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.