Case 9
In January 2011, Dutch brewer Heineken announced the acquisition of five breweries in Nigeria as part of its plan to expand in one of the world's fastest growing beer mar-kets and Africa's second largest. The purchase will raise the firm's market share to approximately 68 percent, giving it a substantial lead over its competitors. Nigeria's beer market has grown at an annual rate of about 9 percent over the past 10 years, and growing sales in the country have provided a dominant share of Heineken's profits in Africa. The move came on the heels of the acquisition of a Mexican brewer, FEMSA Cervesa, for about $5.4 billion in 2010. The deal made the firm a stronger, more com-petitive player in the Latin American beer market, which has also become one of the most profitable and fastest growing markets in the world. It allowed the firm to add FEMSA's beer brands, such as Dos Equis, Sol, and Tecate, to its already vast array of offerings. Heineken had already been distributing these beers in the United States, under license from the Mexican brewery, to cater to the growing Hispanic segment of the population. However, the firm made its most high-profile recent acquisition in 2008 when it bought 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 the Scottish & Newcastle operations in several crucial European mar-kets, such as the United Kingdom, Ireland, Portugal, Fin-land, and Belgium, further solidifying Heineken's position as the leading brewer in Europe. But the Dutch-based firm also took over the Scottish brewer's ventures in far-flung places such as the United States and India. These decisions to acquire brewers that operate in different parts of the world have been 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 changes that are occurring in the global market for beer. Beer con-sumption has been declining in key markets as a result of tougher drunk-driving laws and a growing appreciation for wine. At the same time, the beer industry has become ever more competitive, as the largest brewers have been expanding across the globe through acquisitions of smaller regional and national players (see Exhibits 1 and 2). The need for change was clearly reflected in the appointment in October 2005 of Jean-Francois van Box-meer as Heineken's first non-Dutch CEO. He was brought in to replace Thorny Ruys, who had decided to resign 18 months ahead of schedule because of his failure to show
*This case was developed by Professor Jamal Shamsie, Michigan State University, with the assistance of Professor Alan B. Eisner, Pace University. Material has been drawn from published sources to be used for class discus-sion. Copyright © 2011 Jamal Shamsie and Alan B. Eisner.
much improvement in the company's performance. Prio-to the appointment of Ruys in 2002, Heineken had bee: run by three generations of Heineken ancestors, whose portraits still adorn the dark-paneled office of the CEO in its Amsterdam headquarters. Like Ruys, van Boxmee-faces the challenge of preserving the firm's family-drive: traditions while trying to deal with threats that have neve-been faced before. Confronting a Globalizing Industry Heineken was one of the pioneers of an internatic-- strategy, using cross-border deals to expand its distr.: tion of its Heineken, Amstel, and 170 other beer brands more than 150 countries around the globe. For years, it been picking up small brewers from several countries add more brands and to get better access to new markes.. From its roots on the outskirts of Amsterdam, the firm has evolved into one of the world's largest brewers, operating more than 125 breweries in over 70 countries in the WOrit, claiming a little more than 8 percent of the worldwItin market for beer (see Exhibits 3 and 4). In fact, the firm's flagship Heineken brand second only to Budweiser in a global brand survey jo undertaken by Business Week and Interbrand a couple years ago. This premier brand has achieved worldwide ognition, according to Kevin Baker, director of alcohol.
Exhibit 1 Income Statements (in millions of euros) 2010 2009 2008 2007 Revenue 16,133 14,701 14,319 12,564 EBIT 2,476 1,757 1,080 1,528 Net Profit 1,436 1,018 347 807 Dividend 438 318 210 343
Source: Heineken.
Exhibit 2 Balance Sheets
in millions of euros)
Assets 26,549 20,180 20,563 12,968 Liabilities 16,321 14,533 15,811 7,022 Equity 10,228 5,647 4,752 5,946
Source: Heineken.