Heineken Purchasing Strategy Reduces Risk ililllS 'SÊmlifef World of Helneken 39 winter 2008/2009 Over the last few years we've seen a steep rise in the cost of the raw ingredients used in brewing, grain being one of them - this year alone, input costs for Heineken will increase by around 15% per hectolitre. Heineken has forward looking purchasing policies in place to reduce the impact of price fluctuations. "Heineken spreads the risk of barley purchases by buying around 50 per cent of its requirements pre-harvest, which allows us to agree on the price before the harvest, reducing our risk," explains Jürgen Mulder, Heineken's Category Manager for Barley and Malt. The practice of forward purchasing, known as hedging, has advantages beyond just lowering price risks. "We also hedge on quality. The farmers' co-operatives already know what Heineken needs in the quality chain. This starts at the seed, fertilizer and storage stages and allows us to agree in advance which varieties should be grown. For example, we are already planning on the varieties to be used in 2010," Jürgen says. "This year again, Heineken is actively involved in the selection of the optimum harvest", says Jürgen "Because we have a physical connection with the product, we now enter markets such as Spain, Romania, Ukraine or Russia and we are choosy about which quality grains we want to purchase." Another important aspect in Heineken's purchasing model is to buy locally produced grains whenever possible. "We are the only brewing company with a real global beer brand and we strive to have it tasting the same in each region," Jürgen explains. "We believe in local supply chains, and will buy grains from around the world if it's agronomically sound to do so. This helps employ local people and returns benefits to local suppliers." The fight for stabilisation is important not just for Heineken, but also for its suppliers and, ultimately, for the consumer. Raw material prices today have an influence felt tomorrow and beyond. "Our approach to purchasing helps us keep quality high while ensuring our end product is always competitively priced," says Jürgen. Juergen. Mulder&Heineken. com 34

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World of Heineken | 2008 | | pagina 36