37
Economic and political environment
Environmental legislation
Changing consumer beverage trends
Risk Management
Regulatory changes related to alcohol
Introduction
Sustainability
Review
Other
Information
Financial
Statements
Report
of the
Supervisory
Board
Report
of the
Executive
Board
Recent developments
Authorities and regulators continue to introduce restrictive
measures on alcohol consumption and sales. Recent
examples are restrictions in marketing and labelling
requirements for specific markets. These measures can
have a negative impact on our business in the affected
markets.
What are we doing to manage this risk?
Responsible consumption is an important element of our
Brew a Better World 2030 strategy, because HEINEKEN
strongly believes in the importance of reducing alcohol-
related harm. By using the power and reach of our brands
through campaigns like the award-winning ‘When You
Drive Never Drink’, HEINEKEN strives to make responsible
consumption aspirational for all consumers. We aim to
invest at least 10% of Heineken® media spend into
responsible consumption campaigns each year, aiming to
reach one billion consumers.
Explore further: Brew a Better World 2030
Strategy - Responsible, pages 166-168
Explore further: Fund the growth, fuel the profit,
pages 16-17
What are we doing to manage this risk?
Environmental sustainability is one of the priorities of
HEINEKEN’s Brew a Better World sustainable development
strategy. HEINEKEN continuously monitors existing and
emerging environmental issues and regulations across the
globe to ensure awareness and compliance and to prepare
the business for future changes. Current and future
environmental regulations are being assessed and cross
functional teams assigned to implement the actions
needed.
Beyond this, HEINEKEN closely works with experts such as
NGOs, universities, governments and suppliers across the
value chain. It also co-operates with peer companies in
international and national platforms such as The Brewers
of Europe, the Beverage Industry Environmental
Roundtable and the Dutch Sustainable Growth Coalition.
Explore further: Brew a Better World 2030
Strategy - Environmental, pages 147-158
What are we doing to manage this risk?
The evolving beverage landscape presents both
opportunities and risks for HEINEKEN. To succeed,
HEINEKEN needs to focus on brand building,
premiumisation, differentiation from other beverage
categories, and adapting to changing consumer
preferences and behaviours. The key commercial levers
that are considered priorities for every market are: brand
power increase for strategic and game changer brands,
innovation boost in beer including low- and no-alcohol and
beyond beer, maximisation of distribution and value
creation through smart pricing, promotions, pack/price
architecture and trade terms.
HEINEKEN is constantly working to maintain, develop and
strengthen its portfolio and competitive advantages, in
particular, in Premium spaces, through an integrated Brand
Building Process, making it more appealing to consumers.
HEINEKEN has also embarked on an extensive Consumer
Inspired Growth programme, helping us move from
knowing beer to knowing consumers. By thoroughly
understanding consumer needs in beer and beyond and
comparing them within and across markets, we can
uncover scalable innovation opportunities.
Explore further: Shape the future of beer and
beyond, pages 11-15. Brew a Better World 2030
Strategy - Responsible, pages 166-168
Heineken
N.V.
Annual
Report
2023
What could happen?
The topic of alcohol and health is under scrutiny in many
markets. This may prompt regulators to take further
measures limiting HEINEKEN’s freedom to operate, for
example, through restrictions or bans on advertising and
marketing, sponsorship, availability of products, adding
health warnings to labels, increased taxes and duties or
imposing minimum unit pricing. This could lead to lower
overall consumption or to consumers switching to different
product categories.
What are we doing to manage this risk?
HEINEKEN has set up various tools to limit the impact of
such events on its business. They include supplier
management, short-term liquidity management, tight
foreign exchange monitoring, prudent balance sheet
measures and scenario planning in respect to resource
allocation including various cost and value optimisation
initiatives and risks and opportunity assessments. We
shifted to the practise of a monthly rolling forecast instead
of fixed forecasts updates throughout the year and
expressly introduced much more scenario planning.
HEINEKEN has monitoring mechanisms in place globally
and locally to allow us to monitor, report and engage
proactively on political risks. For events which could
threaten the continuity of the business, contingency plans
are in place. With our strategic priority of ‘Fund the growth,
fuel the profit’, HEINEKEN continuously reviews its cost
base to drive productivity and increase operating leverage.
What could happen?
HEINEKEN could not be able to respond to the impact of
environment-related changes on our operations in a timely
manner. If new environmental legislation is introduced,
this could lead to legal claims, increased compliance costs,
restrictions on production, packaging, distribution, selling
and marketing of our products, reputation damage, and
limits on our licence to operate resulting in negative
business impact.
Recent developments
The beverage landscape is rapidly changing, with many
categories growing faster than beer. There's a significant
risk of losing market share to other beverages, as long-held
boundaries between beer, wine, spirits and non-alcoholic
beverages are blurring, changing the face of competition
and stretching brands into new domains.
Within the beer category, the rise of low- and no-alcohol
products have been the most noticeable changes due to
an increased consumer focus on health and well-being.
Beyond beer, the significant diversification of choice in
ready to drink beverages is remarkable but volatile. Thus, it
is crucial to offer relevant propositions that resonate with
consumers and meet their evolving needs.
What could happen?
Consumers have an ever-expanding choice of beverages
and brands available to meet their needs. There is an
increasing risk of non-beer competitors reaching the same
consumers and occasions as beer players, through product
offerings such as hard seltzers and pre-mix spirits cocktails.
This requires HEINEKEN to constantly adapt its product
offering, innovate and invest to maintain the relevance
and strength of its brands, while meeting new and evolving
consumer needs. Failure to do so would, in the longer term,
affect our revenues, market share and, possibly, our brand
equity.
We also work closely with stakeholders to prevent and
reduce the harm caused by abuse such as underage
drinking or drinking and driving. Our operating companies
are engaging in formal partnerships with local stakeholders
(like governments, NGOs or specialists) to tackle harmful
drinking.
We also stepped up our product labelling guidelines to
provide consumers with more information about our
products. We are aiming for clear and transparent
consumer information on 100% of our products in scope,
including full nutritional information and ingredients on
pack, recycling and legal drinking age symbols and a QR
code on pack that links to further information on alcohol
and health.
What could happen?
Throughout the world, local or regional economic and
political uncertainties could impact our business and that
of our customers. In particular, the risk of an economic
recession, change of law, trade restrictions, inflation,
fluctuations in exchange rates, devaluation,
nationalisation, financial crisis or social unrest could
adversely affect our revenues and profits.
Recent developments
Speed and scope of environment-related changes on our
operations are increasing. Markets need to be prepared to
respond and adapt to these changes in a timely manner to
prevent restrictions in all areas of the value chain and
significant costs to ensure compliance.
Recent developments
The global economy could trend to a slow down due to an
uncertain political landscape impacted by the war in
Ukraine and conflicts in Africa and Middle East; at the
same time, high inflation and higher interest rates have led
to a tightening of monetary policy. This could lead to more
structural shifts and lead to a prolonged recession of the
global economy, with governments tighter monetary
policies weigh on real disposable income and
consumption. This could increase the risk of bankruptcies
and the potential failure of certain sectors to recover. As a
consequence, structural unemployment - especially for
youth - is likely to surge with knock-on effects on consumer
demand. Public debt, the disruption of global value chains
and barriers to the cross-border movement of people and
goods round out the key risks.
Agility has become a priority to enable businesses to
navigate subsequent changes in laws, currency
movements, import restrictions, scarcity of hard currencies,
commodity pricing and their impact on the Company’s
profit.
