Heineken NV is one of the world's largest beer producer, selling more beer outside the United States than its closest competitors, Anheuser-Busch and SABMiller. In 2002, only 14% of its sales were in its home country, the Netherlands. It is a market leader in almost all European countries and sells its products throughout North and South America, Africa and Asia.
The company was founded by Gerald Heineken in Amsterdam in 1864. Key export markets in the early years included countries in Europe and the Far East. In the early years of the 20th century, Heineken started to deal with Van Munching & Company and gave it exclusive rights to import and distribute its products in the U.S. After the Second World War, Alfred Heineken was sent to the U.S. to learn marketing and advertising from Van Munching & Company. He came back in 1948 and used the acquired competences to penetrate other markets across the world.
Heineken grew steadily and has production facilities in more than fifty countries, including France, Canada, New Guinea, Australia and Brazil. The joint venture created with Kirin was a key strategy to its entry into and ensuing strong presence in Japan. In addition, it acquired its largest local competitor, Amstel, in 1968, and, expanded aggressively in Europe in the 1980's to ensure market dominance.
Expansion included entire acquisition or purchase of controlling interests in European breweries. With a view to better manage its complex global distribution system, Heineken heavily invested in Internet-based technology.
Interestingly, for a long period of time, Heineken did not establish a brewery in the U.S. even though it might be cheaper than shipping its beer. The main reason behind such strategy was that the firm wanted to retain its product’s image as a true “imported” beer. Heineken, however, has made a recent strategic move in relation to the U.S. market – it has bought Van Munching & Company and has changed its name to Heineken USA. This has helped the company to improve its operational efficiency and to better coordinate its marketing campaigns in the U.S.
Another key decision of Heineken involved the purchase of Egypt’s sole brewery, Al Ahram Beverage Co. for $280 million in 2002. In line with Islam’s principles, this latter company used to sell a non-alcoholic beer under the Fayrouz label to Egyptians who are mostly Muslims. Heineken’s plan now seems both amazingly simple but with enormous profit potential – it can use its global marketing and distribution networks to introduce Fayrouz in other Islamic markets, potentially attracting millions of new consumers.
Questions
(a) Discuss the key steps to successful exporting.
(b) Discuss Heineken’s strategy in penetrating foreign markets.
(c) Identify the key issues confronted by Heineken in so far as licensing and foreign direct investment is concerned.