Europe
Rest of the world
'On the world beer market we retained our third place,
measured by the volume of beer brewed under our supervision;
world-wide, our output increased by 5.3% to 49.5 million hec
tolitres. Heineken also remained the most international brew
ery group in 1989. In Europe we maintained our leading posi
tion.'
Ireland
Spain
France
Netherlands
Italy
Greece
HEINEKEN INTERNATIONAL MAGAZINE NR. 26 PAGE 2
Heineken still a strong
business
Chairman of the Board G. van
Schaik made it perfectly plain dur
ing the press conference on the fi
nancial annual report that
Heineken's position on the world
beer market is unshakeable. But
this doesn't mean that the compa
ny can afford to relax and put its
feet up. There's always work to be
done, certainly now that interna
tional developments are taking
place in such rapid succession. To
preserve a strong market position
world-wide, the concern manage
ment must constantly keep its fin
ger on the pulse and introduce
changes in good time.
This is also the underlying rea
son for the proposal to have
McKinsey (the bureau of organisa
tion consultants) study whether the
decentralised management struc
ture of the network of operating
companies which was introduced
in the early eighties should be re
tained in future. The study will fur
ther focus on the most effective
over-all organisational form for the
business to face the challenges of
the 1990s.
The European beer market is no
longer growing much. But distinct
shifts are taking place in consumer
preferences. Fast-changing drink
ing habits mean a shorter life cycle
for new products. Heineken in
tends to respond actively to this in
creasing beer market segmentation
by extending the range of drinks it
offers.
A gratifying development, said
Mr Van Schaik, was the success of
Buckler. 'This low alcohol beer is
catching on well in the market and
our targets have been amply ex
ceeded.' Let's take a look at how
the European operating companies
fared over the past year.
Imports to the United States
came under pressure slightly last
year. The total U.S. beer market
was stable, with the import seg
ment showing a small decline.
Shipments of Heineken beer to the
United States were down a little
compared to 1988, but our share of
the imported beers market in
creased. Amstel Light performed
excellently; despite more intense
competition in this segment, its
sales climbed substantially. In a
number of densely populated ur
ban areas Buckler was introduced.
The economic situation in the
Caribbean revealed a mixed pic
ture. The variations in economic
development were due in part to
the ravages of hurricane Hugo
which hit a number of islands in
the region last year. Locally pro
duced brands were able to main
tain their position in virtually all
markets. Imports of beer into the
region climbed slightly, except in
Puerto Rico. Buckler was intro
duced in a number of markets.
In most countries in Africa the
economic situation deteriorated
further last year. Not only the high
level of foreign indebtedness is
causing economic headaches. An
other problem is the decline in pur
chasing power. Heineken was con
fronted by this problem in the form
of tighter restrictions on obtaining
the foreign currency needed to pay
for imports of raw materials, ma
chines and spare parts. Yet the
Board of Directors still sees pos
sibilities in Africa. Proof of this is
the recent acquisition of the soft
drinks business Compagnie Indus-
trielle des Boissons in Zaïre.
In Asia sales of beer brewed un
der Heineken supervision went up
from 2.5 to 2.7 million hectolitres.
This increase was attributable in
part to higher exports of Heineken
beer to countries which have liber
alised their trade policy, such as
Laos, Taiwan, Burma and Viet
nam. The results of Malayan Brew
eries Ltd., which has brewing inter
ests in Singapore, Malaysia, Papua
New Guinea and New Zealand, im
proved again. In China sales of
beer by Shanghai Mila Brew Co.
Ltd. were lower than expectations
as a result of political troubles.
The Irish beer market increased
slightly last year, with a further
growth in the share of the lager seg
ment. Murphy's Brewery Ireland
Ltd. succeeded in boosting its sales
volume considerably. Noteworthy
was the increase recorded for sales
of Heineken - market leader in the
lager segment. Buckler volume
showed further growth. Sales of
Murphy's Stout remained at their
previous year's level.
The operating result was slightly
down compared to 1988. This was
chiefly due to high marketing costs
and the pressure on prices caused
by keen competition.
The Spanish beer market again
showed a slight growth, despite the
weather not being as sunny as usu
al.
El Aguila S.A. was more or less
able to maintain its market share.
Sales of Heineken and Buckler con
tinued to develop well, but those of
Aguila and Adlerbrau were down
on their 1988 level. The range was
extended with the introduction of
Dry 100 and imported Guinness
Stout.
The transfer of distribution ac
tivities to third parties was suc
cessfully continued in 1989. In due
course this should bring down the
distribution costs. However, the
change-over led last year to even
higher costs which meant that El
Aguila's profits were still under
pressure.
Major investments were again
made in 1989 in expanding and
modernising the breweries in
Zaragossa, Cordoba, Valencia and
Madrid.
On the French market beer sales
also grew thanks to the outstanding
summer. Premium beers, low alco
hol beers and shandy benefited
most from this growth. Though the
results of our French operating
company Frangaise de Brasserie
S.A. showed an improvement, they
have still not reached a satisfactory
level. In part this was due to con
tinuing competition from cheap
beer brands. Frangaise de Brasserie
therefore had to incur higher selling
costs to defend market shares for
its brands. Heineken beer per
formed excellently. Last year Buck
ler was also introduced in the li
censed trade and its sales and mar
ket share developed favourably.
Good progress was made to
wards the rationalisation of pro
duction. Modernisation of the
breweries in Mons-en-Baroeul,
Schiltigheim and Marseille is pro
ceeding according to plan. Last
year a great deal of work was done
to minimise the consequences for
employees of the closure of the
Mutzig brewery. For the great ma
jority of the employees there a sat
isfactory solution has now been
found, partly thanks to the social
plan that was drawn up.
Beer consumption per head of
the population in the Netherlands
rose last year from 83.3 to 87.6
litres. This rise was mainly attribu
table to the lengthy spell of summer
weather. The growing interest
shown for low alcohol beers also
contributed to the increase in con
sumption. Because of a greater in
terest in speciality beers and im
ported beers, sales in the tradition
al 'pilsener' lager segment declined.
These shifts in the beer market
brought a slight squeeze on the
market share of Heineken Neder
land B.V. Margins were adversely
affected by higher selling costs and
fierce competition.
In view of the increasing market
segmentation it was decided last
year to acquire Koninklijke Brand
Bierbrouwerijen B.V. Basic condi
tions for the takeover were that
Brand's own identity and brands
strategy would be maintained.
Sales of Brand revealed further
growth last year, as did the beer
volume sold by Brouwerij De Rid
der B.V.
Slimming measures and stream
lining of the organisation were the
key elements of the reorganisation
plan for Heineken Nederland B.V.
announced in the second half of
last year. This restructuring opera
tion is aimed at improving flex
ibility and at reducing the cost base
so as to restore the company's com
petitive strength. Following the an
nouncement of this plan there was
a brief period of labour unrest.
Within a few days the company
reached agreement with the trade
unions on the conditions under
which the organisational changes
will have to take place.
The beer market in Italy again
revealed a slight decline. The less
friendly weather and the reduced
influx of tourists were the principal
reasons for the decline. The soft
drinks market grew further.
Birra Dreher maintained market
share, but its margins were
squeezed by fierce competitor ac
tivity, which meant that results
lagged behind.
The Italian beer market, too, is
characterised by increasing seg
mentation. Dreher's McFarland
brand profited from that growing
interest. The sales level of
Heineken beer was maintained.
Amstel 1870 was introduced on the
islands of Sardinia and Sicily.
At the end of last year the out
dated brewhouse at the brewery in
Macomer (Sardinia) was closed
down. Because an excellent water
source was discovered in the
vicinity of the brewery, there are
plans for Macomer to continue its
activities as a bottling plant for
mineral water. A concession for ex
traction of the mineral water has
meanwhile been applied for. Fol
lowing the closedown of the Ma
comer brewery, capacity was ex
panded at the brewery in Cagliari
(also on Sardinia) with the comple
tion of a new brewhouse and ex
pansion of the cellar capacity.
The declining sales of Henninger
beer, which is produced under li
cence, meant that the closure had
to be announced of the bottling
plant in Catania. This decision led
to social unrest at the end of last
year.
Despite less favourable weather
the Greek beer market showed an
increase. Our operating company
Athenian Brewery S.A. upped its
sales of locally brewed Amstel beer
in line with the growth in the total
market. The position of Heineken
beer was substantially strength
ened. Sales of Amstel Bock Beer,
launched at the end of 1988, were
ahead of expectations.
At the breweries in Athens, The
ssaloniki and Patras the ongoing
modernisation and expansion pro
gramme was continued. Produc
tion of Löwenbrau on a contract
basis was terminated, making more
brewing capacity available for our
own brands.