24
Risk Management (continued)
Strategic risks (continued)
Changing consumer preferences
What could happen
Recent developments
Management capabilities
Recent developments
Industry consolidation
Recent developments
Heineken NV.
Report of the
Report of the
Financial
Sustainability
Other
Annual Report 2016
Introduction
Executive Board
Supervisory Board
Statements
Review
Information
Consumers' preferences and behaviours are
evolving, shaping an increasingly complex
and fragmented beer category. This requires
HEINEKEN to constantly adapt its product
offering, innovate and invest to maintain
the relevance and strength of its brands.
Failure to do so would in the longer term affect
our revenues and profit as well as market share
and possible loss of brand equity.
What are we doing to manage this risk
Over the past years, HEINEKEN has further
strengthened its commercial organisation,
its innovation programme and its marketing
and sales capabilities. Significant investments
have been made in consumer and market
intelligence, new products and formats (both
through innovation and through acquisitions)
and in brand protection to anticipate and
respond to industry changes.
The increasing popularity of craft beer has
been the most noticeable change in consumer
tastes over the past years, and has been fully
embraced by HEINEKEN, as shown by the
partnership with Lagunitas and the addition
to its craft portfolio with several specialty
beers. Changes in consumer perceptions in
relation to alcoholic beverages however, are
more gradual but could gain further traction
on the back of negative publicity related
to increased health risks.
What could happen
HEINEKEN relies on the skills of its people
to lead its growth agenda and strategic
change programmes. HEINEKEN may not
be successful in attracting, developing and
retaining talented staff with the required
capabilities, which may jeopardise its capacity
to execute its strategy and achieve the
targeted returns.
What are we doing to manage this risk
In order to secure a strong management
talent pipeline, HEINEKEN has redesigned
its appraisal and evaluation processes,
as well as the range of management
development programmes and initiatives.
Management capabilities and succession
planning have been enhanced by the
implementation of functional resource
committees and a renewed People
Strategy, supported by a global people
management platform.
Hiring employees with particular expertise
remains challenging, both in emerging
markets due to competition between
multinationals, and in developed markets
where traditional industries face competition
from new economy employers. As an answer,
HEINEKEN has launched in 2016 its first ever
global employer brand campaign, targeting
especially the young and diverse audience it
needs to fuel its talent pipeline.
What could happen
Consolidation of the alcoholic beverage
industry has accelerated in 2016 and may
affect existing market dynamics in the
future due to competitive disadvantage
with suppliers and increased competition
on commercial spend and customer
acquisition strategies.
What are we doing to manage this risk
HEINEKEN is constantly working on improving
its cost efficiency, while rolling out its strategy
to maintain and develop its competitive
advantages, in particular in the premium
and cider markets. Through a number of
acquisitions, HEINEKEN has evolved its
footprint extensively to reach an optimal
balance of both higher growth developing
markets and more stable developed markets,
and to build an extensive and complementary
brand portfolio alongside its flagship
Heineken® brand.
Despite recent market consolidation, beer
remains a very local industry with respective
country shares more relevant than global
share. HEINEKEN remains committed
to winning through a portfolio strategy
focused on premium and led by Heineken®.
Within individual markets, international and
local brands complement Heineken® and
provide valuable scale.