HEINEKEN:

BREWING A BETTER WORLD

Anmol Mirpuri
212265963
INTL 4400

Table of Contents
Problem Statement...........................................................................................................................1
Situational Analysis.........................................................................................................................1
Alternatives......................................................................................................................................2
Recommendation.............................................................................................................................3
Implementation Plan........................................................................................................................4
Appendices......................................................................................................................................5
APPENDIX 1: SWOT ANALYSIS.............................................................................................5
APPENDIX 2: RBV ANALYSIS................................................................................................6
APPENDIX 3: FINANCIAL RATIO ANALYSIS......................................................................6
References........................................................................................................................................7

Problem Statement
Should Heineken segregate its sustainably sourced resources from the conventionally sourced
production, and if so to what extent should the segregation be prominent throughout the value
chain of Heineken?

Situational Analysis
Heineken is in a very competitive market, and thus, it is important to consider all factors (both
internal and external) before coming to a conclusion about whether or not the production process
should be segregated. Its important to note that Heineken has a broad portfolio of products and a
change in direction will affect many brands across the globe. It is equally important to be able to
adapt to the needs and wants of the local markets that they participate in because there is fierce
local competition. As can be seen from both the SWOT and RBV analysis (Appendices 1 and
2) Heineken has been a leader in introducing sustainable advantages in the beer world. However
its major competitors; SabMiller and AB.InBev have recently joined the venture into becoming
more sustainable as this initiative gains popularity. Thus, it is important that Heineken continues
to innovate to gain a competitive edge. Additionally, it is important to note that Heineken is on
track with the majority of the sustainability goals it has set, and in fact has added a focus on
community development and health & wellness as well.
Appendix 2 shows that another major competitive advantage that Heineken depends on is its
relationships with local, sustainable, NGOS that help push its initiatives in Africa. This is highly
important because Africa is a rapidly growing market with a lot of potential and these
relationships are hard to foster. This can help Heineken gain a strong footing in the African
markets.

Alternatives
To solve Heinekens dilemma there are 3 major alternatives that should be considered:
1. Continue with the mass balance principal approach
2. Segregate the production of sustainably-sourced raw materials
3. Shift to completely sustainable production
Continuing with the mass balance approach: By pursuing this method, Heineken can continue
to follow its current sustainability goals and targets. Additionally, the company can focus on
gradually increasing the sustainability levels of the products. It would also give the company
time to transition into completely sustainably grown recourses. However, it would be difficult
Segregating the production: Segregating the sustainably-sourced raw materials will give
Heineken an upper hand in terms of accounting for the level of sustainability for their projects. If
Heineken does choose to implement this system however, marketers will receive an upper hand
in terms of conveying the sustainability message. However, due to limited recourses, only
limited number of brands (the smaller niche brands in particular) will reap the benefits of being
100% sustainably sourced. This might create a divided image among products in the Heineken
portfolio. Additionally, arranging for farmers and managers (Especially in Africa) to agree on
this process will be a difficult task as (1) farmers are resistant to change as demonstrated by past
accounts and (2) Heineken has no control over individual farmer actions in Africa and uses
agents/managers to reach out to them. Inflicting another change requirement on African farmers
might scare these farmers to selling to the competition instead.
Shift to completely sustainable production: Although this may be the ultimate goal for
Heineken, it would extremely expensive and though to implement at its current stage. Heineken
needs to work on improving its footing with its suppliers and needs to raise capital before taking

the jump into being 100% sustainably sources at a point in time with sustainability isnt so
important when it comes to picking a beer.

Recommendation
It is recommended that Heineken sticks to their current Mass Balance Principle when it comes to
measuring the level of sustainable grown resources until they can transition into becoming fully
sustainable. This is because segregating production will create a divide in the goals of the
company. The segregated segments might vary from the overall mission and vision of the
company. Additionally, it will be easier to transition to a company that uses 100% sustainablysourced products from a unified production house. Segregating the production for accountability
purposes only goes against Heinekens policy of do and dont say, whereas gradually
improving production will only boast of the product once it is 100% sustainably sourced.
To add, if Heineken spends all its available funds on segregating its resources, it wont be able to
concentrate on the other 5 pillars of its sustainability vision. To emphasize, community
development and health & safety, the newest additions, need to be developed so they arent
perceived as fluff marketers included in the report to upsell the company image.
On last point to take not of is that although sustainable products are growing in popularity,
currently, a very minimal percent of sales is driven by sustainable initiatives. As seen in
Appendix 3, liquidity (current ratio), net income, and EPS have all had a significant decline in
the past year. As a result, investors may be reluctant in investing a project that does not have
significant impact on revenue at the current time. This in turn may reduce shareholder value even
further and reduce the value of the firm. Thus, improving production will gradually as
sustainability gains more popularity will be more feasible.

Implementation Plan
Company goals: Current sustainability targets are seen as too passive and therefore the first
order of action would be to evaluate and re-set targets. Achieving these tangible targets will
resonate with stakeholders who are concerned with sustainable initiatives, and it will prove that
Heineken is not simply trying to upsell the company image.
Supplier Code: In order to gradually achieve the sustainable goal of 100% a change to the
supplier code is recommended. Continuous improvement should be a crucial aspect of the code
and it is important that al suppliers are okay with evaluating and improving the current processes.
Therefore implementing and training managers on the six sigma approach should be crucial.
Sustainability Report: It is important to create a sustainability report that stakeholders will be
able to resonate with and be able to easily view Heinekens accomplishments as well as future
goals. Because the goals set are gradual an do not demonstrate an immediate result, it is
essential to be able to display that Heineken has embedded sustainability throughout its value
chain and is only looking to do better in the future.
Community Development: Heineken should also place an emphasis on this pillar, especially in
Africa, as the company is utilizing the continents natural recourses. Many countries that are
large hubs for Heineken, like Burundi, suffer from below average GDP/head and it is important
to show that the company is interested in making a difference in these communities and not just
reaping profits. One possible project could be to open up a vocational academy that focuses on
sustainable crop growing. This would create a win-win scenario for both Heineken and the
local community. They would learn the ways of the west and then be able to provide the quality
products that Heineken is looking for.

Appendices
APPENDIX 1: SWOT ANALYSIS
STRENGTHS:
-

Brewing a Better world campaign to increase the rate that

which sustainability is integrated within the company
Third biggest brewer in terms of volume globally
250 brand portfolio
Creative marketers

OPPORTUNITIES:
-

Largest international presence in the beer market

Partnerships with external sustainability players
Support from Dutch government
Support from the SAI platform
The demand for sustainable products is growing

WEAKNESSES:
-

Sustainability targets may not be ambitious enough

No concreate data on the amount of raw materials that are
sustainably sourced due to mass balance principle. Only
estimates are available
Sustainability report too technical

THREATS:
-

Sale volumes are declining internationally (except Asia

Pacific)
Threat from large brewery companies, but from local microbreweries as well
Competitors are also looking to get into sustainable sourcing
Heinekens main competitors are also members of the SAI
and thus the knowledge gained on establishing sustainable
practises is also shared with them
Rural farmers may be reluctant to new techniques
Loss in confidence from farmers in Sierra Leone

APPENDIX 2: RBV ANALYSIS

Rarity

Difficulty of
Conclusion
substitution
Yes. Its very hard to
come up with a
Yes. Consumers
Can be a source of
process to grow
demand for
competitive
recourses
sustainable products
advantage.
sustainably and
is on the rise.
implement it.
No. Other
Can aid company
companies use their
Yes. It is necessary
growth, but cannot
own competencies to
to come up with
be used as a
come up with
campaigns that
competitive
successful
support the product.
advantage on its
campaigns.
own.

Competency

Value

Inimitable

Sustainable
Sourcing

Yes. Consumers are

appreciating
sustainable sources
more and more.

Yes. Heineken is the

leader in sustainable
sourcing in the beer
industry.

Marketing

Yes. Consumers are

reactive to
successful add
campaigns.

No. Other
companies launch
their own
campaigns.

Partnerships in
Africa with NGOs.

Yes. Partnerships
allow them to be
more efficient in
Africa.

Yes. Very few

corporations are
successful in
creating meaningful
partnerships in
Africa.

Yes. It is hard to
form a strategic
alliance with a
common long-term
goal.

Yes. Partnerships are

essential for growth
in Africa.

Can be a source of
competitive
advantage

Support from
Dutch Government

Yes. The support

allows the company
to enhance their
projects.

No. Other
corporations also
receive support from
their local
governments.

Yes. It is difficult to
gain national support
on corporate
projects.

No. Support from

government can be
substituted by
support from other
organisations.

Can aid company

growth, but cannot
be used as a
competitive
advantage on its
own.

APPENDIX 3: FINANCIAL RATIO ANALYSIS

Net Profit (In Millions

2012
2914.00

2013
1364.00

% Change
-114%

of EUR)
EPS
Current Ratio

5.07
0.71

2.37
0.69

-114%
-3%

References
Reinhadt, Forest ; Alvarez, Jose; Junker, Tonia and Beyersdorfer, Daniela. Heineken-Brewing
a Better World. Case study. Boston: Harvard Business School Publishing, 2015.