The Netherlands: Heineken outlines plan for future growth

Dutch brewer Heineken outlined a five-point plan for profit growth to help offset sluggish western European beer markets and the effects of a weak dollar, Reuters announced June 09.

The world's fourth-largest brewer highlighted that it aimed to improve performance in its most profitable market, the United States, and in its biggest market by volume, Russia, where its long-term aim is to grab a 20 per cent share.

Heineken Chief Financial Officer Rene Hooft Graafland said the plan included expanding its eponymous beer brand, raising the level of innovation, launching its premium light beer in the United States, increasing its Russian presence and cutting costs.

"We are absolutely confident we are on track to reach these targets. If we focus on these five things, you will see a different company in three years' time," he told Reuters in an interview during a group investor conference in Spain.

Graafland admitted Heineken's growth in sales, margins and underlying profits had slowed over the last three years.

He also said the appointment of Chief Executive Jean-Francois van Boxmeer last October had brought a new sense of urgency to speed up growth and cut costs. The brewer is already the world's most profitable in terms of profit per hectolitre of beer, he said.

The Amsterdam-based company, which is controlled by the Heineken family, said nearly two-thirds of its profits come from sluggish mature beer markets in Western Europe and the United States.

Graafland said extra money was going behind the Heineken brand, because any growth in mature markets was coming from premium brands. The Heineken brand, although only 20 per cent of group volumes, accounts for some 40 per cent of profit.

Innovation is also been being stepped up, with its take-home DraughtKegs of beer, new packaging and new products such as zero-alcohol Moretti beer in Italy, he added.

In the US market, which accounted for 12 per cent of group profits last year and where "light" beers take a 50 percent share, the company is spending $US50 million behind the launch of its Heineken Premium Light.

In Russia, the brewer has expanded rapidly by making eight acquisitions since buying Bravo in 2002, culminating in last year's purchase of Ivan Taranov. That deal put it into third place in the world's fifth-largest beer market and one of the fastest growing.

Ochakovo is the last big Russian independent brewer still up for grabs in Russia after Turkey's Efes Breweries International snapped up Krasny Vostok in January.

"We need to be number 1 or number 2, or a strong number 3. Our 14 per cent market share is a good base for further growth. For the longer term, we have to have at least 20 percent," Graafland said.

The brewer now ranks behind Baltic Beverages Holding, which is jointly owned by Carlsberg and Scottish & Newcastle and has a 34.9 per cent market share, and Belgium-based InBev with 19.4 per cent.

Heineken is focused on restructuring its Russian operations, which include 10 breweries, and Graafland did not rule out future brewery closures. While its sites are spread across the world's biggest country, it does have two in St Petersburg.

The Russian restructuring is part of a larger group effort.

In February, Heineken said it aimed to reach annual group savings of 200 million euros ($A346 million) by 2008, of which 135 million euros would be completely new covering head office, breweries, wholesale distribution and support functions and would probably mean job losses among its 65,000 worldwide workforce.

"We can not do this without losing people. Brewery closures will be a part but not a major part," Graafland added.

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