VRUMONA BACK ON THE RIGHT TRACK
Murphy's Brewery stronger on Irish
market through introduction of Amstel
Drastic restructuring bears fruit
At a much earlier date than expected Vrumona, Heine-
ken's soft drinks business in the Netherlands, has returned to
a reasonable earnings position following a number of lean
years. The losses that the business was forced to accept for
several years have meanwhile been replaced by much bright
er figures. This recovery in profitability within the space of
one year brings an optimistic statement from managing direc
tor R. Overgaauw: "We have confidence in the future."
Successful
Phase II
'Light' grows
Exports
Indications of success
In June Irish consumers were able to have their first taste of
Amstel lager. New to Ireland, this brand is brewed at
Murphy's Brewery in Cork and is available on draught. There
are plans to start supplying Amstel in bottles and cans shortly.
As Murphy's Brewery only has a keg-filling line, these
supplies will be shipped over from the Netherlands.
Response
PAGE 8 HEINEKEN INTERNATIONAL MAGAZINE NR. 15
The Vrumona range is extensive.
Some years ago Vrumona's
future prospects could not be
described as rosy. Because of the
economic decline in the early 1980s
sales of Vrumona products started
to falter. The growth in consump
tion stagnated and consumers also
started to opt more for 'B' brands
and private labels. "Vrumona's
brands range consists solely of 'A'
brands and that meant that we lost
sales", explains Mr. Overgaauw.
An internal long-term plan showed
that only drastic changes would
enable Vrumona to respond effec
tively to the impact of these exter
nal factors.
In 1985 Vrumona called in an
organisation consultancy bureau to
identify the problems facing the
business, to recommend what
measures needed to be taken and to
check these out against Vrumona's
own ideas about the required policy
changes. The bureau's findings
included five recommendations to
bring Vrumona back into profit:
realigning the marketing strategy;
reducing the export range and
working out export opportunities
together with Heineken Export
and licensers; cutting down produc
tion costs, continued automation
and efficiency improvement, better
planning, education and training;
fourthly, a further automation of
the financial and accounting
department; and lastly, adaptations
within the management.
On the basis of the investigation
Vrumona initiated the "Vrumona
Restructuring" project. The
project's aim was to restore the
yield within three years. "That
project has proved more successful
than we anticipated. After only one
year the losses had been wiped out
and in the second year our operat
ing result had already returned to
profit. The workforce was reduced
by one hundred employees. For
many of them we were able to
arrange a transfer within Heineken
Nederlands Beheer (the Dutch
Heineken organisation). But
another element of very great
importance was the way in which all
employees made maximum efforts
to help Vrumona through those
two tense but difficult years, and
they can now see with pride that
their efforts have borne fruit", says
Mr. Overgaauw.
As there are still a few future
threats and as efficiency and labour
productivity can be improved still
further through automation and
capital investment, Phase II of the
restructuring will be started shortly;
the request for advice on this has
meanwhile received the Works
Council's approval.
Phase two will last four years. Of
the present 430 jobs, a further fifty
may disappear in the years ahead.
Implementation of the early retire
ment scheme at 57V2 and natural
wastage should ensure that there
will be no need for compulsory
dismissals. But, as it is not only the
cost level but also the market
position which determines the
operating result, the request for
advice also contains a proposal to
expand the hotel, restaurant and
bar sales organisation and to
strengthen several functions which
also have a decisive influence on the
quality of Vrumona products.
Mr. Overgaauw hopes and
expects that the second phase can
also be achieved in constructive
consultation with the Works
Council.
Vrumona continues to set the
pace not only in terms of reorganis
ing but also in the soft drinks
market. Growing sales volumes of
its extensive brands range (Pepsi
Cola, Seven-Up and Rivella as
brands sold under licence), Royal
Club, Sisi, Sourcy, the B3 fruit
juices plus the recently acquired
licence for the Isostar sports drink
make Vrumona Holland's biggest
soft drinks industry.
The market in which Vrumona
operates is a dynamic one. Though
the soft drinks industry as a whole
has only been growing very slowly
since the beginning of the 1980s, we
can see a conspicuously strong
growth for the 'Light' varieties of
drinks. These artificially sweetened
soft drinks already account for five
per cent of the total market. "In the
next ten years this market share will
climb further to around ten per
cent", believes Mr. Overgaauw.
Vrumona has responded promptly
NfAMSTCL
An aerial photo of Vrumona in
Bunnik, near Utrecht. Each year 2
million hectolitres of soft drinks are
produced here.
to this trend with the launch of
Royal Club Light in orange,
blackcurrant, cherry and lemon
flavours.
Also noteworthy is the above-
normal growth of Pepsi Cola. Pepsi
faces severe competition and this is
why it has such large-scale advertis
ing campaigns. As a result the
consumer sees much more publicity
for cola-type drinks than for other
soft drinks. The outcome is that
cola consumption is growing and
that both brands are strengthening
their position.
Holland also plays a leading role
as an exporter of soft drinks. With
2V2 to 3V2 million hectolitres a year,
the Netherlands is even the world's
number one exporter. For
Vrumona, too, the export market
has meanwhile become familiar
territory and exports make an
interesting contribution to its
operating result. This is achieved in
close cooperation with the export
department of Heineken N. V. and
the regional offices of licenser Pepsi
Cola. So, Vrumona products can
really be found all over the globe:
from Russia to the Caribbean.
forms part of this strategy", says
Mr. Vuyk.
For the Amstel lager launch
campaign Murphy's Brewery is
using TV commercials, posters and
promotional activities in pubs.
Amstel lager is being introduced
under the motto 'If you're more
into having a beer than talking
about it.'
The management of Murphy's
Brewery is firmly confident about
the success of the Amstel introduc
tion. In fact, the lager-test-brewed
in Cork in cooperation with Heine
ken Technisch Beheer - scored
high marks in blind taste tests
compared to rival brands. And the
advertising campaign, devised in
collaboration with Corporate
Advertising, met with a good
response in market research tests.
The main reason behind
Murphy's introduction of Amstel
lager is the pronounced change in
the lager market. The market is
splitting up into segments and our
company's strategy in response to
this is to be represented with a lager
brand in the most important
segments. "We can now clearly see
the emergence of a premium
segment and that's where Heine
ken lager belongs. Amstel will
become our brand in the
'mainstream' segment. Last
month's launch of Buckler also
Heineken's Regional Marketing
Manager G.J. Vuyk expects that
the heavy competition will lead to
changes. "We think that eventually
there will be a shake-out on the
lager market. Small lager brands
will disappear. Our task is to ensure
that, when that time comes, we've
already built up a strong position
for Amstel."
'1 At the moment eleven lager
brands are available on the Irish
market and competition is keen.
Industry watchers refer to the
outbreak of a 'lager war' in Ireland.
