CEO Dolf van den Brink announced yesterday that he’ll step down from his role in May: saying it was the right time for a new leader to take on the next phase of the company’s strategy.
His decision comes after Heineken warned that FY2025 will be a difficult year: with volumes expected to ‘decline modestly’ and with operating profit expected to be at the lower end of expectations.
Heineken is now on a search for a leader who can help it grab the key opportunities it sees to move from the defensive to the offensive in the beer category.
Shaking up beer
Changing consumer trends are challenging for brewers: and consumers move away from traditional beers and towards newer, trendier options such as canned cocktails.
But Heineken believes this shift offers both challenges and opportunities.
Despite declines, beer still leads the beverage market, capturing 42% of consumer spending on alcohol. That’s twice the amount consumers spend on carbonated soft drinks.
And, in fact, there’s still ‘meaningful room to grow’ within beer for brewers who embrace innovation and technology, tap into emerging consumer trends and markets, and stretch brands into new occasions, says the brewer.
Embracing emerging markets
Heineken claims to be the most global brewer in the world: thanks to a footprint that covers a diverse range of international markets.
It has 85,000 employees around the world and sales in 190 countries.
That includes fast-growing emerging markets like India, Vietnam, Ethiopia and Mexico. In these markets, brand Heineken is a clear powerhouse: but there’s also local stars such as Harar in Ethiopia, Kingfisher in India, and Tecate in Mexico.
Emerging markets represent 80% of the world’s population: yet only have around half the per capita beer consumption of developed markets. Population growth, led by Gen Z, alongside urbanization and a growing middle class are boosting demand.
Heineken wants to use its scale and global know-how to embrace the opportunities in emerging markets and develop opportunities around the world.
Restructuring top roles
Van den Brink’s departure is not the only shake-up. Heineken is restructuring its business: putting more focus into Heineken Business Services (HBS), the division that provides essential functions such as finance, HR and IT.
This global network of connected hubs provides essential services and capabilities to operating companies within Heineken.
Meanwhile, Heineken is changing the focus of its global head office in Amsterdam this year: shifting some roles to Heineken Business Services and redesigning selected departments. Instead, the head office will hone its focus on strategy.
Around 400 roles are affected: either being moved over to HBS or ceasing to exist.
Heineken now says its achieved around €3bn (£2.6bn) in gross savings over the past five years, while it is on track to deliver a further €400-500m in annual gross savings moving forward.
Heineken is also accelerating digital transformation through the rollout of its Digital Backbone: a €1bn+ investment in how the company operates across 70 key markets.
Strategy for change
Heineken set out its strategy for change at its Capital Markets Day in Seville in October last year.
As well as leveraging its global footprint, reshaping top roles and targeting cost savings, it will also focus on growing key product categories. That includes premium beer and alcohol-free beer, led by Heineken 0.0, the world’s top alcohol-free brew.
It also wants to make new moves in categories beyond beer: such as cider and canned cocktails.
Heineken has delivered a TSR (total shareholder return) of -9% since Van Den Brink’s appointment in 2020: compared to 36% for AB InBev and 12% for Carlsberg.
Consequently, his departure is no surprise, says James Edwardes Jones, analyst at RBC Capital Markets. While Heineken has laid out a comprehensive strategy for the future, it hasn’t yet gathered the momentum investors want.
“We still think Heineken’s strategy laid out at the Capital Markets Day to increasingly focus on ROIC, spread more investments towards other global brands and improve data stifling productivity is the right one, but execution has been wanting in our view,” said Jones.
“Perhaps this change at the top is what Heineken needs.”