Papa Brau, mama Union
The differences are the same
Polska success
THE WORLD OF HEINEKEN
the portfolio and the Heineken brand - has taken on this massive market
and is enjoying the fruits of their labor. The rest of the CEE region is
operated by BRAU UNION.
When Austria's BBAG was acquired by Heineken in 2003, its long
standing regional experience and strong local relationships made it the
perfect organisation to become Heineken's Regional Management Centre in
Central Europe and the caretaker/representative of Heineken assets in the
region.
Based at offices in Vienna and Linz. BRAU UNION had grown from five
breweries that amalgamated in 1921 to become the biggest brewing group
in Central Europe and market leader in six markets: Poland, Austria,
Romania, Slovakia, Bulgaria and Macedonia. In Hungary, Croatia and the
Czech Republic, BRAU UNION has a strategic regional leadership position.
The marriage brought together the combined know-how of Heineken,
with its track record of international brand support and global position,
and BRAU UNION'S regional leadership and brand portfolio with its
proximity to customers in the region and understanding of their attitudes
and habits. These, plus the combined tools and processes from both
companies, are already reaping rewards.
The integration of the operations, which started in October 2003, is
proceeding according to plan and yielding the forecast synergy gains: In
2004 26 million were realized and it is expected that 80 million
synergies will be reaped before the end of 2007. In 2005 BRAU UNION will
be halfway towards the 80 million before taxes, which is 60 million cost
and 20 million revenue. This has combined with consistent brand
management to improve the EBIT for the region by approximately 6%.
Today, Brau Union's 28 breweries and 15,000 employees produce
approximately 27 million hectolitres of beer, i.e. 24% of the total sales
volume of the Heineken group.
BRAU UNION benefits from EU enlargement in countries such as Poland,
Hungary, Slovakia and the Czech Republic. The rise of the purchasing
power in these countries also influences the demand for high quality
products. Alongside Heineken as the flagship brand, BRAU UNION'S
portfolio incorporates international brands such as Gösser, Zipfer, Amstel,
Edelweiss, Murphys, Desperados and Schlossgold.
Despite their similarities, the countries of the Wild East show significant
differences in disposable income and market maturity. "In Poland, for
example, where people are gradually earning more, they are keen to show
their internationalism, the fact that they can afford to buy premium beers,"
says Susanne Weichselbaum, head of communications at BRAU UNION.
"Romania has a bright, educated population yet little money to spend, so
there we also produce beer - still good quality, but more affordable, in
large PET bottles."
"The countries have a lot of autonomy, but it is important for them to
coordinate their strategies and be sure of good exchange of best
practices," says Weichselbaum. "We (BRAU UNION Office) also work as
consultants to the countries. For example when a brewery has to be closed
down we can support them in managing difficult processes like this."
Weichselbaum points out that there is "a really strong network in each
country to coordinate, help and make sure we are all pursuing the same
targets and right strategies. We are responsible for synergies, so we have
to have a big view of how all the markets are operating."
Countries in line for EU membership, such as Romania, are also seeing
some benefits. "Candidate status means you get support for lining up the
legislation, infrastructure, administration and so on to the EU standards;
this is very important," says Ana-Maria Muresan of BRAU UNION Romania.
"It also means access to resources that the country itself would not have
alone, and is recognition that the economy is heading in the right direction,
which indirectly creates trust from various other investors."
Poland is a good example of how Heineken is pursuing its CE strategy. After
two acquisitions, Heineken created Grupa Zywiec in 1999 with majority
control of all breweries. It was a good building block acquisition, and
quickly established volume position in the marketplace. Nevertheless, the
group required significant restructuring - there were multiple brewing
sites, duplicated sales organisation, a highly fragmented and regionalised
portfolio of 20 brands.
Grupa Zywiec integrated 4 sales forces into 2 organisations and
implemented a consumer-focused strategy to rationalise its portfolio. The
strategy nationalised key brands (Zywiec, Warka and Tatra), while
aggressively rationalising the brand portfolio, created an international
premium segment with Heineken, built strong line extensions to dominate
the high alcohol segment, and seeded new brands to cover emerging
consumer trends (Paulaner, Desperados, Freeq).
The development of Grupa Zywiec in 2004 was supported by substantial
investments in quality, employee training, technology and the group's own
distribution network, Zywiec Trade Holding. One of the main investments of
last year was the construction of the brewhouse in Warka (including
Europe's largest brewing vat of over 13 metres in diameter), which doubled
the brewery's annual production capacity to 3.5 million hectolitres of beer.
Cost cutting, mainly in the form of constant optimisation of production
capacity and further reductions in production costs (down 30% per
hectolitres), significant streamlining (four breweries were closed and a fifth
sold between 2001 and 2004) and operational efficiencies were achieved.
Heineken built a diverse brand portfolio covering all market segments,
which resulted in significant volume growth for Grupa Zywiec from 8.6
million hectolitres in 1999 to 10.3 million in 2004, growing market share to
36% and increasing profits.
A solid IT framework was introduced with a common SAP platform
across all breweries that, for example, allowed data mining and greater
organisational transparency, leaving Grupa Zywiec poised for grater value
creation in the future.
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