile 24
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