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Teaching Note: Case 29 – Heineken
Case Objectives
1. To investigate how a firm competes in a global market.
See the table below to determine where to use this case:
NOTE: There are both PRIMARY and Secondary chapters that can be used for this case. The Teaching
Note gives guidance for the PRIMARY use chapters, and provides suggestions if the instructor wants to
use the case to illustrate concepts from the optional Secondary chapters.
Chapter Use Key Concepts Additional Readings or
Exercises
PRIMARY
International expansion;
NOTE additional reading, case
SECONDARY
Environment
External scanning and monitoring;
NOTE additional reading on
5: Business Level
Competitive strategy; generic
9: Strategic Control
& Governance
Strategic control; traditional vs.
contemporary control system;
Case Synopsis
This case deals with a firm that had been a pioneer in establishing itself as a global competitor in the beer
business, gaining recognition around the world based on its well-known green bottle. Heineken had to
Jean-Francois van Boxmeer was appointed as Heineken’s first non-Dutch CEO in October 2005. Since his
appointment, Heineken restructured itself to increase its ability to respond to the mega-acquisitions done
by its formidable competitors such as Belgium’s InBev and South Africa/United Kingdom’s SAB Miller.
Heineken entered into a joint venture deal with Denmark’s Carlsberg to acquire Scottish-based brewer
Scottish & Newcastle, and most recently had acquired breweries in Nigeria, Ethiopia, and Mexico. This
would help establish Heineken as the leading brewer in Europe, the second largest in Africa, and
a supplier to the growing Hispanic population in the U.S. Heineken had needed to raise its stature in its
various worldwide markets and respond to the changes that were occuring in the global beer industry.
Were the current strategies effective?
Teaching Plan
This is a fairly brief case, which can be covered quickly. The major opportunity here is to demonstrate the
ICEBREAKER
This case can start with an icebreaker. Starting from the perspective of a customer may make it easier for
students to transition to a strategic analysis.
How many of you are beer drinkers? Who do you think are the top beer companies in the world?
Students may call out beer BRANDS, not realizing that the global strategy of companies in the beer
industry is to consolidate brands into an increasingly smaller group of beer companies. After InBev’s
acquisition of Anheuser-Busch in 2008, the top 3 beer companies in the world are InBev (Belgium),
South Africa/United Kingdom’s SABMiller, and Heineken (Dutch). Other top companies worldwide
include the Japanese firms Kirin Holdings and Asahi, Carlsberg (Denmark) and Grupo
For an additional perspective on this industry, consider also assigning Case 14: The Boston Beer
How many of you drink Heineken by choice? Why or why not?
Here’s where students can discover just how hard it is to “differentiate” a brand. Is their preference based
on taste or on marketing? How many of them would be willing to bet they could identify their favorite
beer in a blind taste test?!
Before engaging in discussion, you might want to test student’s basic knowledge regarding the case and
Which of the following statements is most true?
a. Heineken is one of the most widely recognized beer brands worldwide.
b. Heineken started in Belgium, and has become a leading brewer in Europe.
c. Although sales of beer in stagnating in other places, demand is growing in the U.S. and Europe.
d. CEO Jean-Francois van Boxmeer is Dutch.
ANSWER: a. Due to its distinctive stubby green bottle, Heineken is one of the most widely recognized
beer brands worldwide. Although a leading European brewer, Heineken has always been a Dutch
Stella Artois, along with Amstel, is one of Heineken’s brands.
a. Yes
b. No
ANSWER: b. Although Amstel is one of Heineken’s brands, Stella Artois is a Belgium beer made by
Summary of Discussion Questions
Here is a list of the suggested discussion questions. You can decide which questions to assign, and also
Discussion Questions:
1. PRIMARY QUESTION: What strategy does Heineken follow in the global beer market?
2. SECONDARY QUESTIONS: What is the structure of the global beer industry?
3. What changes has Heineken made that will help it deal with its challenges?
Discussion Questions and Responses
1. What strategy does Heineken follow in the global beer market?
Strategy is all about the ideas, decisions, and actions that enable a firm to succeed. See Chapter 1, Exhibit
1.1: Strategic management consists of the analyses, decisions, and actions an organization undertakes in
order to create and sustain competitive advantages:
●strategy directs the organization toward overall goals and objectives;
●includes multiple stakeholders in decision making;
Corporate strategy focuses discussion on the questions of what businesses a corporation should compete
Diversification is the process of firms expanding their operations by entering new businesses. In related
diversification, a firm enters a different business in which it can benefit from leveraging core
competencies, sharing activities, or building market power. Some possibilities include:
●Mergers and acquisitions
●Strategic alliances
Whatever the choice, it should create value for all stakeholders – employees, suppliers, distributors, and
Referencing Chapter 7: International Strategy: Creating Value in Global Markets
International expansion is a viable diversification strategy, however before pursuing this, a firm needs to
There are several reasons to expand internationally. A firm’s motivation for international expansion could
involve the following:
▪To increase the size of potential markets
▪To attain economies of scale
When choosing a country to expand into, firms must assess certain factors: the degree of consumer
demand, the degree to which resources such as skilled labor and other supplier or supporting
There are two opposing forces that firms face when entering international markets: cost reduction, and
adaptation to local markets. Therefore there are four basic strategies firms can use: international, global,
multidomestic, and transnational. See Chapter 7, Exhibit 7.4.
Strategies that favor global products and brands should standardize all of a firm’s products for all of their
worldwide markets and should reduce a firm’s overall costs by spreading investments over a larger
market. These strategies are based on three assumptions:
●Customer needs and interests worldwide are becoming more homogeneous
●Economies of scale in production and marketing can be achieved through supplying global
Heineken’s global strategy was to create a corporate office to coordinate and control operations across the
Heineken’s expansion strategy was to pursue acquisitions of local breweries known in regional markets.
This means these acquisitions can be geared to local tastes. Of interest is a comment Heineken CEO made
Heineken also engaged in joint venture partnerships with other brewers, as it did with Danish-based
Issues Heineken still needed to address: substantial investments may be needed to build up the activities
Acquisition is the incorporation of one firm into another through purchase. It can be a means of obtaining
valuable resources that can help an organization expand its product offerings and services. Acquisition
Heineken had already acquired local breweries in Italy, France, Austria, and Germany. Heineken’s
acquisition of the Scottish-based Scottish & Newcastle brewer allowed it access to not only the brewery,
Acquisition of Asian Pacific Breweries gave it access to many popular Asian beers such as Tiger and
Bintang.
Other acquisitions included an acquisition in Singapore, an aggressive push into Russia, and purchase of
Everyone likes beer. Using its international reach and its local partners, Heineken could brew a type of
beer that met local tastes while also marketing its Heineken brand in that region. This reduced overall
NOTE – ADDITIONAL READING AND VIDEO VIEWING:
Visit Heineken’s website to see current news and product positioning:
http://www.theheinekencompany.com/age-gate?returnurl=%2f
Go to Investors, Reports and Presentations to see the Annual Reports from previous years. For instance,
the 2007 report cites strong increases in sales in Central & Eastern Europe, Africa and the Far East, plus
plans to construct a brewery in South Africa, all supporting long-term growth. At the same time, growth
In an attempt to broaden the appeal of the Heineken brand, several interesting TV commercials have been
made. See, for instance, the video “The Date” at https://www.youtube.com/watch?v=57zo8O5pDXc
See SAB Miller’s take on the global beer market:
http://www.sabmiller.com/home and http://www.sabmiller.com/about-us/where-we-operate
News in 2007 of the change in the European competitive landscape, with Russian beer consumption
growing, and a Russian brewery, Baltika, gaining market share is here:
http://www.businessweek.com/globalbiz/content/jul2007/gb2007073_616975.htm. No wonder Heineken
identified Russia as a major growth target.
The #2 brewer SAB Miller targeted Africa for growth. Recognizing that the economies of most African
countries don’t support much beer drinking by the low income population, SAB Miller was looking into
using cheaper, African-grown ingredients such a barley and cassava. A reduction in the cost of production
In the U.S. market, although sales are dominated by U.S. brewers Anheuser-Busch InBev, Miller Coors
Brewing Co. and Pabst Brewing Co., with competition from global competitors Heineken and Grupo
Modelo/Crown, the “craft” brewers, notably Sam Adams, which holds .009 market share, are gaining
ground. For an historical perspective, see the 2009 documentary “Beer Wars”, which documents the rise
of the craft brewers such as Boston Beer and Dogfish Head. For instance, “Beer Wars exposes a clear and
Have these growth areas been adequately anticipated by Heineken’s competitive strategy? What else can
Heineken do to fuel growth?
2. SECONDARY QUESTION: What is the structure of the global beer industry?
NOTE this section does not have any accompanying PowerPoint slides.
Referencing Chapter 2: Analyzing the External Environment
As part of strategic analysis, it’s necessary to engage in external scanning: surveillance of a firm’s
external environment to predict environmental changes to come, detect changes already under way, put
Strategic analysis assesses the segments of the external competitive environment that include competitors,
customers, and suppliers, substitutes and new entrants. One key issue that must be addressed is the
question what industry are you in? Heineken is in the beer industry, which is different from the general
Rivalry
High
Substitutes’
Threat
High
Buyers’
Power
Med
Suppliers’
Power
Low
Suggested: High - largest
brewers expanding across
the globe through
acquisitions of smaller
regional/national players;
fragmented industry; beer
consumption in the U.S.
has declined.
Suggested: There are no
industry buyers, only local
consumers who do not have
negotiating power over price;
however, there are abundant
choices for consumers, and
the appeal of the brand is
difficult to maintain. Brand
image, therefore the
marketing strategy, is
important.
Suggested: Low –
Supplier commodities are
those such as water,
hops, barley, etc.
Suggested: High
– Growing
appreciation of
wine. Hard liquor
still popular in
many places.
Suggested: Med - The top four
brewers account for only about
a third of the global market
share – a number of local
brewers operate successfully in
their niches.
Threat of
New
Entrants
Med
Once the industry is defined, Porter’s five forces model allows strategists to anticipate where the industry
Based on the external environmental factor analysis, the beer business has some opportunity for
NOTE – ADDITIONAL READING:
Historically, the global beer industry has looked to acquisitions or product innovations to fuel growth in
the past. In this report from 2008 it appears that the opportunities for continued acquisitions were
becoming limited. This meant major players would have to look at regional/local brewers if they wanted
to grow through acquisition – or they would have to do internal development:
http://www.businessweek.com/globalbiz/content/jul2008/gb20080714_615944.htm
In June 2013, Anheuser-Busch InBev audaciously completed its acquisition of Grupo Modelo. This means
the brands Corona, Modelo Especial, and Pacifico, which occupy top places in market share of U.S.
imported beer sales, will now add clout to the A-B InBev stable of products. A-B InBev now has Corona
to add to Budweiser, Stella Artois, and Beck’s, positioning the company as a global powerhouse in beer
products. See http://online.wsj.com/article/SB10001424052702303649504577495921266834262.html for
From early 2013, here is a story about this consolidation in the beer industry. See this video discussing
Anheuser-Busch InBev’s acquisition of Mexican’s Modelo:
http://www.bloomberg.com/news/videos/b/b96f37ba-d801-44fa-b549-ada5fc44eaa5 According to this
Here’s a fun facts graphic on A-B InBev: http://www.businessweek.com/articles/2012-10-25/99-facts-
about-beer-on-the-wall-dot-dot-dot
Regarding the global socioeconomic challenges of beer, here’s a story issued by Russia's biggest beer
brand, Baltika, a division of international brewer Carlsberg about the outlook for beer and alcohol
consumption in Russia. Macroeconomic issues reduced opportunity in Russia in 2015, and the brand's
long-term growth opportunities in the region are very uncertain:
http://www.themoscowtimes.com/article/520630.html
Referencing Chapter 5: Business-Level Strategy
In order to achieve a sustainable competitive advantage, Heineken has to assess its ability to contend with
other consumer goods providers, especially its main rivals, SAB Miller and InBev. The question of how
to compete in a given business to attain competitive advantage requires an assessment of the types of
competitive strategies, including the three generic strategies that are used to overcome the five forces and
achieve a competitive advantage:
●Overall cost leadership
oLow-cost-position relative to a firm’s peers
●Differentiation
oCreate products and/or services that are unique and valued
●Focus strategy
oNarrow product lines, buyer segments, or targeted geographic markets
Ask the students which strategy they think Heineken should pursue, and why.
Although any company in this crowded industry must keep costs low, if only to achieve parity with
competition, the only way Heineken has chosen to compete is through differentiation. The hope is that
3. What changes has Heineken made that will help it deal with its challenges?
See Chapter 1, Exhibit 1.3 for a depiction of the strategic management process. During strategic analysis,
the leader does “advance work” to anticipate unforeseen environmental developments, identify
In strategy implementation, depending on the type of organization structure, the leader might include key
individuals in a discussion around selecting which strategies might be best to implement at which level
within the organization. The leader must ensure proper strategic controls and organizational design, and
The basic question strategic management tries to answer is: How can we create a sustainable competitive
advantage in the marketplace that is not only unique and valuable but also difficult for competitors to
copy or substitute?
Heineken adopted a new organizational structure to speed up decision-making – reduced size of
management, created clear areas of responsibility. It also concentrated on key brands - building a global
Referencing Chapter 9: Strategic Control and Corporate Governance
Strategic control involves the process of monitoring and correcting a firm’s strategy and performance.
In a traditional control system, top management formulates strategies and sets goals. These strategies are
implemented, and then performance is measured against the predetermined goals. In a contemporary
Contemporary control systems must have four characteristics to be effective.
1. The focus is on constantly changing information that has potential strategic importance.
2. The information is important enough to demand frequent and regular attention from all levels
3. The data and information generated are best interpreted and discussed in face-to-face meetings.
4. The control system is a key catalyst for an ongoing debate about underlying data, assumptions,
An executive’s decision to use the control system interactively – in other words, to invest the time and
attention to review and evaluate new information – sends a clear signal to the organization about what is
Students should therefore recognize the importance of involving all operating managers in setting
Upon taking over the helm of Heineken in 2005, CEO Jean-Francois van Boxmeer had announced that he
would have to work on the company’s culture in order to accelerate the speed of decision making.
Heineken had been run by three generations of Heineken ancestors, whose portraits still adorned the dark-
Furthermore, van Boxmeer seemed quite comfortable working within the family-controlled structure.
“Since 1952 history has proved it is the right concept,” he stated about the current ownership structure.
Highlighting the importance of using contemporary controls, involving all levels of management in
decision making, Heineken created management positions that would be responsible for five different
operating regions and several different functional areas. These positions were created to more clearly
Corporate governance refers to the need for a firm’s shareholders (the owners) and their elected
representatives (the board of directors) to ensure that the firm’s executives (the management team) strive
to fulfill their fiduciary duty of maximizing long-term shareholder value. In this, students also should
Although the management of Heineken moved away from the family for the first time, the managers were
well aware that the long-standing and well-established family traditions would be difficult to change.
The family members were behind some of the changes announced at the time of van Boxmeer’s
appointment that would support the firm’s next phase of growth as a global organization. As part of the
plan, dubbed “Fit 2 Fight,” the executive board was cut down from five members to CEO van Boxmeer
The Executive Committee of Heineken was cut down from 36 to 12 members in order to speed up the
decision-making process. Besides including the two members of the executive board, this management
Finally, all of the activities of Heineken were overseen by a supervisory board, which consisted of 10
members. Individuals on this board were drawn from different countries and had a wide range of
These changes were evidence that Heineken recognized the need to align key stakeholders’ interests and
NOTE – ADDITIONAL MATERIAL ON HEINEKEN LEADERSHIP:
Regarding management and leadership, the Heineken Supervisory Board in Amsterdam had asked its
chief executive Anthony Ruys to step down in 2005 after only two years in the position, to be succeeded
by a Belgian, Heineken executive board member Jean Francois van Boxmeer. Van Boxmeer had been
with Heineken for over 20 years, and would become the first non-Dutchman to lead the company. The
change was prompted by poor financial performance and the perceived need to streamline the
management structure. According to the following article, Heineken would replace a single-market
approach with operations grouped on geographic lines. This would put in place a structure aligned “with
the rest of the industry”:
http://www.ft.com/intl/cms/s/0/44265a32-abb9-11d9-893c-00000e2511c8.html#axzz3oqsdS2JZ
Here is information about the management structure:
http://www.heinekeninternational.com/management.aspx
Van Boxmeer had said he “would continue a strategy built on partnerships, the acquisition of regional
players and organic growth.” Playing down prospects of a mega-merger, he added: “Beer is a multi-
regional business. World scale is not what you should pursue.” He said this in 2005. Do you think he
would say this today?
Given Van Boxmeer’s approach to strategy, do you think Heineken will be able to continue its growth?
