Long term outlook
Summer 2007
Heineken owns and operates more than 115 breweries in over
65 countries, and the number continues to grow with each
passing year. The company's commitment to increasing its
global presence means not only strengthening the business in
countries where it already operates, but also venturing into
new, pioneer markets.
This continual international expansion is achieved both through purchasing
established brewing operations and by building new brewing facilities from
scratch. Currently, Heineken is constructing greenfield breweries in eight
markets around the globe.
"Strategic and selective acquisitions in key markets offer massive growth
potential for the business," says Pieter van der Meulen, Manager Supply
Chain Services. In Russia, Heineken has established a strong presence
following a flurry of brewery purchases in the 12 months between 2004 and
2005. The company's current operation consists of 10 breweries across the
Russian Federation. It now accounts for the company's largest beer market
in terms of volume.
"However, suitable operations aren't always available, and the ones that
are for sale may not offer strategic advantages," says Van der Meulen. "An
alternative is the development of greenfield breweries - building
operations from the ground up."
The decision to construct a greenfield brewery is based on a range of
factors; a market's forecasted growth potential in the long term, the
regulatory and logistical steps involved, as well as the perceived benefits of
local production versus a distribution contract. These are details which
must be factored in to any decision to embark on a greenfield project. The
central coordination unit for greenfield projects within Heineken is the GSC
Services department.
Illustrating this decision-making process is Heineken's joint-venture project
in Laos. Via its jointly owned business Asia Pacific Breweries (APB), a
greenfield brewery is currently in full construction 28 kilometres north of
the Laos capital of Vientiane. The country represents a relatively small beer
market totalling 900,000 hectolitres annually, and a per capita consumption
rate of only 15 litres. However, Laos has been registering steady rates of
growth over the past few yeas. Favourable economic conditions and an
ideal age demographic offer Heineken much potential for growth.
"Culturally, Laos is very similar to its geographical neighbour, Thailand,"
says Harry Heijlands, Project Manager for the Laos brewery project. "Using
the growth rates of the neighbouring Thai beer market as a rough guide,
we see growth potential for developing Laos. The new brewery is expected
to be operational by the end of this year.
It will have a capacity of 500,000 hectolitres per year. Following future
expansions, the ultimate figure will be one million hectolitres." Heineken,
PAGE 9
