Thinking outside the Box
Heineken’s long-term bartender has pulled his last pint. Jean-Francois van Boxmeer, the world’s second largest brewer’s chairman and chief executive for the last 15 years, leaves a reasonable legacy. That doesn’t mean his successor, insider Dolf van den Brink, won’t face a tricky first few sips in charge.
Van Boxmeer’s last annual results, unveiled on Wednesday, were decent enough. Organic net revenue growth of 5.6% trumped that of smaller peer Carlsberg and expected 2019 growth for market leader Anheuser-Busch InBev. And more broadly, his longer-term strategy of getting into more countries and flogging premium brews has largely paid off. Heineken is now sold in 192 countries and more than 40% of its revenue are in higher priced “premium” beers, higher than rivals. Since October 2005, Heineken’s shares have returned 371% including reinvested dividends, according to Refinitiv data. That’s just shy of AB InBev’s and more than four times the Euro STOXX index of Europe’s biggest companies.
The outgoing boss’s expansion success is less helpful than it might seem, though. While Van Boxmeer engineered a joint venture with China Resources, which has a 20% domestic market share according to Euromonitor and has given Heineken access to a ready-made distribution network, other areas are struggling. Mexico and Vietnam generate a quarter of Heineken’s profit, but the former’s economy contracted last year and tough new fines for drink driving are expected to hit sales in the latter. Meanwhile, the coronavirus dampened trade in early 2020 in Asia, including the busy Lunar New Year period.
That makes Van den Brink’s inheritance a bit tricky. In his 22 years at the company, premiumisation and global diversification have become sacred cows. Yet some of these may need to be slayed. In Mexico he might want to prioritise cheaper brands to give cash-strapped drinkers choice, but that would go against the precedent and logic of protecting margins by selling pricier brands. He might also want to spend less on advertising regular Tiger beer in Vietnam if people are drinking less across the board, but that might hurt market share. Van Boxmeer’s continued presence on the Heineken board may act as a disincentive to be radical.
(This article is corrected to change “40% of volumes” to “more than 40% of revenue” in the second paragraph.)