22
Risk Management (continued)
Distribution
channel transformation
Changing consumer preferences
Management capabilities
Report of the
Report of the
Financial
Sustainability
Other
Introduction
Executive Board
Supervisory Board
Statements
Review
Information
Heineken N.V. Annual Report 2017
Strategic risks
What could happen
Maintaining strong relationships
with our customers is key for brand
positioning and availability to consumers.
Consolidation among our customers,
emergence of buying alliances and rise of
e-commerce distribution channels may
affect ourabilityto obtain favourable
pricing and favourable trade terms and
negatively impact our operating margin.
Recent developments
Retail consolidation and the rise of discounters
have been reshaping the beverage industry
distribution landscape. This has led HEINEKEN
to develop its e-commerce channel, both
B2B and B2C, and to develop a unique and
innovative sales approach to boost its on-trade
business, which has been being rolled out
across all four regions.
What are we doing to manage this risk
HEINEKEN constantly invests in its business
relationships and has developed joint business
plans with distributors and key retailers,
while enhancing sales performance through
commercial capabilities programmes,
customer relationship management at
central and local level, and development
of its e-commerce capabilities.
Explore Further:
- Del iver top l ine growth, page 10
-Europe, page 18
Strategic risks
What could happen
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. Failuretodosowould in the longer
term affect our revenuesmarket share and
possibly our brand equity
Recent developments
The popularity of craft beer and the rise of low-
and no-alcohol products have been the most
noticeable changes in consumertastes over
the past years. HEINEKEN has fully embraced
these trends, as shown by the acquisition of
Lagunitas, the addition of several specialty
beers to its craft portfolio and the launch of
Heineken® 0.0. to complement its low- and
no-alcohol category.
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.
Explore Further:
- Delivertop line growth, page 10
- Advocating responsible consumption, page 143
Strategic risks
What could happen
HEINEKEN relies on the skills of its people
to lead its growth agenda and deliver on
its strategic ambitions. HEINEKEN may not
be successful in attracting, developing and
retaining diverse and talented people and
leaders with the required capabilities, which
may jeopardise its capacity to execute its
strategy and achieve the targeted returns.
Recent developments
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. HEINEKEN continues to invest in its
global employer branding, targeting especially
the young and diverse audience it needs to fuel
itstalent pipeline.
What are we doing to manage this risk
To secure a strong leadership pipeline, HEINEKEN
has a robust performance management
processin place which is supported by a
leadership development curriculum with
targeted development interventionsforvarious
levels of leaders across the organisation.
Succession planning has been enhanced by
the implementation of Functional Resource
Committees and a renewed People Strategy
that is focused on talent and leadership
development and the responsibility of people
managers to nurture our leaders of the future.
Explore Further:
- Engage and develop our people, page 13
- Values and behaviours, page 147
