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.

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Heineken International Magazine | 1990 | | pagina 2