HeinekenMGT 490Sean Maines

About HeinekenOne of the leading beer brands for 140+ yearsHeadquartered in Amsterdam#1 beer in Europe#2 imported beer in USA125 breweries in over 70 countriesPremier brands - Heineken, Amstel, Newcastle

Financial Snapshot 2010

*in millions (EUR)

20092010Change in %Revenue14,70116,1339.7%EBIT1,7572,47640.9%Net Profit1,0181,43641.1%Total Assets20,18026,54931.6%Free Operating Cash Flow1,7411,99314.5%Employees55,30165,73019.6%

Since 2006EBIT

Consolidated Beer Volume

Net ProfitIn millions of EurosIn millions of EurosIn millions of hectoliters

Beverage Life Cycle

PEST ANALYSIS

FACTORTRENDEVALUATIONIMPACTRANKPOLITICAL- Government excises alcohol because it is addictive - Heavy taxes on emerging beer markets- Threat

- Threat- 2

- 34ECONOMICAL- Currency fluctuation with Euros- Raised costs of grain, glass, aluminum- Higher advertising costs- Raised unemployment around the globe- Threat- Threat- Threat- Threat- 2- 4- 3- 43

Political

Government has a negative view on alcohol due to the negative social and health consequencesAll governments have higher taxes on emerging beer markets while exporting alcohol

EconomicUnemployment around the world is rising Money for leisure spending will decrease for everyone globally

PEST ANALYSIS

FACTORTRENDEVALUATIONIMPACTRANKSOCIO-CULTURAL- Women are drinking beer more- More fast paced lifestyles- USA more health conscious - Decrease in college student drinking- Opportunity- Threat- Opp/Threat- Threat- 4- 3- 5- 21TECHNOLOGICAL- Increased information technology- Opportunity-42

Socio-culturalBeer isnt just for men anymore. More and more women are enjoying beer for the tasteThe new lifestyle of the newest generation is face paced. This leads to less time to drink beer; at home or at a bar. The growing population in China leads to more leisure time for people to drink.The more health conscious America becomes leads to less drinking.

TechnologicalEvery business uses some type of technology.With Heineken increasing their technology, it becomes easier for them to communicate with all aspects of their worldwide operation.Makes penetrating new markets easier

Industry OverviewContributes $223.8 B/yr. to US economyBeer industry predicted to increase steadily Every brewers goal- to grow globallyVery concentrated industry

Michael PorterFive Forces of Power

Supplier PowerSuppliers for ingredients are mainly farmers. Threat for supplier power is very highMakers of green glass bottle is Heye Glass NetherlandHad 33% stake in the pastSince 2002, they have kept 100% stake

Buyer PowerA buyer has many different options on where to buy beerA buyer also has many different options on what beer they want to drinkThreat for buyer power is very high

Competitive RivalryThe Top US Breweries include:Anheuser-Busch, MillerCoors, Pabst, Boston BeerThe Top International Competition include:Anheuser-Busch, Carlsberg, SABMillerBeer industry is very saturatedNo evidence of price rivalryProduct differentiation is very important

Threat of SubstitutionThreat of substitution is very highPeople have many different tastes and preferences Some aggressive mergers could help Heineken develop new products under their core brand

Threat of New EntryRecent explosion of craft breweries in last decadeMaking industry very competitiveThreat of new entry is very highHeineken must focus on uniqueness and innovations to keep a competitive advantage

Five Forces Summary

FORCEDRIVERSEFFECT OF PROFITSSUPPLIER POWERSmall suppliers, high power-BUYER POWERHigh distributing power. Many choices-COMPETITIVE RIVALRYHighly concentrated, Big Four0THREAT OF SUBSTITUTIONSGrowing substitutes, low switching costs-THREAT OF NEW ENTRYIncrease in craft breweries, Need more innovations-

Blue Ocean Strategy?Penetrating RussiaBiggest untapped beer marketGrowing economy (7-8% annually)Growing market for alcoholPremium beer is 50% of beer market

ConclusionsHighly competitive and concentrated industryHeineken must focus on differentiation with the competitive environmentContinue to grow globally with increased technologiesMust develop new product innovations with rapid increase of craft breweries

competitionTop Breweries Worldwide by Volume

1. AB InBev2. SABMiller3. Heineken4. Carlsburg5. Tsingtao6. Molson Coors7. Grupo Modelo8. Beijing Yanjing9. Kirin10. Asahi Breweries

Competition by Region (%)Fastest predicted drink rates regions- Asia Pacific and Africa

AB InBevSABMillerHeinekenNorth America32.4%14%21%Latin America38.6%31%-Western Europe8%-47%Central/Eastern Europe6.7%19%19%Asia Pacific14.3%2%1%Africa-34%12%

Strategic mapBUDMILLERHENSAMCOORSSpecializationHIGHLOWBranding EffectsHIGHLOWCORONA

competition

BeerAdjunct% alcoholCaloriesLoyaltyPriceTarget MarketRice4.2%110Very HighMedium- Beer drinkers of all agesMiller LiteCorn Starch4.2%96MediumMedium- Men in mid 20s- Health consciousRice4.15%104MediumMedium- Heavy focus on what men likeHeinekenPurest Water5%150LowHigh- Young males- AffluentCoronaRice4.8%148LowHigh-Vacationers- Mexican decent

import competition

Losing Import Market Share2.25 gallon cases

Brand Supplier20052006% changeCoronaGrupo Modelo96,10597,9301.9HeinekenHeineken USA62,50063,1251.0Labatt BlueInBev15,07514,192-5.9

Competitor Analysis

Strategy- - Volume growth through brand development- Enjoy the moment campaign- Grow their sponsorship portfolioAssumptions-- Heavy sales in warmer regions- Seasonal sales drop- Growing popularity of light beverages Objectives-- Maximize potential in high-growth markets- Penetrate Canada and other colder climate marketsResources- - Strong brand image- Good relationship with distributors- Financially healthy

one of the best selling beers in Mexico and one of the top selling beers worldwide. The top selling import beer in the United States

Types of rivalryPrice-basedNo evidence of price wars in industryNon price-basedCompete with product innovationsEx- Bud Light Lime vs. Miller ChillProduct Differentiation Ways each company brews their beer

bud lightFuture strategic plansStay undisputed market leaderSteal loyal drinkers from other companiesTake tag lines out of campaignsOnly for loyal customers

Miller LiteFuture strategic plansTake market share from InBevNew strategy plan against Bud LightBetter tasting beer campaign New multi-addition hoppy process

Coors lightFuture strategic plansWhat guys like campaignLess focus on TV campaignsMore broad adversing fieldsMore sponsorship in sports

CoronaFuture strategic plansStrong penetration into FacebookGoing after Canada beer drinkersIncrease sales in all seasonsSaturated summer

Who is drinking?- one drink/week

who is drinking?AgeOccupationIncome

Where people are drinkingPremium beer drinkers go to bars lessDomestic beer drinkers go to bars more

Growing rateAccording to Global Beer Trends Report:Global beer consumption will increase to 2 billion hL by 2013Global average growth by country is 2.8% per year from 2011 and 2015Predicting very strong changes in country consumption trends

Global drinking trendsBetween years 2011 and 2015

Beer trendsTrends towards increased:Craft beersMalt beveragesWineLow calorie beers

beer trendsHuge growth in MicrobreweriesMore appreciation for craft beersHurting sales of major brewersMore attention to detail and ingredients

Social Media InfluencesBudweiser steps out of there comfort zone with social media advertising.Big Brother meets FIFA World Cup with BUDHOUSE, a reality TV show with 32 soccer fansAlso added a Facebook application where fans can paint their face with flag of favorite teamWith social media, Budweiser can increase there branding with people across the world.

social media influencesMiller realized that mobile devices has become a part of everyones everyday life.Take approach towards active, low-calorie life style MGD 64 promotesUsers can compete with friends and take progress on Facebook application.

ReflectionEvery top beer company world-wide has a goal of:Overcoming their competitionSustaining global growthFocusing on markets not yet reached Strengthening their global position anyway possibleCompanies need to make changes due to:Shift in global beer marketsTrends in alcohol useIncrease of social media advertising

Heineken - OverviewCorporate Overview

Corporate HeadquartersAmsterdam, The NetherlandsCEOJean-Francois van Boxmeer# of Employees world-wide57,557Developing RegionsLatin America, Asia, AfricaRevenue - 2010$16,133,000Net Profit - 2010$1,436,000Key BrandsHeineken, Newcastle, Strongbow, AmstelGeographical Revenue - 2010Western Europe- 48.9%Americas- 21.2%Central/Eastern Europe- 19.4%Geographical Assets - 2010Western Europe - 38.2%Americas - 32.0%Central/Eastern Europe- 17.7%

Key Figures 2006-2010In mill euros- Heineken was hit by the 2008 recession, but was able to weather it better than its competitors due to its premium brands.

20102009200820072006Revenue16,13314,70114,31911,24510,829Net Profit1,4361,0182098071,211

Geographical SplitIn mill eurosThe Africa/Middle East Region is the only region not to have a decline in revenue during the 5-year period.

REVENUES20102009200820072006Western Europe7,8948,4327,6615,4505,351Eastern/Central Europe3,1433,2003,6873,2263,359Africa/Middle East1,9881,8171,7741,3111,182Americas3,4311,5411,5661,6081,975Asia Pacific206305279245560Head Office/Eliminations-529-594-648-595-598Totals1613314701143191124511829

The Global PictureRevenue - Euros (mil)

RegionFull Yr 2010Full Yr 2009% ChangeWestern Europe$7894$8432-6.4%Central/Eastern Europe$3143$3200-1.8%Africa/Middle East$1988$1817+9.4%Americas$3431$1541+123%Asia Pacific$206$305-32%

Business Model

Growth StrategyRole in SocietyPerformanceConsumer SegmentSustainability- Marketing excellence- Key innovations- Focusing on the changes of consumer needs- Making aggressive investments to yield huge returns- Social Responsibility in every region they operate-Heavy training with employees on alcohol abuse- Being the Worlds Greenest Brewer- Sustain a broad successful brand portfolio (acquisitions)- Strengthen position in all regions of worlds premium beer- Focus on American and Central/Eastern Europe regions with poor economic conditions- More focus on a younger market as a growth strategy - Acquisition spree in order to find beers that appeal to the younger drinker- Decrease in television ads because it is ineffective to successful 18-26 year old males- Brewing a Better Future plan- Making a 10-year plan to create a valuable future- Creates innovative ideas and new products and services

Mission - SustainabilityTo Brew a Better FutureBecome the GREENEST international brewer in the worldContinuously IMPROVE the environmental impact of our brands and businessEMPOWER our people and the communities in which we operatePositively IMPACT the role of beer in our society

Brewing a Better FutureHeinekens 10-year Plan

Three Core ValuesPassion for QualityResponsible Enjoyment of the BrandRespect for the People, the Environment and the Society we work in

BCG Matrix

SWOT ANALYSIS

STRENGTHSWEAKNESSES1. Has brands in over 13 markets world-wide2. Global pioneer of international strategy3. Strong brand recognition4. Different dispensing instruments1. Play it safe culture2. Not drank by younger beer drinkers3. Price versus top domestic beers in USOPPORTUNITIESTHREATS1. Low-calorie beer that helps healthier lifestyles2. Growing populations in Russia/Asia3. Growing hispanic culture in US4. Premium beer market expected to grow 84% by 20121. Increasing laws against DUIs2. Competitors are increasing in US market share3. Older brand lacking excitement4. All brewers are trying to increase global presence 5. Rising costs of commodities - aluminum and glass

Value Chain AnalysisPrimary ActivitiesInbound LogisticsHeineken is distributed globally, with warehouses strategically placed throughout to minimize shipping costs.OperationsHeineken was limited to buying smaller breweries but bought BBAG in 2003, making it the largest beer maker in 7 countries across Europe- Materials handling and Inventory control- Assembly and Packaging

Value Chain AnalysisPrimary ActivitiesOutbound LogisticsHeineken has brewers throughout the world so they can ship their finished product to local areas to minimize shipping costsMarketing and SalesHeineken is the 5th most recognizable beer brand in the world. By steadily buying smaller breweries they can spread their name even more.- Order processing and Deliveries- Advertising, Sales promotions, and pricing

Value Chain AnalysisPrimary ActivitiesServiceHeineken has ventured out to the field of non-alcoholic beverages to service a different type of consumer- Repairs in Warehouses and Training of employees

Value Chain AnalysisSecondary ActivitiesGeneral AdministrationHeineken has been the top import premium beer in the USA until Corona took over. So, Heineken pushed on its different brands to put less stress on its core brand. Human Resource ManagementHeineken created more management positions in all five operating regions. This lead to more risk taking and boosted the level of energy within the company.- Most popular import light beer in USA - Amstel Light- Increased recruiting, training, and developing personnelTechnology DevelopmentHeineken increased technology to keep more detailed documents of deliveries to keep shipping more efficient. - Product and Process development

Heineken Strategic ChoiceHeinekens strategy of Broad Differentiation has helped them be the largest premium beer in the world. The beer has a unique brewing process and they have been able to gain new products with increasing mergers and acquisitions.

Heineken Grand Strategy

Heineken Grand Strategy

FactorProduct DevelopmentDeveloping new innovations in the beer industry will make Heineken stand out from the US domestic brewers.Market DevelopmentExpand marketing to emerging market such as Asia, Middle East, Russia, and Africa. This will allow them to penetrate these markets first.Market PenetrationFocus on the marketing of Stars and Question Mark brands in developing regionsBackwards IntegrationInvest in more distribution channels to lower the shipping costsFrontwards IntegrationThis will allow: getting closer to the customer, increase the involvement in the value chain, and increase the product offeringsConcentric DiversificationTake on a technology to help enter markets not penetrated yet. It would be useful to start with core brands first, such as Heineken, Amstel, Strongbow

ConclusionsHeineken has a very strong brandNeed to continue to market core brands while penetrating emerging regionsHeineken should continue to focus on strengths while taking advantage of opportunities that are presentStrong focus on sustainability will be key to continue to be the global leader in premium beer