Heineken N.V.

views updated Jun 27 2018

Heineken N.V.

Tweede Weteringplantsoen 21
1017 ZD Amsterdam
The Netherlands
Telephone: (20) 523 92 39
Fax: (20) 626 35 03
Web site: http://www.heinekencorp.nl

Public Company (50% Owned by Heineken Holding N.V.)
Incorporated: 1873 as Heineken’s Bierbrouwerij Maatschappij N.V.
Employees: 36,733
Sales: EUR 7.15 billion (US$6.9 billion) (1999)
Stock Exchanges: Amsterdam Brussels Luxembourg
NAIC: 312120 Breweries; 312110 Soft Drink Manufacturing; 422810 Beer and Ale Wholesalers; 422820 Wine and Distilled Alcoholic Beverage Wholesalers; 422490 Other Grocery and Related Products Wholesalers

Heineken N.V. owns and operates one of the largest and most respected network of breweries in the world, producing the popular Heineken and Amstel brands of beer (which rank number one and number two, respectively, in Europe), as well as Murphy’s Irish Stout, all of which the company markets internationally. The company’s beer portfolio also includes a large number of national and regional brands, including Tiger, the number one regional brand in Asia. Heineken ranks second in the world beer market (trailing only Anheuser-Busch Companies, Inc.), selling beer in 170 countries and brewing beer at more than 110 company-owned breweries in more than 50 countries. Run by the Heineken family for most of its existence, the business built a solid reputation early in its history for maintaining high standards for its beer, standards the company continues to adhere to more than 135 years later. Moreover, Heineken is also the single largest exporter of beer in the world. The company has operations in many countries outside its base in the Netherlands, though it has no brewing facilities in the United States, by far the company’s largest export market; Heineken beer is the number two imported beer in the United States (behind Grupo Modelo, S.A. de C.V.’s Corona). In parts of Europe, Heineken N.V. owns beverage wholesalers, which, in addition to handling beer, also supply soft drinks and spirits to restaurants and taverns; some of these soft drinks are manufactured in Heineken factories. Although no longer involved in day-to-day management, the Heineken family retains influence over the company it founded through its 50 percent ownership of Heineken Holding N.V., which holds a 50 percent stake in Heineken N.V.

Birth and Early Development

In 1864 Gerard Adriaan Heineken convinced his mother that there would be fewer problems with alcoholism in Holland if the Dutch could be induced to drink beer instead of gin, and, moreover, that beer brewed in Holland was of such poor quality that he felt a personal obligation to produce a high-quality beer. Heineken’s mother bought him an Amsterdam brewery known as De Hooiberg (The Haystack) which had been established almost 300 years before, in 1582. Heineken was only 22 when he assumed control of De Hooiberg, one of Amsterdam’s largest breweries. He was so successful that after four years he built a new, larger brewery and closed the original facility. His business continued to grow rapidly, and after six more years, in 1874, he purchased a Rotterdam brewery to add to his operation. Heineken incorporated his company as Heineken’s Bierbrouwerij Maatschappij N.V. (Heineken’s Beer Brewery Company) in 1873.

During this time, using a new cooling technique developed by Carl von Linde, Heineken gained the ability to brew year round at a consistent quality level. Heineken was thus one of the first breweries in the world to eliminate the brewer’s traditional dependence on seasonal natural ice. In 1879 Heineken hired Dr. Elion, a former student of Louis Pasteur, to research yeast. Over the next 13 years Elion systematically bred and selected a specific yeast cell for Heineken, which came to be known as the “Heineken A-yeast” (yeast being the source of alcohol and carbon dioxide in beer). The Heineken A-yeast would continue in use into the 21st century and would eventually be shipped from Holland to all breweries owned or operated by the company, providing for a uniformity in taste among Heineken products, regardless of the different climates in which they were produced or consumed.

Heineken began to export just 12 years after the De Hooiberg purchase, with regular shipments to France. Exporting to the United States began soon after the founder’s son, Dr. H.P. Heineken, assumed control of the company in 1914. Traveling on the Dutch liner Nieuw Amsterdam to New York, he met Leo van Munching, the liner’s bartender. Impressed by van Munching’s knowledge of beer, Heineken offered him a position as the company’s importer in New York. The bartender quickly accepted. Van Munching distributed Heineken beer to the finer restaurants, taverns, and hotels in the New York area until Prohibition forced him to stop in 1920.

1930s Through Mid-1960s: Accelerating International Expansion

After the repeal of Prohibition in 1933, Heineken was the first beer imported into the United States. World War II once again brought importing to a temporary halt while van Munching served in the U.S. Navy. When he returned in 1945, he formed Van Munching and Company, Inc. and established a nationwide distribution system to expand the beer’s market beyond the New York area.

Beginning in the 1940s, the U.S. market became extremely important to Heineken, eventually becoming the beer’s largest market outside the Netherlands. Through Van Munching’s distribution system, Heineken became the dominant beer import in most of the United States. While many imports were available only in metropolitan areas or other limited geographical regions, by the 1980s Heineken was available in 70 percent of the nation’s retail outlets handling alcoholic beverages. The majority of Heineken beer destined for the United States was brewed at the company’s Hertogenbosch brewery, where special production lines accommodated the varied labeling requirements of the different states. Heineken beer also became the leading import in Japan, Canada, and Australia. Moreover, currency fluctuations had little effect on the company itself, largely because Heineken sold its beer to Van Munching, which paid the brewer in guilders and thereby assumed all currency risks.

In 1931 the company entered the first of many joint brewing ventures in countries to which it had previously exported. That year Malayan Breweries was formed in Singapore in association with a local partner. This was followed closely by participation in a brewery in Indonesia. In 1949 the company built the first of four breweries in Nigeria; the fourth opened in 1982. Between 1958 and 1972 the company also built four breweries and two soft drink plants in Zaire. Heineken had breweries in Rwanda, Chad, Angola, the People’s Republic of Congo, Ghana, Madagascar, and Sierra Leone as well.

During the late 1940s H.P. Heineken sent his son Alfred to New York to learn about Van Munching’s marketing operation. The young Heineken took advertising and business courses in the evening and spent his days canvassing New York on foot with Van Munching’s sales staff. His return to Holland in 1948 marked the beginning of a new era in the company’s marketing strategy. Alfred Heineken had been impressed with the changes in the U.S. lifestyle brought about by electrical refrigerators and modern supermarkets, and he foresaw the eventual impact of modern conveniences on the Dutch way of life. He prompted the company to implement marketing techniques that capitalized on these habits. Recognizing the importance of the take-home market, for instance, the company began selling beer in grocery stores (with store displays designed by Alfred Heineken). In addition, Heineken began advertising its beer on the radio. Previously, advertising had been considered unnecessary because tavern owners were tied to specific breweries.

In the 1960s the company institutionalized its meticulous quality control efforts under its technical services group, Heineken Technisch Beheer, or H.T.B., which was formed in 1963. High quality was always the company’s hallmark. The brewing process of medium-quality beers usually took three days and aging lasted a week at most. Heineken, however, brewed its beer for eight days and aged it for six weeks. The H.T.B. unit operated out of the company’s laboratory at Zoeterwoude in the Netherlands and provided laboratory services, research on raw materials, project engineering, and other services for all breweries associated with the company. There was also a tasting center at the Zoeterwoude laboratory. Samples of all beers brewed under Heineken supervision were shipped there each month to be tested by panels of taste experts. The tests at Zoeterwoude augmented the taste testing that was carried out at each individual brewery.

Company Perspectives:

As in every industry, today’s international beer market is characterised by increasing globalisation. The world is growing smaller in many ways—but that doesn’t mean the diversity of local culture will diminish as a result.

At Heineken, we believe the opposite is true. The more we learn about each other—and experience the variety of life at first hand—the more we value our differences. Heineken is a global company in every sense—but we are wholeheartedly committed to servicing local tastes and attitudes. Our business is global—but many of our brands are rooted in the cultures of individual markets. And although our heritage is Dutch, our working methods are multinational.

It is this unique combination—combined with the guaranteed quality of all our products—that makes Heineken the success it is today: the world’s preferred brewer of quality beers.

Late 1960s Through 1980s: Product Diversification and Continued Growth

Product diversification began relatively late in Heineken’s history, because the company’s emphasis had been on expanding its markets. In 1968, however, the company purchased the Amstel Brewery, Holland’s second largest, founded by Jonkheer C.A. de Pesters and J.H. van Marwijk Kooy in 1870 and the first in Holland to brew lager beers. Amstel’s export market was firmly established by the time Heineken purchased the operation. Through its acquisition of Amstel, Heineken gained interests in breweries in Surinam, the Netherlands Antilles, Jordan, Lebanon, and Greece. In 1980 Heineken eventually entered the low calorie beer market with Amstel Light; by the 1980s Amstel beers were sold in more than 60 countries.

In 1971 Alfred Heineken was appointed chairman. The following year, the company changed its name from Heineken’s Bierbrouwerij Maatschappij N.V. to Heineken N.V. The company’s remarkable success outside the Netherlands led management to emphasize Heineken’s international presence rather than casting it as a Dutch company with significant international operations. In fact, the company looked upon all of Europe as its domestic market. Heineken Holland had headquarters at the Zoeterwoude brewery. Its various breweries contracted with Heineken World to supply worldwide beer shipments. Heineken World headquarters remained in Amsterdam and were housed in an addition to the Heineken family home.

In 1970 Heineken entered the stout market by buying the failing James J. Murphy brewery in Cork, Ireland. In addition to Murphy’s Irish Stout, which dated back to 1856, the brewery produced Heineken light lager brew under license. Wines, spirits, and soft drinks were also becoming increasingly important Heineken products. Soft drinks were made at Bunnik by Vrumona B.V., and the company bottled PepsiCola and 7Up under license. Heineken and its affiliates also sold Royal Club, Sisi, Sourcy, and B3 soft drinks; Royal Club and Green Sands shandies; and nonalcoholic beers such as Amstel Brew. Spirits and wines included Bologna, Hoppe, Coebergh, Glenmark, Grand Monarque, and Jagermeister brands. In 1971 Heineken purchased the Bokma distillery. Bokma Genever was Holland’s most popular gin. The distillery at Zoetermeer was the headquarters of Heineken’s Netherlands Wine and Spirits Group B.V.

The French market proved the most challenging to Heineken, and since entering France in 1972 through the purchase of a majority stake in the third largest brewing group, Heineken had only one profitable year there by the mid-1980s. The situation was considered so bleak that in 1986 the company and its French partner cut 500 jobs and closed down three breweries and a bottling plant in France, offering displaced employees retraining and outplacement. From 1983 to 1986 Heineken invested significantly in Sogebra S.A. (Société Générale de Brasserie), trying to sustain the company’s French activities.

Heineken continued its international expansion throughout the 1970s and 1980s. Through license agreements, Heineken beer began to be produced in Sierra Leone and Trinidad (1972), Jamaica (1973), Norway and Sweden (1975), St. Lucia and Tahiti (1976), Haiti (1977), Ireland (1978), Italy (1979), Morocco (1980), Greece and South Korea (1981), Japan (1983), and Spain (1988). The company also purchased stakes in numerous foreign brewers, including: a minority stake in Cervejarias Kaiser S.A., a leading Brazilian brewing group, in 1983; a minority stake in El Aguila S.A., a leader in Spain, in 1984 (increased to 51.2 percent in 1986); and a minority stake in Quilmes International (Bermuda) Ltd., which had interests in Argentina, Uruguay, and Paraguay and later expanded into Chile.

In the 1980s the company was a victim of a series of criminal incidents. In 1982 two unsuccessful blackmail attempts were made against the brewery, followed the next year by an extortion attempt. The most serious incident was the November 1983 kidnapping of the company chief, Alfred Heineken, and his chauffeur. The two were held for 21 days and released after the company paid out an estimated 30 million guilders for their return (though the actual amount was never made public).

Key Dates:

1592:: An Amsterdam brewery known as De Hooiberg (The Haystack) is established.
1856:: Murphy’s Irish Stout is first brewed in Cork, Ireland.
1864:: Gerard Adriaan Heineken assumes control of De Hooiberg.
1870:: Jonkheer C.A. de Pesters and J.H. van Marwijk Kooy establish Amstel Brewery.
1873:: Heineken incorporates his company as Heineken’s Bierbrouwerij Maatschappij N.V.
1876:: Company begins exporting, with regular shipments to France.
1900:: Beer volume reaches 200,000 hectoliters.
1914:: Dr. H.P. Heineken, son of the founder, takes control of the company.
1931:: Company enters into its first joint brewing venture, Malayan Breweries.
1933:: Heineken is the first beer imported into the United States following the repeal of Prohibition.
1968:: Heineken acquires Amstel.
1970:: Company acquires the James J. Murphy brewery and its Murphy’s Irish Stout brand; beer volume reaches 11.3 million hectoliters.
1971:: Alfred Heineken, grandson of the founder, is appointed chairman.
1972:: Company changes its name to Heineken N.V.
1980:: Amstel Light makes its debut.
1991:: Heineken purchases Van Munching & Company; expansion into Eastern Europe begins with the purchase of a majority stake in Hungary-based Komáromi Sörgyár RT.
1994:: Company acquires stakes in Poland’s Zywiec Brewing and Bulgaria’s Zagorka Brewery.
1995:: Interbrew Italia S.p.A. and a majority stake in Slovakia’s Zlaty Bazant A.S. are acquired.
1996:: Heineken takes over France’s Fischer Group and Italy’s Birra Moretti S.p.A.
1998:: Heineken increases its stake in Zywiec to 75 percent, then combines Zywiec with Brewpole, emerging with a 50 percent stake in the new Zywiec, now Poland’s largest brewer.
1999:: Beer volume reaches 90.9 million hectoliters.
2000:: Grupo Cruzcampo S.A., Spain’s largest brewer, is acquired.

Heineken spent tens of millions of guilders each year to bolster its image as a prestigious import. The company’s refusal to brew in the United States, even though its beer is brewed under license in many other countries, was in part attributable to a need to maintain the image. Lölwenbräu’s experience was not lost on Heineken; when Miller Brewing Company began brewing Löwenbräu under license in the United States the German brand lost a major portion of its market share. It appeared that Americans enjoyed the exclusivity of an import. The premium price they paid for Heineken beer lent credence to the image.

Heineken was unquestionably a powerful force in the brewing industry in the 1980s. In revenues it ranked fifth in the world behind Anheuser-Busch, Miller Brewing, Britain’s Allied Domecq PLC, and Japan’s Kirin Brewery Company, Limited. Its share of the world beer market increased from 2.61 to 2.82 percent between 1977 and 1981.

Management policies at Heineken changed little over the years. The family retained control over virtually all aspects of the company, which was managed by a small team selected by the head of the family. The group was kept small in order to prevent factions from developing. As in the past, however, the family head of the company was involved in Heineken’s day-today functions. Alfred Heineken, grandson of the founder and owner of 50 percent of the shares in the company, directly supervised research and development, finance, and public relations in the mid-1980s. Though Alfred Heineken officially retired in 1989, he kept close ties with the company well into the 1990s, serving as chairman and delegate member of the supervisory council (until 1995) and as chairman of the board of Heineken Holding N.V., which held a 50 percent stake in Heineken N.V.

1990s: Expanding Aggressively into Emerging Markets

As the company entered the 1990s, Gerard Van Schaik took over as chairman. When Van Schaik joined the company in 1959, he was responsible for export sales to the United States, which then, as in the 1990s, was the most important source of profits for Heineken. U.S. sales represented just 2.6 percent of the company’s total, but contributed 23 percent of the company’s US$435 million in pretax profits in 1991; a 24-bottle case of Heineken sold on average for about 50 percent more than a case of the domestic favorite Budweiser.

Van Schaik focused on expanding the company’s presence in Germany, by far the world’s top consumer of beer. Emphasizing Heineken as a premium beer, the company invested in costly advertising, targeting in particular young Germans who, it was hoped, might find a foreign, imported beer appealing. Van Schaik also oversaw an important U.S. acquisition in 1991, when Heineken purchased Van Munching & Company, the U.S. operation that had handled the Heineken import business in the United States for six decades. This business then became officially known as Heineken USA, the U.S. arm of subsidiary Heineken Worldwide. Expansion into former communist markets began in 1991 with the acquisition of a 50.3 percent interest (increased to 100 percent in 1994) in Komáromi Sörgyár RT, a Hungarian brewer.

In the 1990s specialty beers remained very strong among the U.S. beer-drinking public as many consumers began drinking less and drinking better beers. Heineken was able to take advantage of this trend, offering a more full-bodied, European beer that many consumers desired. In fact, Heineken became the leading imported beer in the United States and brought the entire Heineken USA portfolio double-digit growth in 1994. During this time, more than one out of every five imports in the United States was a Heineken.

According to a 1992 Forbes magazine article, worldwide annual beer consumption had increased to about 30 billion gallons, equivalent to more than ten six-packs of beer per person per year, with especially strong volume in Latin American and Asia. In accordance with this trend, Heineken announced in 1992 that it had signed a joint agreement to become the first foreign beer producer in Vietnam. A US$42.5 million brewery located near Ho Chi Minh City began producing beer under the Heineken and Tiger labels. In 1993 Heineken also moved into China, which in 1994 represented the world’s second largest beer market, after the United States. By 1994, Heineken had three export offices and three breweries in China.

Karel Vuursteen became Heineken’s chairman in 1993 and continued to expand the company’s international presence focusing on Latin America, the Far East, Scandinavia, and Middle Europe. To facilitate the introduction of Heineken in Poland, Heineken paid US$40 million for a 25 percent stake in Poland’s Zywiec Brewing in 1994 (the stake was increased to 31.8 percent later in 1994). That same year, the company moved into Bulgaria through the purchase of 40 percent of the state-owned Zagorka Brewery A.D., which was based in Stara Zagorka and held 20 percent of the country’s beer market. Also in 1994, Heineken entered into ventures to build new breweries in China (to brew Tiger beer) and in Cambodia (to brew Tiger and ABC Stout). The company also sold the bulk of its spirits and wine business that year.

In early 1995 Heineken acquired Interbrew Italia S.p.A., whose brands included Stella Artois and Classica von Wunster, from Interbrew S.A. of Belgium, increasing Heineken’s Italian market share from 25 to 30 percent. Interbrew Italia was merged into Heineken Italia S.p.A. In October 1995 Heineken acquired a 66 percent stake in Zlaty Bazant A.S., the largest brewery in Slovakia. That year, Heineken also ventured into Myanmar through a joint venture that began constructing a new brewery to produce Tiger beer. Heineken’s Indonesian subsidiary broke ground in 1995 at the site of a new brewery near Surabaja.

Heineken’s aggressive acquisition drive continued in 1996. Early that year the company acquired the fourth largest brewer in France, the Fischer Group, and the third largest Italian brewery, Birra Moretti S.p.A., which produced the Moretti and Sans Souci brands. Heineken thereby gained the number two position in France, with 35 percent market share, and the top spot in Italy, with 38 percent of the market—although at the price of a short-term reduction in profits due to high integration costs. Also in 1996, the company withdrew from its Myanmar venture, concerned about the human rights situation there and the impact its presence there might have on the company’s reputation.

The late 1990s continued to provide conditions ripe for consolidation in the global beer industry. Growth was slowing not only from the maturation of developed markets but also from the financial crises that rocked such emerging areas as Asia and Latin America. Heineken remained at the forefront of the consolidation trend, enhancing its position as the most international brewing group in the world through additional dealmaking. Poland was the focus during 1998. That year Hein-eken increased its stake in Zywiec to 75 percent, then merged Zywiec with Brewpole, the largest brewing group in the country and maker of the popular EB brand. Heineken held a controlling 50 percent stake in the enlarged Zywiec, which commanded 38 percent of the Polish market. Also in 1998 Heineken gained a 25 percent stake in Pivara Skopje A.D., the leading beer maker in Macedonia with a market share of 70 percent. In June 1999 Heineken reached an agreement to acquire Grupo Cruzcampo S.A., Spain’s largest brewer, from Diageo plc. Spanish regulators, concerned about the purchase because of Heineken’s majority stake in El Aguila, forced the company to cut about one-sixth of its Spanish production and storage facilities before the deal was consummated in January 2000. Heineken immediately began integrating Cruzcampo into El Aguila.

Heineken’s position of international preeminence at the dawn of the 21st century was attributable to its two-pronged strategy of exporting its key global brands—Heineken, Amstel, and Murphy’s—and acquiring or building from scratch foreign breweries with strong local or regional brands. Heineken thereby had attained leading positions in several markets in Europe and elsewhere and the number two position in Africa, behind South African Breweries plc (SAB). The company did occasionally bypass expansion opportunities, as it did in early 1999 when it decided not to bid for a controlling stake in SAB. But another cropped up a year later when Bass PLC of the United Kingdom began exploring the sale of its brewing operations and Heineken showed keen interest. It faced a potential battle, however, from several rivals, including SAB itself, Anheuser-Busch, and Denmark’s Carlsberg A/S.

Principal Subsidiaries

Heineken Nederlands Beheer B.V.; Heineken Brouwerijen B.V.; Heineken Nederland B.V.; Heineken Internationaal Beheer B.V.; Heineken Technical Services B.V.; Amstel Brouwerij B.V.; Amstel Internationaal B.V.; Vrumona B.V.; Inverba Holland B.V.; Brouwerij De Ridder B.V.; B.V. Beleggingsmaatschappij Limba; Brand Bierbrouwerij B.V.; Beheer-en Exploitatiemaatschappij Brand B.V.; Sogebra S.A. (France); El Aguila S.A. (Spain; 71.3%); Heineken Italia S.p.A. (Italy); Athenian Brewery S.A. (Greece; 98.8%); Murphy Brewery Ireland Ltd.; Amstel Sörgyár RT (Hungary); Zywiec S.A. (Poland; 50%); Zlatý Bazant A.S. (Slovakia); Pivovar Corgon S.R.O. (Slovakia; 59%); Calanda Haldengut A.G. (Switzerland; 99.7%); Mouterij Albert N.V. (Belgium); Ibecor S.A. (Belgium); Heineken USA Inc.; Antilliaanse Brouwerij N.V. (Netherlands Antilles; 56.3%); Commonwealth Brewery Ltd. (Bahamas; 53.2%); Windward & Leeward Brewery Ltd. (St. Lucia; 72.7%); ‘Brahma’ S.A.R.L. (Democratic Republic of the Congo; 94.3%); Brasseries et Limonaderies du Rwanda ‘Bralirwa’ S.A. (70%); Brasseries et Limonaderies du Burundi ‘Brarudi’ S.A.R.L. (59.3%); Brasseries de Bourbon S.A. (Réunion; 85.4%); Ghana Breweries Ltd. (75.6%); Brasseries du Logone S.A. (Tsjaad); P.T. Multi Bintang Indonesia Tbk. (84.5%).

Principal Competitors

Adolph Coors Company; Allied Domecq PLC; Anheuser-Busch Companies, Inc.; Companhia Antarctica Paulista Industria Brasileira de Bebidas e Conexos; Asahi Breweries, Ltd.; Bass PLC; Bavaria S.A.; Brauerei Beck & Co.; Canandaigua Brands, Inc.; Carlsberg A/S; Companhia Cervejaria Brahma; Diageo pic; Fomento Economico Mexicano, S.A. de C.V.; Foster’s Brewing Group Limited; The Gambrinus Company; Genesee Corporation; Groupe Danone; Grupo Modelo, S.A. de C.V.; Interbrew S.A.; Kirin Brewery Company, Limited; Miller Brewing Company; Molson Inc.; S&P Company; San Miguel Corporation; Scottish & Newcastle pic; South African Breweries pic; Taiwan Tobacco & Wine Board; Whitbread PLC.

Heineken N.V.

views updated Jun 11 2018

Heineken N.V.

2E Weteringplantsoen 21
1000 AA Amsterdam
The Netherlands
(020) 709 111

Public Company
Incorporated: January 27, 1873
Employees: 28,749
Sales: Df 15.45 billion (US$2.296 billion)
Market value: Df 14.557 billion (US$2.074 billion)
Stock Index: Amsterdam Antwerp Brussels
Luxembourg

Founded more than 100 years ago, the Heineken brewing company is today one of the world’s largest and most respected breweries. The family-run business built a solid reputation early in its history for maintaining high standards for its beer, standards Heineken still adheres to in the 1980’s. Currenty ranked fifth in revenue among the world’s beer makers, Heineken has operations in many countries outside its base in the Netherlands, though it has no brewing facilities in the United States, by far the company’s largest export market.

In 1864 Gerard Adriaan Heineken convinced his mother that there would be fewer problems with alcoholism in Holland if the Dutch could be induced to drink beer instead of gin, and, moreover, that beer brewed in Holland was of such poor quantity that he felt a personal obligation to produce a highquality beer. Heineken’s mother bought him an Amsterdam brewery known as De Hooiberg (The Haystack) which had been established almost 300 years before. Heineken was only 22 when he assumed control of De Hooiberg, one of Amsterdam’s largest breweries. He was so successful that after four years he built a new, larger brewery and closed the original facility. His business continued to grow rapidly, and after six more years, in 1874, he purchased a Rotterdam brewery to add to his operation.

Carl von Linde developed a new cooling technique for the wort which in 1873 gave Heineken the ability to brew year-round at a consistent quality level. Heineken was one of the first breweries in the world to eliminate the brewer’s traditional dependence on seasonal natural ice.

In 1879 Heineken hired a Dr. Elion, a former student of Louis Pasteur, to research yeast. Over the next 13 years Elion systematically bred and selected a specific yeast cell which came to be known as the “Heineken A-yeast” (yeast is the source of alcohol and carbon dioxide in beer). The Heineken A-yeast has been used for more than a century now, and is shipped from Holland to all breweries owned or operated by the company. Because the A-yeast has been studied comprehensively and its action in the brewing process fully cataloged, regular use of it lends uniformity to Heineken products. Heineken now operates plants in very different climates around the world, so consistency control is crucial.

The Dutch have always been interested in business opportunities outside their small country. Heineken actually began to export just 12 years after the De Hooiberg purchase. Exporting to the U.S. began soon after the founder’s son, Dr. H. P. Heineken, assumed control of the company in 1914. Traveling on the Dutch liner Nieuw Amsterdam to New York, he met Leo van Munching, the liner’s bartender. Impressed by van Munching’s knowledge of beer, Heineken offered him a position as the company’s importer in New York. The bartender quickly accepted.

Van Munching distributed Heineken beer to the finer restaurants, taverns, and hotels in the New York area until Prohibition forced him to stop the importing operation in 1920. After repeal of Prohibition in 1933, Heineken was the first beer imported into the United States. World War II once again brought importing to a temporary halt while van Munching served in the U.S. Navy. In 1945 he formed Van Munching and Company, Inc. and established a nationwide distribution system to build the beer’s market beyond the New York area.

Since the 1940’s the U.S. has been extremely important to Heineken; it has grown to become the beer’s largest market outside the Netherlands. Heineken used Van Munching’s distribution system over the years to become the dominant beer import in most of the United States. Most other imported beers (there are over 200) are still available only in major metropolitan areas or in narrow geographical regions. Heineken, on the other hand, is available in 70% of the nation’s retail outlets handling alcoholic beverages. The company commands 40% of the imported beer market in the U.S. Heineken beer is also the leading import in Japan, Canada, and Australia. Today the majority of Heineken beer destined for America is brewed at the company’s Hertogenbosch brewery, where special production lines accommodate the varied labelling requirements of the different states.

Currency fluctuations have little effect on the company itself, largely because Heineken sells its beer to Van Munching, which pays the brewer in guilders and thereby assumes all currency risks.

In 1930 the company entered the first of many joint brewing ventures in countries to which it had previously exported. That year Malayan Breweries was formed in Singapore in association with a local partner. This was followed closely by participation in a brewery in Indonesia. In 1949 the company built the first of four breweries in Nigeria; the fourth opened in 1982. Between 1958 and 1972 the company also built four breweries and two soft drink plants in Zaire. Heineken has breweries in Rwanda, Chad, Angola, the People’s Republic of Congo, Ghana, Madagascar, and Sierra Leone as well.

During the late 1940’s H.P. Heineken sent his son Alfred to New York to learn about Van Munching’s marketing operation. The young Heineken took advertising and business courses in the evening and spent his days canvassing New York on foot with Van Munching’s sales staff. His return to Holland in 1948 marked the beginning of a new era in the company’s marketing strategy. Alfred Heineken had been impressed with the changes in the American lifestyle brought about by electrical refrigerators and modern supermarkets, and he foresaw the eventual impact of modern conveniences on the Dutch way of life. He prompted the company to implement marketing techniques that capitalized on these habits. Recognizing the importance of the take-home market, for instance, the company began selling beer in grocery stores (with store displays designed by Alfred Heineken). In addition, Heineken began advertising its beer on the radio. Previously, advertising had been considered unnecessary because tavern owners were tied to specific breweries.

In the 1960’s the company institutionalized its meticulous quality control efforts under its technical services group, Heineken Technisch Beheer, or H.T.B. High quality has always been the company’s hallmark. The brewing process of medium-quality beers usually takes three days and aging lasts a week at most. Heineken, however, brews its beer for eight days and ages it for six weeks. The H.T.B. unit operates out of the company’s laboratory at Zoeterwoude in the Netherlands and provides laboratory services, research on raw materials, project engineering, and other services for all breweries associated with the company. There is also a tasting center at the Zoeterwoude laboratory. Samples of all beers brewed under Heineken supervision are shipped there each month to be tested by panels of taste experts. The tests at Zoeterwoude augment the taste testing that is carried out at each individual brewery.

Product diversification began relatively late in Heineken’s history, because the company’s emphasis had been on expanding its markets. However, in 1968 the company purchased the Amstel Brewery, Holland’s second largest, founded by Jonkheer C. A. de Pesters and J. H. van Marwijk Kooy in 1870 and the first in Holland to brew lager beers. Amstel’s export market was firmly established by the time Heineken purchased the operation. Heineken entered the low-calorie beer market with Amstel Light soon after the purchase. Amstel beers now sell in more than 60 countries.

Shortly after the Amstel purchase, the company changed its name from Heineken’s Beer Brewery Company to Heineken. The company’s remarkable success outside the Netherlands has in recent years led management to emphasize Heineken’s international presence rather than casting it as a Dutch company with a significant international operation. In fact, the company now looks upon all of Europe as its domestic market. Heineken Holland has headquarters at the Zoeterwoude brewery. Its various breweries contract with Heineken World to supply worldwide beer shipments. Heineken World headquarters remain in Amsterdam and are housed in an addition to the Heineken family home.

In 1970 Heineken entered the stout market by buying the failing James J. Murphy brewery in Cork, Ireland. In addition to Murphy’s Irish Stout, the brewery now produces Heineken light lager brew under license.

Wines, spirits, and soft drinks are becoming increasingly important Heineken products. Soft drinks are made at Bunnik by Vrumona B.V., and the company bottles Pepsi-Cola and 7-Up under license. Heineken and its affiliates also sell Royal Club, Sisi, Sourcy, and B3 soft drinks; Royal Club and Green Sands shandies; and non-alcoholic beers such as Amstel Brew. Spirits and wines include Bologna, Hoppe, Coebergh, Glenmark, Grand Monarque, and Jagermeister brands. In 1971 Heineken purchased the Bokma distillery. Bokma genever is now Holland’s most popular gin. The distillery at Zoetermeer is the headquarters of Heineken’s Netherlands Wine and Spirits Group B.V.

The French market has proven to be the most difficult part of Heineken’s European operations, and since entering France in 1972, Heineken has had only one profitable year there. The situation was considered so bleak that in 1986 the company and its French partner cut 500 jobs and closed down three breweries and a bottling plant in France. (The company offered displaced employees retraining and outplacement.) From 1983 to 1986 Heineken invested more than Dfl 550 million in Sogebra S.A. (Société Genérale de Brasserie), trying to sustain the company’s French activities. Heineken holds 51% of the shares of Sogebra, the second largest brewery in France.

In the 1980’s the company has been victim of a series of criminal incidents. In 1982 two unsuccessful blackmail attempts were made against the brewery, followed the next year by an extortion attempt. The most serious incident was the November 1983 kidnapping of the company chief, Alfred Heineken, and his chauffeur. The two were held for 21 days and released after the company paid out an estimated 30 million guilders for their return (though the actual amount was never made public).

Heineken spends tens of millions of guilders each year to bolster its image as a prestigious import. The company’s refusal to brew in the United States, even though its beer is brewed under license in many other countries, is in part attributable to a need to maintain the image. Löwenbräu’s experience was not lost on Heineken; when Miller began brewing Löwenbräu under license in the United States the German brand lost a major portion of its market share. It appears that Americans enjoy the “snob appeal” of an import. The premium price they pay for Heineken beer lends credence to the image.

Management policies at Heineken have changed little over the years. The family retains control over virtually all aspects of the company, which is managed by a small team selected by the head of the family. The group is kept small—presently three men—in order to prevent factions from developing. However, as in the past, the family head of the company is involved in Heineken’s day-to-day functions. Alfred Heineken, grandson of the founder and owner of 50% of the shares in the company, directly supervises research and development, finance, and public relations.

Heineken is unquestionably a powerful force in the brewing industry in the 1980’s. In revenues it ranks fifth in the world behind Anheuser-Busch, Miller, Britain’s Allied and Japan’s Kirin. Its share of the world beer market increased from 2.61% to 2.82% between 1977 and 1981. Total sales of beer brewed under Heineken’s supervision was 42.1 million hectolitres in 1986 (the figure includes the beer output of affiliates, as well as that brewed under license by third parties). In the future Heineken is certain to remain a family business; the current major stockholder and director, Alfred Heineken, has publicly stated that he will pass his shares along to his daughter Charlene.

Principal Subsidiaries

Heineken Nederlands Beheer BV; Heineken Brouwerijen BV; Heineken Nederland BV; Heineken Technisch Beheer BV; Heineken Internationaal Beheer BV; Heineken Reken Centrum BV; Heineken Assurantie Bemiddeling BV; Heineken Exploitatie Maatschappij BV; Inverba Holland BV; Amstel Brouwerij BV; Amstel Internationaal BV; Panden Exploitatie Maatschappij BV; Vrumona BV; Bokma BV; Coebergh BV; Gedistilleerd en Wijngroep Nederland BV; Mouterij Albert NV (Belgium); Ibecor S.A. (Belgium); Atheniean Brewery S.A. (Greece), 98.3%; Birra Dreher S.p.A.; Duncan Gilbey & Matheson (U.K.); Murphy Brewery Ireland Ltd. (Ireland); Heineken Finance N.V. (Netherlands Antilles); Windward & Leeward Brewery Ltd., 82.7%; Heineken do Brasil Comercial Leda (Brazil); Amstel Brewery Canada Ltd. The company also lists subsidiaries in Angola, Burundi, France, Indonesia, New Caledonia, People’s Republic of Congo, Rwanda, Sierra Leone, Singapore, Spain, Trinidad, and Zaire.

International Directory of Company Histories

Heineken N.V.

views updated May 18 2018

Heineken N.V.

P.O. Box 28
1000 AA Amsterdam, Netherlands
The Netherlands
(20) 5 239 239
Fax: (20) 6 263 503

Public Company
Incorporated: 1873
Employees: 23,997
Sales: $5.65 billion
Stock Exchanges: Amsterdam Brussels Luxembourg
SICs: 2082 Malt Beverages; 2086 Bottled and Canned Soft Drinks & Carbonated Waters; 5181 Beer and Ale; 5149 Groceries & Related Products, Not Elsewhere Classified

Heineken N.V. owns and operates one of the largest and most respected network of breweries in the world, producing the popular Heineken and Amstel Light brands of beer, as well as Murphy’s Irish Stout and Buckler nonalcoholic beer, all of which the company markets worldwide. In 1995, Heineken ranked second in the world beer market, selling beer in more than 150 countries and brewing beer in 90 of those countries. The family-run business built a solid reputation early in its history for maintaining high standards for its beer, standards the company continued to adhere to over a century later. Moreover, Heineken was also the single largest exporter of beer in the world. The company had operations in many countries outside its base in The Netherlands, though in the mid-1990s it had no brewing facilities in the United States, by far the company’s largest export market.

In 1864 Gerard Adriaan Heineken convinced his mother that there would be fewer problems with alcoholism in Holland if the Dutch could be induced to drink beer instead of gin, and, moreover, that beer brewed in Holland was of such poor quality that he felt a personal obligation to produce a high-quality beer. Heineken’s mother bought him an Amsterdam brewery known as De Hooiberg (The Haystack) which had been established almost 300 years before. Heineken was only 22 when he assumed control of De Hooiberg, one of Amsterdam’s largest breweries. He was so successful that after four years he built a new, larger brewery and closed the original facility. His business continued to grow rapidly, and after six more years, in 1874, he purchased a Rotterdam brewery to add to his operation.

During this time, using a new cooling technique developed by Carl von Linde, Heineken gained the ability to brew year round at a consistent quality level. Heineken was thus one of the first breweries in the world to eliminate the brewer’s traditional dependence on seasonal natural ice. In 1879 Heineken hired Dr. Elion, a former student of Louis Pasteur, to research yeast. Over the next 13 years Elion systematically bred and selected a specific yeast cell for Heineken, which came to be known as the “Heineken Ayeast” (yeast being the source of alcohol and carbon dioxide in beer). The Heineken Ayeast would continue in use into the 20th century and would eventually be shipped from Holland to all breweries owned or operated by the company, providing for a uniformity in taste among Heineken products, regardless of the different climates in which they were produced or consumed.

Heineken began to export just 12 years after the De Hooiberg purchase. Exporting to the United States began soon after the founder’s son, Dr. H. P. Heineken, assumed control of the company in 1914. Traveling on the Dutch liner Nieuw Amsterdam to New York, he met Leo van Munching, the liner’s bartender. Impressed by van Munching’s knowledge of beer, Heineken offered him a position as the company’s importer in New York. The bartender quickly accepted.

Van Munching distributed Heineken beer to the finer restaurants, taverns, and hotels in the New York area until Prohibition forced him to stop in 1920. After the repeal of Prohibition in 1933, Heineken was the first beer imported into the United States. World War II once again brought importing to a temporary halt while van Munching served in the U.S. Navy. When he returned in 1945, he formed Van Munching and Company, Inc. and established a nationwide distribution system to expand the beer’s market beyond the New York area.

Beginning in the 1940s, the U.S. market became extremely important to Heineken, eventually becoming the beer’s largest market outside the Netherlands. Through Van Munching’s distribution system, Heineken became the dominant beer import in most of the United States. While many imports were available only in metropolitan areas or other limited geographical regions, by the 1980s Heineken was available in 70 percent of the nation’s retail outlets handling alcoholic beverages. The majority of Heineken beer destined for America was brewed at the company’s Hertogenbosch brewery, where special production lines accommodated the varied labeling requirements of the different states. Heineken beer also became the leading import in Japan, Canada, and Australia. Moreover, currency fluctuations had little effect on the company itself, largely because Heineken sold its beer to Van Munching, which paid the brewer in guilders and thereby assumed all currency risks.

In 1930 the company entered the first of many joint brewing ventures in countries to which it had previously exported. That year Malayan Breweries was formed in Singapore in association with a local partner. This was followed closely by participation in a brewery in Indonesia. In 1949 the company built the first of four breweries in Nigeria; the fourth opened in 1982. Between 1958 and 1972 the company also built four breweries and two soft drink plants in Zaire. Heineken had breweries in Rwanda, Chad, Angola, the People’s Republic of Congo, Ghana, Madagascar, and Sierra Leone as well.

During the late 1940s H. P. Heineken sent his son Alfred to New York to learn about Van Munching’s marketing operation. The young Heineken took advertising and business courses in the evening and spent his days canvassing New York on foot with Van Munching’s sales staff. His return to Holland in 1948 marked the beginning of a new era in the company’s marketing strategy. Alfred Heineken had been impressed with the changes in the American lifestyle brought about by electrical refrigerators and modern supermarkets, and he foresaw the eventual impact of modern conveniences on the Dutch way of life. He prompted the company to implement marketing techniques that capitalized on these habits. Recognizing the importance of the take-home market, for instance, the company began selling beer in grocery stores (with store displays designed by Alfred Heine-ken). In addition, Heineken began advertising its beer on the radio. Previously, advertising had been considered unnecessary because tavern owners were tied to specific breweries.

In the 1960s the company institutionalized its meticulous quality control efforts under its technical services group, Heineken Technisch Beheer, or H.T.B. High quality was always the company’s hallmark. The brewing process of medium-quality beers usually took three days and aging lasted a week at most. Heineken, however, brewed its beer for eight days and aged it for six weeks. The H.T.B. unit operated out of the company’s laboratory at Zoeterwoude in The Netherlands and provided laboratory services, research on raw materials, project engineering, and other services for all breweries associated with the company. There was also a tasting center at the Zoeterwoude laboratory. Samples of all beers brewed under Heineken supervision were shipped there each month to be tested by panels of taste experts. The tests at Zoeterwoude augmented the taste testing that was carried out at each individual brewery.

Product diversification began relatively late in Heineken’s history, because the company’s emphasis had been on expanding its markets. However, in 1968 the company purchased the Amstel Brewery, Holland’s second largest, founded by Jonk-heer C. A. de Pesters and J. H. van Marwijk Kooy in 1870 and the first in Holland to brew lager beers. Amstel’s export market was firmly established by the time Heineken purchased the operation. Heineken eventually entered the low calorie beer market with Amstel Light, and Amstel beers were sold in more than 60 countries.

Shortly after the Amstel purchase, the company changed its name from Heineken’s Beer Brewery Company to Heineken. The company’s remarkable success outside The Netherlands led management to emphasize Heineken’s international presence rather than casting it as a Dutch company with significant international operations. In fact, the company looked upon all of Europe as its domestic market. Heineken Holland had headquarters at the Zoeterwoude brewery. Its various breweries contracted with Heineken World to supply worldwide beer shipments. Heineken World headquarters remained in Amsterdam and were housed in an addition to the Heineken family home.

In 1970 Heineken entered the stout market by buying the failing James J. Murphy brewery in Cork, Ireland. In addition to Murphy’s Irish Stout, the brewery produced Heineken light lager brew under license. Wines, spirits, and soft drinks were also becoming increasingly important Heineken products. Soft drinks were made at Bunnik by Vrumona B.V., and the company bottled PepsiCola and 7Up under license. Heineken and its affiliates also sold Royal Club, Sisi, Sourcy, and B3 soft drinks; Royal Club and Green Sands shandies; and nonalcoholic beers such as Amstel Brew. Spirits and wines included Bologna, Hoppe, Coebergh, Glenmark, Grand Monarque, and Jagermeis-ter brands. In 1971 Heineken purchased the Bokma distillery. Bokma Genever was Holland’s most popular gin. The distillery at Zoetermeer was the headquarters of Heineken’s Netherlands Wine and Spirits Group B.V.

The French market proved the most challenging to Heineken, and since entering France in 1972, Heineken had only one profitable year there by the mid-1980s. The situation was considered so bleak that in 1986 the company and its French partner cut 500 jobs and closed down three breweries and a bottling plant in France, offering displaced employees retraining and outplacement. From 1983 to 1986 Heineken invested significantly in Sogebra S.A. (Société Générale de Brasserie), trying to sustain the company’s French activities.

In the 1980s the company was a victim of a series of criminal incidents. In 1982 two unsuccessful blackmail attempts were made against the brewery, followed the next year by an extortion attempt. The most serious incident was the November 1983 kidnapping of the company chief, Alfred Heineken, and his chauffeur. The two were held for 21 days and released after the company paid out an estimated 30 million guilders for their return (though the actual amount was never made public).

Heineken spent tens of millions of guilders each year to bolster its image as a prestigious import. The company’s refusal to brew in the United States, even though its beer is brewed under license in many other countries, was in part attributable to a need to maintain the image. Löwenbräu’s experience was not lost on Heineken; when Miller began brewing Löwenbräu under license in the United States the German brand lost a major portion of its market share. It appeared that Americans enjoyed the exclusivity of an import. The premium price they paid for Heineken beer lent credence to the image.

Heineken was unquestionably a powerful force in the brewing industry in the 1980s. In revenues it ranked fifth in the world behind AnheuserBusch, Miller, Britain’s Allied, and Japan’s Kirin. Its share of the world beer market increased from 2.61 to 2.82 percent between 1977 and 1981.

Management policies at Heineken changed little over the years. The family retained control over virtually all aspects of the company, which was managed by a small team selected by the head of the family. The group was kept small in order to prevent factions from developing. However, as in the past, the family head of the company was involved in Heineken’s day-to-day functions. Alfred Heineken, grandson of the founder and owner of 50 percent of the shares in the company, directly supervised research and development, finance, and public relations in the mid-1980s. Though Alfred Heineken officially retired in 1989, he kept close ties with the company well into the 1990s, serving as chairman and delegate member of the board of directors.

As the company entered the 1990s, Gerard Van Schaik took over as chairman. When Van Schaik joined the company in 1959, he was responsible for export sales to the United States, which then, as in the 1990s, was the most important source of profits for Heineken. U.S. sales represented just 2.6 percent of the company’s total, but contributed 23 percent of the company’s $435 million in pretax profits in 1991; a 24-bottle case of Heineken sold on average for about 50 percent more than a case of the domestic favorite Budweiser.

Van Schaik focused on expanding the company’s presence in Germany, by far the world’s top consumer of beer. Emphasizing Heineken as a premium beer, the company invested in costly advertising, targeting in particular young Germans who, it was hoped, might find a foreign, imported beer appealing. Also during this time, Van Schaik oversaw an important American acquisition, when Heineken purchased Van Munching & Company, the U.S. operation that had handled the Heineken import business in the United States for six decades. This business then became officially known as Heineken USA, the American arm of subsidiary Heineken Worldwide.

In the 1990s specialty beers remained very strong among the American beer-drinking public as many consumers began drinking less and drinking better beers. Heineken was able to take advantage of this trend, offering a more full-bodied, European beer that many consumers desired. In fact, Heineken became the leading imported beer in the United States and brought the entire Heineken USA portfolio double digit growth in 1994. During this time, more than one out of every five imports in the United States was a Heineken.

According to a 1992 Forbes magazine article, worldwide annual beer consumption had increased to about 30 billion gallons, equivalent to more than ten six-packs of beer per person per year, with especially strong volume in Latin American and Asia. In accordance with this trend, Heineken announced in 1992 that it had signed a joint agreement to become the first foreign beer producer in Vietnam. A $42.5 million brewery located near HoChi Minh City began producing beer under the Heineken and Tiger labels. Heineken also moved into China, which in 1994 represented the world’s second largest beer market, after the United States. By 1994, Heineken had three export offices and three breweries in China. Later, Heine-ken and Fraser & Neave joined forces to build a brewery in Cambodia, producing about 17 million liters of Tiger and ABC stout annually.

Karel Vuursteen became Heineken’s chairman in 1993 and continued to expand the company’s international presence focusing on Latin America, the Far East, Scandinavia, and Middle Europe. To facilitate the introduction of Heineken in Poland, Heineken paid $40 million for a 25 percent stake in Poland’s Zywiec Brewing. Moreover, in April 1995 Heineken acquired Interbrew Italia SpA from Interbrew of Belgium, increasing Heineken’s Italian market share from 25 to 30 percent.

When asked by a company publication, The World of Heineken, what position the company would occupy in ten years, Vuursteen responded, “We are going to consolidate and expand our leading position as a brewer in Europe. ... Essential in that drive for growth is a true understanding of the three C’s: customers, consumers and competitors.” Following this principle, Heineken would likely remain a major force in the world’s brewing industry for many years to come.

Principal Subsidiaries

Heineken Nederlands Beheer BV; Heineken Brouwerijen BV; Heineken Nederland BV; Heineken Internationaal Beheer BV; Heineken Technical Services B.V.; Inverba Holland BV; Amstel Brouwerij BV; Amstel Internationaal BV; Vrumona BV; Brouwerij De Ridder B.V.; Limba B.V.; Brand Bierbrouwerij B.V.; Gemeenschappelijk Bezit Brand B.V.; Beheer- en Exploitatiemaatschappij Brand B.V.; Sogebra S.A. (France); El Aguila S.A. (Spain; 64.8%); Calanda Haldengut AG (Switzerland; 89.3%); Amstel Sörgyár RT (Hungary); Mouterij Albert NV (Belgium); Ibecor S.A. (Belgium); Atheniean Brewery S.A. (Greece), 98.8%; Murphy Brewery Ireland Ltd. (Ireland); Heineken Finance N.V.; Heine-ken USA Inc.; Brasseries, Limonaderies et Malteries du Zaire ‘Bralima’ S.A.R.L. (71.8%); Brasseries et Limonaderies du Rwanda ‘Bralirwa’ S.A. (70%); Brasseries et Limonaderies du Burundi ‘Brarudi’ S.A.R.L. (59.3%); Brasseries de Bourbon S.A. (Reunion; 52.4%); P.T. Multi Bintang Indonesia (77.2%).

Heineken N.V.

views updated May 21 2018

Heineken N.V.

Tweede Weteringplantsoen 21
Amsterdam, 1017 ZD
Netherlands
Telephone: (31 20) 523 92 39
Fax: (31 20) 626 35 03
Web site: http://www.heinekeninternational.com

Public Company (50% Owned by Heineken Holding N.V.)
Incorporated: 1873 as Heineken's Bierbrouwerij Maatschappij N.V.
Employees: 57,557
Sales: EUR 11.82 billion ($12.78 billion) (2006)
Stock Exchanges: Euronext Amsterdam
Ticker Symbol: HEI
NAIC: 312120 Breweries; 312110 Soft Drink Manufacturing; 422810 Beer and Ale Wholesalers; 422820 Wine and Distilled Alcoholic Beverage Wholesalers; 422490 Other Grocery and Related Products Wholesalers

Heineken N.V. owns and operates one of the largest and most respected network of breweries in the world, producing the popular Heineken and Amstel brands of beer, as well as Murphy's Irish Stout, all of which the company markets internationally. The company's beer portfolio also includes a large number of national and regional brands, including Tiger, the number one regional brand in Asia. Heineken sells beer in nearly every country across the globe and brews beer at more than 115 company-owned breweries in more than 65 countries.

Run by the Heineken family for most of its existence, the business built a solid reputation early in its history for maintaining high standards for its beer, standards the company continues to adhere to more than 140 years later. Moreover, Heineken is also the single largest exporter of beer in the world. The company has operations in many countries outside its base in the Netherlands, though it has no brewing facilities in the United States, by far the company's largest export market; Heineken beer is the number two imported beer in the United States (behind Grupo Modelo, S.A. de C.V.'s Corona).

In parts of Europe, Heineken N.V. owns beverage wholesalers, which, in addition to handling beer, also supply soft drinks and spirits to restaurants and taverns; some of these soft drinks are manufactured in Heineken factories. Although no longer involved in day-to-day management, the Heineken family retains influence over the company it founded through its 50 percent ownership of Heineken Holding N.V., which holds a 50 percent stake in Heineken N.V.

BIRTH AND EARLY DEVELOPMENT

In 1864 Gerard Adriaan Heineken convinced his mother that there would be fewer problems with alcoholism in Holland if the Dutch could be induced to drink beer instead of gin, and, moreover, that beer brewed in Holland was of such poor quality that he felt a personal obligation to produce a high-quality beer. Heineken's mother bought him an Amsterdam brewery known as De Hooiberg (The Haystack) which had been established almost 300 years before, in 1582. Heineken was only 22 when he assumed control of De Hooiberg, one of Amsterdam's largest breweries. He was so successful that after four years he built a new, larger brewery and closed the original facility. His business continued to grow rapidly, and after six more years, in 1874, he purchased a Rotterdam brewery to add to his operation. Heineken incorporated his company as Heineken's Bierbrouwerij Maatschappij N.V. (Heineken's Beer Brewery Company) in 1873.

During this time, using a new cooling technique developed by Carl von Linde, Heineken gained the ability to brew year round at a consistent quality level. Heineken was thus one of the first breweries in the world to eliminate the brewer's traditional dependence on seasonal natural ice. In 1879 Heineken hired Dr. Elion, a former student of Louis Pasteur, to research yeast. Over the next 13 years Elion systematically bred and selected a specific yeast cell for Heineken, which came to be known as the Heineken A-yeast (yeast being the source of alcohol and carbon dioxide in beer). The Heineken A-yeast would continue in use into the 21st century and would eventually be shipped from Holland to all breweries owned or operated by the company, providing for a uniformity in taste among Heineken products, regardless of the different climates in which they were produced or consumed.

Heineken began to export just 12 years after the De Hooiberg purchase, with regular shipments to France. Exporting to the United States began soon after the founder's son, Dr. H. P. Heineken, assumed control of the company in 1914. Traveling on the Dutch liner Nieuw Amsterdam to New York, he met Leo van Munching, the liner's bartender. Impressed by van Munching's knowledge of beer, Heineken offered him a position as the company's importer in New York. The bartender quickly accepted. Van Munching distributed Heineken beer to the finer restaurants, taverns, and hotels in the New York area until Prohibition forced him to stop in 1920.

ACCELERATING INTERNATIONAL EXPANSION

After the repeal of Prohibition in 1933, Heineken was the first beer imported into the United States. World War II once again brought importing to a temporary halt while van Munching served in the U.S. Navy. When he returned in 1945, he formed Van Munching and Company, Inc., and established a nationwide distribution system to expand the beer's market beyond the New York area.

Beginning in the 1940s, the U.S. market became extremely important to Heineken, eventually becoming the beer's largest market outside the Netherlands. Through Van Munching's distribution system, Heineken became the dominant beer import in most of the United States. While many imports were available only in metropolitan areas or other limited geographical regions, by the 1980s Heineken was available in 70 percent of the nation's retail outlets handling alcoholic beverages. The majority of Heineken beer destined for the United States was brewed at the company's Hertogenbosch brewery, where special production lines accommodated the varied labeling requirements of the different states. Heineken beer also became the leading import in Japan, Canada, and Australia. Moreover, currency fluctuations had little effect on the company itself, largely because Heineken sold its beer to Van Munching, which paid the brewer in guilders and thereby assumed all currency risks.

In 1931 the company entered the first of many joint brewing ventures in countries to which it had previously exported. That year Malayan Breweries was formed in Singapore in association with a local partner. This was followed closely by participation in a brewery in Indonesia. In 1949 the company built the first of four breweries in Nigeria; the fourth opened in 1982. Between 1958 and 1972 the company also built four breweries and two soft drink plants in Zaire. Heineken had breweries in Rwanda, Chad, Angola, the People's Republic of Congo, Ghana, Madagascar, and Sierra Leone as well.

COMPANY PERSPECTIVES

Clearly recognizable standards and values are not a luxury: they are essential to our business at every level. Heineken is committed to sustainable development and as such, to optimizing our financial results with minimal impact to our business environment. To do this, we abide by a number of governing business principles and three core values—respect and enjoyment and passion for quality—that reflect our passion for beer and our respect for our employees, business partners, customers, shareholders and all others who are connected to our company.

During the late 1940s H. P. Heineken sent his son Alfred to New York to learn about Van Munching's marketing operation. The young Heineken took advertising and business courses in the evening and spent his days canvassing New York on foot with Van Munching's sales staff. His return to Holland in 1948 marked the beginning of a new era in the company's marketing strategy. Alfred Heineken had been impressed with the changes in the U.S. lifestyle brought about by electrical refrigerators and modern supermarkets, and he foresaw the eventual impact of modern conveniences on the Dutch way of life. He prompted the company to implement marketing techniques that capitalized on these habits. Recognizing the importance of the take-home market, for instance, the company began selling beer in grocery stores (with store displays designed by Alfred Heineken). In addition, Heineken began advertising its beer on the radio. Previously, advertising had been considered unnecessary because tavern owners were tied to specific breweries.

In the 1960s the company institutionalized its meticulous quality control efforts under its technical services group, Heineken Technisch Beheer, or H.T.B., which was formed in 1963. High quality was always the company's hallmark. The brewing process of medium-quality beers usually took three days and aging lasted a week at most. Heineken, however, brewed its beer for eight days and aged it for six weeks. The H.T.B. unit operated out of the company's laboratory at Zoeterwoude in the Netherlands and provided laboratory services, research on raw materials, project engineering, and other services for all breweries associated with the company. There was also a tasting center at the Zoeterwoude laboratory. Samples of all beers brewed under Heineken supervision were shipped there each month to be tested by panels of taste experts. The tests at Zoeterwoude augmented the taste testing that was carried out at each individual brewery.

PRODUCT DIVERSIFICATION AND CONTINUED GROWTH

Product diversification began relatively late in Heineken's history, because the company's emphasis had been on expanding its markets. In 1968, however, the company purchased the Amstel Brewery, Holland's second largest, founded by Jonkheer C. A. de Pesters and J. H. van Marwijk Kooy in 1870 and the first in Holland to brew lager beers. Amstel's export market was firmly established by the time Heineken purchased the operation. Through its acquisition of Amstel, Heineken gained interests in breweries in Surinam, the Netherlands Antilles, Jordan, Lebanon, and Greece. In 1980 Heineken eventually entered the low-calorie beer market with Amstel Light; by the 1980s Amstel beers were sold in more than 60 countries.

KEY DATES

1592:: An Amsterdam brewery known as De Hooiberg (The Haystack) is established.
1856:: Murphy's Irish Stout is first brewed in Cork, Ireland.
1864:: Gerard Adriaan Heineken assumes control of De Hooiberg.
1870:: Jonkheer C.A. de Pesters and J.H. van Marwijk Kooy establish Amstel Brewery.
1873:: Heineken incorporates his company as Heineken's Bierbrouwerij Maatschappij N.V.
1876:: Company begins exporting, with regular shipments to France.
1900:: Beer volume reaches 200,000 hectoliters.
1914:: Dr. H. P. Heineken, son of the founder, takes control of the company.
1931:: Company enters into its first joint brewing venture, Malayan Breweries.
1933:: Heineken is the first beer imported into the United States following the repeal of Prohibition.
1968:: Heineken acquires Amstel.
1970:: Company acquires the James J. Murphy brewery and its Murphy's Irish Stout brand; beer volume reaches 11.3 million hectoliters.
1971:: Alfred Heineken, grandson of the founder, is appointed chairman.
1972:: Company changes its name to Heineken N.V.
1980:: Amstel Light makes its debut.
1991:: Heineken purchases Van Munching & Company; expansion into Eastern Europe begins.
1995:: Interbrew Italia SpA and a majority stake in Slovakia's Zlatý Bazant A.S. are acquired.
1996:: Heineken takes over France's Fischer Group and Italy's Birra Moretti SpA.
1999:: Beer volume reaches 90.9 million hectoliters.
2000:: Grupo Cruzcampo S.A., Spain's largest brewer, is acquired.
2003:: Brau-Beteiligungs A.G. is purchased.
2005:: Heineken Premium Light is launched in the United States.

In 1971 Alfred Heineken was appointed chairman. The following year, the company changed its name from Heineken's Bierbrouwerij Maatschappij N.V. to Heineken N.V. The company's remarkable success outside the Netherlands led management to emphasize Heineken's international presence rather than casting it as a Dutch company with significant international operations. In fact, the company looked upon all of Europe as its domestic market. Heineken Holland had headquarters at the Zoeterwoude brewery. Its various breweries contracted with Heineken World to supply worldwide beer shipments. Heineken World headquarters remained in Amsterdam and were housed in an addition to the Heineken family home.

In 1970 Heineken entered the stout market by buying the failing James J. Murphy brewery in Cork, Ireland. In addition to Murphy's Irish Stout, which dated back to 1856, the brewery produced Heineken light lager brew under license. Wines, spirits, and soft drinks were also becoming increasingly important Heineken products. Soft drinks were made at Bunnik by Vrumona B.V., and the company bottled PepsiCola and 7Up under license. Heineken and its affiliates also sold Royal Club, Sisi, Sourcy, and B3 soft drinks; Royal Club and Green Sands shandies; and nonalcoholic beers such as Amstel Brew. Spirits and wines included Bologna, Hoppe, Coebergh, Glenmark, Grand Monarque, and Jagermeister brands. In 1971 Heineken purchased the Bokma distillery. Bokma Genever was Holland's most popular gin. The distillery at Zoetermeer was the headquarters of Heineken's Netherlands Wine and Spirits Group B.V.

The French market proved the most challenging to Heineken, and since entering France in 1972 through the purchase of a majority stake in the third largest brewing group, Heineken had only one profitable year there by the mid-1980s. The situation was considered so bleak that in 1986 the company and its French partner cut 500 jobs and closed down three breweries and a bottling plant in France, offering displaced employees retraining and outplacement. From 1983 to 1986 Heineken invested significantly in Sogebra S.A. (Société Générale de Brasserie), trying to sustain the company's French activities.

Heineken continued its international expansion throughout the 1970s and 1980s. Through license agreements, Heineken beer began to be produced in Sierra Leone and Trinidad (1972), Jamaica (1973), Norway and Sweden (1975), St. Lucia and Tahiti (1976), Haiti (1977), Ireland (1978), Italy (1979), Morocco (1980), Greece and South Korea (1981), Japan (1983), and Spain (1988). The company also purchased stakes in numerous foreign brewers, including: a minority stake in Cervejarias Kaiser S.A., a leading Brazilian brewing group, in 1983; a minority stake in El Aguila S.A., a leader in Spain, in 1984 (increased to 51.2 percent in 1986); and a minority stake in Quilmes International (Bermuda) Ltd., which had interests in Argentina, Uruguay, and Paraguay and later expanded into Chile.

In the 1980s the company was a victim of a series of criminal incidents. In 1982 two unsuccessful blackmail attempts were made against the brewery, followed the next year by an extortion attempt. The most serious incident was the November 1983 kidnapping of the company chief, Alfred Heineken, and his chauffeur. The two were held for 21 days and released after the company paid out an estimated 30 million guilders for their return (though the actual amount was never made public).

Heineken spent tens of millions of guilders each year to bolster its image as a prestigious import. The company's refusal to brew in the United States, even though its beer is brewed under license in many other countries, was in part attributable to a need to maintain the image. Löwenbräu's experience was not lost on Heineken; when Miller Brewing Company began brewing Löwenbräu under license in the United States the German brand lost a major portion of its market share. It appeared that Americans enjoyed the exclusivity of an import. The premium price they paid for Heineken beer lent credence to the image.

Heineken was unquestionably a powerful force in the brewing industry in the 1980s. In revenues it ranked fifth in the world behind Anheuser-Busch, Miller Brewing, Britain's Allied Domecq plc, and Japan's Kirin Brewery Company Ltd. Its share of the world beer market increased from 2.61 to 2.82 percent between 1977 and 1981.

Management policies at Heineken changed little over the years. The family retained control over virtually all aspects of the company, which was managed by a small team selected by the head of the family. The group was kept small in order to prevent factions from developing. As in the past, however, the family head of the company was involved in Heineken's day-to-day functions. Alfred Heineken, grandson of the founder and owner of 50 percent of the shares in the company, directly supervised research and development, finance, and public relations in the mid-1980s. Though Alfred Heineken officially retired in 1989, he kept close ties with the company well into the 1990s, serving as chairman and delegate member of the supervisory council (until 1995) and as chairman of the board of Heineken Holding N.V., which held a 50 percent stake in Heineken N.V.

EXPANDING AGGRESSIVELY INTO EMERGING MARKETS

As the company entered the 1990s, Gerard Van Schaik took over as chairman. When Van Schaik joined the company in 1959, he was responsible for export sales to the United States, which then, as in the 1990s, was the most important source of profits for Heineken. U.S. sales represented just 2.6 percent of the company's total, but contributed 23 percent of the company's $435 million in pretax profits in 1991; a 24-bottle case of Heineken sold on average for about 50 percent more than a case of the domestic favorite Budweiser.

Van Schaik focused on expanding the company's presence in Germany, by far the world's top consumer of beer. Emphasizing Heineken as a premium beer, the company invested in costly advertising, targeting in particular young Germans who, it was hoped, might find a foreign, imported beer appealing. Van Schaik also oversaw an important U.S. acquisition in 1991, when Heineken purchased Van Munching & Company, the U.S. operation that had handled the Heineken import business in the United States for six decades. This business then became officially known as Heineken USA, the U.S. arm of subsidiary Heineken Worldwide. Expansion into former communist markets began in 1991 with the acquisition of a 50.3 percent interest (increased to 100 percent in 1994) in Komáromi Sörgyár RT, a Hungarian brewer.

In the 1990s specialty beers remained very strong among the U.S. beer-drinking public as many consumers began drinking less and drinking better beers. Heineken was able to take advantage of this trend, offering a more full-bodied, European beer that many consumers desired. In fact, Heineken became the leading imported beer in the United States and brought the entire Heineken USA portfolio double-digit growth in 1994. During this time, more than one out of every five imports in the United States was a Heineken.

According to a 1992 Forbes magazine article, worldwide annual beer consumption had increased to about 30 billion gallons, equivalent to more than ten six-packs of beer per person per year, with especially strong volume in Latin America and Asia. In accordance with this trend, Heineken announced in 1992 that it had signed a joint agreement to become the first foreign beer producer in Vietnam. A $42.5 million brewery located near Ho Chi Minh City began producing beer under the Heineken and Tiger labels. In 1993 Heineken also moved into China, which in 1994 represented the world's second largest beer market, after the United States. By 1994, Heineken had three export offices and three breweries in China.

Karel Vuursteen became Heineken's chairman in 1993 and continued to expand the company's international presence focusing on Latin America, the Far East, Scandinavia, and Middle Europe. To facilitate the introduction of Heineken in Poland, Heineken paid $40 million for a 25 percent stake in Poland's Żywiec Brewing in 1994 (the stake was increased to 31.8 percent later in 1994). That same year, the company moved into Bulgaria through the purchase of 40 percent of the state-owned Zagorka Brewery A.D., which was based in Stara Zagorka and held 20 percent of the country's beer market. Also in 1994, Heineken entered into ventures to build new breweries in China (to brew Tiger beer) and in Cambodia (to brew Tiger and ABC Stout). The company also sold the bulk of its spirits and wine business that year.

In early 1995 Heineken acquired Interbrew Italia SpA, whose brands included Stella Artois and Classica von Wunster, from Interbrew S.A. of Belgium, increasing Heineken's Italian market share from 25 to 30 percent. Interbrew Italia was merged into Heineken Italia SpA. In October 1995 Heineken acquired a 66 percent stake in Zlatý Bazant A.S., the largest brewery in Slovakia. That year, Heineken also ventured into Myanmar through a joint venture that began constructing a new brewery to produce Tiger beer. Heineken's Indonesian subsidiary broke ground in 1995 at the site of a new brewery near Surabaja.

Heineken's aggressive acquisition drive continued in 1996. Early that year the company acquired the fourth largest brewer in France, the Fischer Group, and the third largest Italian brewery, Birra Moretti SpA, which produced the Moretti and Sans Souci brands. Heineken thereby gained the number two position in France, with 35 percent market share, and the top spot in Italy, with 38 percent of the market, although at the price of a short-term reduction in profits due to high integration costs. Also in 1996, the company withdrew from its Myanmar venture, concerned about the human rights situation there and the impact its presence there might have on the company's reputation.

The late 1990s continued to provide conditions ripe for consolidation in the global beer industry. Growth was slowing not only from the maturation of developed markets but also from the financial crises that rocked such emerging areas as Asia and Latin America. Heineken remained at the forefront of the consolidation trend, enhancing its position as the most international brewing group in the world through additional deal making. Poland was the focus during 1998. That year Heineken increased its stake in Żywiec to 75 percent, then merged Żywiec with Brewpole, the largest brewing group in the country and maker of the popular EB brand. Heineken held a controlling 50 percent stake in the enlarged Żywiec, which commanded 38 percent of the Polish market. Also in 1998 Heineken gained a 25 percent stake in Pivara Skopje A.D., the leading beer maker in Macedonia with a market share of 70 percent. In June 1999 Heineken reached an agreement to acquire Grupo Cruzcampo S.A., Spain's largest brewer, from Diageo plc. Spanish regulators, concerned about the purchase because of Heineken's majority stake in El Aguila, forced the company to cut about one-sixth of its Spanish production and storage facilities before the deal was consummated in January 2000. Heineken immediately began integrating Cruzcampo into El Aguila.

HEINEKEN IN THE NEW MILLENNIUM

Heineken's position of international preeminence at the dawn of the 21st century was attributable to its twopronged strategy of exporting its key global brands (Heineken, Amstel, and Murphy's) and acquiring or building from scratch foreign breweries with strong local or regional brands. Heineken thereby had attained leading positions in several markets in Europe and elsewhere and the number two position in Africa, behind South African Breweries plc (SAB). The company did occasionally bypass expansion opportunities, as it did in early 1999 when it decided not to bid for a controlling stake in SAB. But another cropped up a year later when Bass plc of the United Kingdom began exploring the sale of its brewing operations and Heineken showed keen interest. It faced a potential battle, however, from several rivals, including SAB itself, Anheuser-Busch, and Denmark's Carlsberg A/S. In the end, it was Interbrew, now known as InBev NV/SA, that won the bid for Bass.

The company's growth continued in 2002 with acquisitions in Egypt, Panama, Costa Rica, and Nicaragua. Heineken made its largest acquisition to date in 2003 when it added Brau-Beteiligungs A.G. (BBAG) to its arsenal. The $2.13 billion deal strengthened the company's foothold in Europe and also gave it an edge in Austria, Romania, Hungary, Poland, and the Czech Republic. By this time, Heineken held the leading market position in seven countries in Eastern Europe.

Intense competition and a changing beer market forced Heineken to continue its growth strategy during the early years of the new millennium. A September 2003 Business Week article summed up the climate in the industry claiming, "Beer consumption is declining in the U.S. and Europe, the source of two-thirds of Heineken's profits, because of tougher drunk-driving laws and a growing appreciation for wine. At the same time, the beer marketplace is becoming ever more crowded, thanks to a flood of new brands, from low-carbohydrate brews to Italian and Czech imports. But the number of players is shrinking." Indeed, industry consolidation had left Heineken as the world's fourth largest brewer based on volume. During 2005, the company sold 119 million hectoliters (99 million barrels) of beer and controlled 8 percent of the global beer market.

Heineken continued to bolster its holdings and introduce new products in 2004 and 2005. Acquisitions were made in China, Germany, and Russia. The company launched Heineken Premium Light in the United States in 2005 in an attempt to tap into the country's growing light beer segment. The company controlled 35 percent of the U.S. market and hoped the new product would not only strengthen its position but increase profits as well. At the same time, the company embarked on a cost-cutting program led by Belgian Jean François van Boxmeer, the company's first non-Dutch CEO. The restructuring included job cuts and brewery closures and was expected to save $473 million by 2008.

After 41 years Heineken cut ties with SABMiller, a company that was licensed to brew and market Amstel lager in South Africa. In 2006 the company opted to partner with Diageo plc and Namibia Breweries to create Brandhouse Beverages. Heineken planned to market its Amstel brand through this new venture. Financial results in 2006 were promising with increases in both revenue and profits over the previous year. The company's plans in the years to come focused on positioning the Heineken brand as a global leader, as well as increasing the popularity of its growing arsenal of regional brands.

Beth Watson Highman

Updated, David E. Salamie ;

Christina Stansell Weaver

PRINCIPAL SUBSIDIARIES

Heineken Brouwerijen B.V.; Heineken Nederland B.V.; Amstel International B.V.; Heineken France S.A.; Heineken España S.A. (Spain); Heineken Italia SpA (Italy); Athenian Brewery S.A. (Greece); Grupa Żywiec S.A. (Poland); Heineken USA Inc.; OJSC Patra (Russia); Ibecor S.A. (Belgium); Heineken Ireland Ltd.; Brau Union AG (Austria); Heineken Slovensko a.s. (Slovakia); Karlovačka Pivovaro d.d. (Croatia); Heineken Switzerland AG; Affligem Brouwerij BDS N.V. (Belgium).

PRINCIPAL COMPETITORS

Anheuser-Busch Companies, Inc.; InBev NV/SA; Grupo Modelo C.V. de S.A.; Diageo plc; Mendocino Brewing Company Inc.

Heineken N.V.

Heineken N.V.

Birth and Early Development

1930s Through Mid-1960s: Accelerating International Expansion

Company Perspectives:

Late 1960s Through 1980s: Product Diversification and Continued Growth

Key Dates:

1990s: Expanding Aggressively into Emerging Markets

Principal Subsidiaries

Principal Competitors

Further Reading

Heineken N.V.

Heineken N.V.

Principal Subsidiaries

Heineken N.V.

Heineken N.V.

Principal Subsidiaries

Further Reading

Heineken N.V.

Heineken N.V.

BIRTH AND EARLY DEVELOPMENT

ACCELERATING INTERNATIONAL EXPANSION

COMPANY PERSPECTIVES

PRODUCT DIVERSIFICATION AND CONTINUED GROWTH

KEY DATES

EXPANDING AGGRESSIVELY INTO EMERGING MARKETS

HEINEKEN IN THE NEW MILLENNIUM

PRINCIPAL SUBSIDIARIES

PRINCIPAL COMPETITORS

FURTHER READING

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Heineken N.V

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