Reference no: EM132240473

1. How would you characterize the pressures for customization and global integration in Heineken's industry?
2. What international strategy (International, Global, Multi-domestic, Transnational) does Heineken follow in the global beer market?

Case

HEINEKEN*

Dutch brewer Heineken was expanding its presence around the globe in response to the merger of Anheuser-Busch InBev with SAB Miller giving the combined firm a commanding 30 percent of global beer sales. Heineken was in talks to buy the Brazilian unit of Kirin, which the Japanese parent was planning to sell. The addition of Kirin beer would double Heineken's share in Brazil to 20 percent. The firm was also planning to launch Bintang, its biggest selling beer brand in Indonesia, into the UK and select European markets. An industry spokesman was positive about the move: "There is clearly significant demand for premium world beers. We believe Bintang is perfectly suited to meet this demand."¹

These moves came on the heels of acquisitions and capacity investments that Heineken had been making in other developing markets. In 2013, the firm had strengthened its position as the world's third largest brewer by taking full ownership of Asian Pacific Breweries, the owner of Tiger, Bintang, and other popular Asian beer brands. With this deal, Heineken added 30 breweries across several countries in the Asia Pacific region. A few years earlier, the firm had acquired Mexican brewer FEMSA Cervesa, producer of Dos Equis, Sol, and Tecate beers, to become a stronger, more competitive player in Latin America.

At the same time, Heineken maintained its leading position across Europe. It had made a high profile acquisition in 2008 of Scottish-based brewer Scottish & Newcastle, the brewer of well-known brands such as Newcastle Brown Ale and Kronenbourg 1664. Although the purchase had been made in partnership with Carlsberg, Heineken was able to gain control of Scottish & Newcastle's operations in several crucial European markets such as the United Kingdom, Ireland, Portugal, Finland, and Belgium.

These decisions to acquire brewers that operate in different parts of the world have been a part of a series of changes that the Dutch brewer has been making to raise its stature in the various markets and to respond to growing consolidation within the industry and changes that are occurring in the global market for beer. Even as sales of beer have stagnated in the U.S. and Europe, demand has been growing elsewhere, especially in developing countries. This has led the largest brewers to expand across the globe through acquisitions of smaller regional and national players.

Van Boxmeer is well aware of the need for Heineken to use its brands to build upon its existing stature across global markets. Yet in spite of its formidable presence in markets 

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around the world with its flagship Heineken brand, the firm has been reluctant to match the recent moves of formidable competitors such as Belgium's InBev and UK's SABMiller, which have grown significantly through mega-acquisitions.

For many years, Heineken limited itself to snapping up small national brewers such as Italy's Moretti and Spain's Cruzcampo that have provided it with small, but profitable avenues for growth. In 1996, Heineken acquired Fischer, a small French brewer, whose Desperados brand has been quite successful in niche markets. Similarly, Paulaner, a wheat beer that the firm picked up in Germany a few years ago, has been making inroads into the U.S. market.

But as other brewers reached out to make acquisitions all over the globe, Heineken risked falling behind its more aggressive rivals. To deal with this growing challenge, the firm broke out of its play-it-safe corporate culture to make a few big deals. In 2003, Heineken spent $2.1 billion to acquire BBAG, a family-owned company based in Linz, Austria. Because of BBAG's extensive presence in Central Europe, Heineken has become the biggest beer maker in seven countries across Eastern Europe. The acquisition of Scottish & Newcastle in 2008 similarly reinforced the firm's dominance in Western Europe.

Heineken's acquisitions in Ethiopia, Singapore, and Mexico have allowed it to build its position in these growing markets. The firm has made an aggressive push into Russia with the acquisition of mid-sized brewing concerns. Through several acquisitions since 2002, Russia has become one of Heineken's largest markets by volume. Heineken now ranks as the third-largest brewer in Russia, behind Sweden's Baltic Beverages Holding and InBev. The firm has also pounced on brewers in far-flung places like Belarus, Panama, Egypt, and Kazakhstan. In Egypt, Ruys bought a majority stake in Al Ahram Beverages Co. and has been using the Cairo-based brewer's fruit-flavored, nonalcoholic malts as an avenue into other Muslim countries. Rene Hooft Graafland, the company's Chief Financial Officer, has stated that Heineken will continue to participate in the consolidation of the $460 billion global retail beer industry by targeting many different markets around the world.

Maintaining a Premium Position

For decades, Heineken was able to rely on the success of its flagship Heineken brand, which enjoyed a leading position among premium beers in many markets around the world. It was the best-selling imported beer in the U.S. for several decades, giving it a steady source of revenues and profits from the world's biggest market. But by the late 1990s, Heineken had lost its 65-year-old leadership among imported beers in the U.S. to Grupo Modelo's Corona. The Mexican beer appeals to a certain segment of younger American beer drinkers, and more importantly, to the growing number of Hispanic Americans who represent one of the fastest growing segments of beer drinkers in the U.S.

The firm was concerned that Heineken was perceived as a stodgy or even an obsolete brand by many young drinkers. John A. Quelch, a professor at Harvard Business School who has studied the beer industry, said of Heineken: "It's in danger of becoming a tired, reliable, but unexciting brand."⁵ The firm has therefore worked hard to increase awareness of their flagship brand among younger drinkers. Heineken also introduced a light beer, Heineken Premium Light, to target the growing market for such beers in the U.S. The firm has managed to reduce the average age of the Heineken drinker from about 40 years old to about 30 years old.