Heineken: Brewery Operations, Supply Chain & Cost Structure

This is a snippet of the transcript, sign up to read more.

You have a fascinating career and the perfect profile to discuss some of the questions I have. I wanted to start by looking at the various OPCOs and Heineken regions around the world, focusing on benchmarking. Can you walk me through the benchmarking process within Heineken at HQ, between OPCOs, and between regions? Is it an aggressive benchmarking process, competitive, or is each OPCO only competing with itself in terms of brewery operations, efficiency, etc.?

Both. We used to be very weak in that area, to be honest. Compared to our biggest competitor, ABI, InBev, they are much more performance-driven. Sometimes we referred to them as bankers because we felt they lacked enough brewers, but they were more business and performance-oriented. We have an internal benchmark system called the BCS, which stands for Brewery Comparison System. It includes various indicators from brewing, packaging, operations, logistics, and more to compare breweries. The methodology and system were in place, but our standardization in processes, ways of working, and systems was poor. We often made excuses like, "You can't compare me with Poland because Poland is doing this and that." It wasn't well developed. In the last five to 10 years, we've moved towards a standard way of working, standard solutions, and systems, leading to stronger and more aggressive benchmarking, which I think is beneficial.

This is a snippet of the transcript, sign up to read more.

If you had to put a thesis out there, what implications do you think this has had, is having, or will have on the business in terms of cost per hectoliter or other aspects?

There are two sides to the coin. In the short term, it will lead to an increase in costs. A good example is our heavy investment in a planning tool in Europe to standardize demand and supply planning. That cost a significant amount of money. If you made the business case with a two to three-year timeframe, it would have been negative. However, it is mandatory for the next step we are now in the middle of, to optimize our footprint. We are moving towards demand planning, production planning, and transport planning, centrally led for all of Europe. Then, a lot of savings and efficiencies will kick in.

This is a snippet of the transcript, sign up to read more.

Before we dive into the details of fully freight on board to a retailer's distribution center, which is what I want to discuss, could you spend a few minutes on the current atmosphere at Heineken HQ? Specifically, the pressure they're feeling concerning the end markets in Europe. Has the urgency ever been greater than now? Is there a realization that they need to be more aggressive on costs than ever before? If you compare the situation today to five years ago, is it very different or not much has changed?

On the bottom line, we squared the numbers, but there was always a slight reduction in ATL and BTL spending. We reduced marketing expenses slightly to maintain the same EBITDA at the end of the year. When Dolf van den Brink stepped in, he made a clear statement that we would do the opposite. He said we would increase our spending on ATL and BTL because reducing it is a dangerous strategy. It might work for a couple of years, but eventually, you start losing traction, brand power, and market share.

This is a snippet of the transcript, sign up to read more.