Perfect Storm Brewing in Europe: Heineken CEO
Chairman and CEO of Europe's largest brewer, Heineken, Jean-François van Boxmeer, tells CNBC's Christine Tan that a "perfect storm" is brewing in Europe where it is struggling with declining sales as a result of weak consumer sentiment.
Q: How challenging has it been growing sales in this environment?
It is a perfect storm in Europe because we have no growth... by and large because of no population growth. But there is another side to our story and it is our development in places like Africa where it is booming, in Asia overall where we are booming, and also in Latin America. So i think that the story has both sides. Yes, tough times in Europe and North America, but also very promising times in the rest of the world.
Q: What strategies have you had to weather this downturn?
In Europe in the last 10 years, we have closed down 47 brewing and malting plants. We have been restructuring a lot, boosting our productivity, and at the same time, investing in innovation and new products in order to gain market share. So the game is tough, but we have to create a mindset in the company to win because even if the market is decreasing, you have to put the minds of our people to winning.
Q: In August, you warned that weak consumer sentiment and a bad summer would actually wipe out profit growth this year. Are you seeing any signs of improvement going into next year?
Well, I'm waiting for next summer. I hope it will be better so you can't do anything about it. Economic circumstances in Europe are tough, and it translates essentially to our market that people are going out less than they usually do. Going one time per week less out to the pub, for example, that times millions of people translates into quite a sizeable downside to our business in some European countries.
Q: Western Europe economies, including. Portugal Italy, Greece and Spain, make up around 45 percent of Heineken's overall revenue. Do you have a contingency plan in place if things take a turn for the worse?
We have of course contingency plans in place but the country which has been most affected so far has been Greece. Not only because people consume less, but also because the Greek government has been raising the taxes in our industry quite heavily, and among other industries by the way too. So that is, I would say, the biggest danger that you would have on an industry like ours when things got worse for public finances. They turn to breweries to fill part of the gap. I would say that is the biggest risk I see.
Q: Are you prepared to close down more factories or more breweries in the affected countries in Europe if you have to?
If we would have to, but let's not go to the worst scenario. We are a very ordinary and popular product that is consumed everyday. What you see is a shift in consumption. I mean people buy a little bit more in supermarkets when people go out compared to when they stay at home. So the effect on our sales at present is not that big compared to cyclical goods like automobiles or electronic goods. So we suffer definitely less in consumption than in other categories.
This is an excerpt taken from CNBC’s longest-running feature program Managing Asia. Catch the show with anchor Christine Tan on 16 December 1830 (SIN/HK) and repeats over the weekend on CNBC.