The History, Design and Strategies of Heineken - Research Paper Example

Heineken On the 16th of December 1863, Gerard Adriaan bought Haystack breweries, an Amsterdam brewery, which had begun in 1592. After a few years, he had succeeded in achieving such increased sales that the current brewery became too small. Thus, in 1867, construction of a new brewery started in the outskirts of the city. Its speciality is the brewing of a 5% pale lager, which was commissioned in 1873. However, it was made available in a variety that was 4.6% and above in such countries as Ireland. This beer became its flagship product. To date, the group beer is brewed in more than 135 countries all over the world, with 2.74 billion litters produced in the year 2011, with total beer production in the same period hitting 16.46 billion litres across the world. Most of their brand beer has been brewed in a Zoeterwoude Heineken brewery, in the Netherlands since 1975. They form part of the most popular brands in brewing globally. This paper seeks to analyze Heineken’s United States international market currently and to discuss how its size plays a role in its logistics decisions. Heineken started as a family enterprise, and through three Heineken generations, each has formulated its own business building approach (Riggs 88). Heineken soon became the favourite beer brand in Europe and has successfully managed to export beer to every part of the globe. By the close of the 19th century, the competition had increased from other breweries. Thus, onward from 1950, Heineken International was expanded, under the stewardship of the Heineken NV Executive Board Chairman Alfred Heineken. He was responsible for imbuing Heineken with a unique image and worldwide fame. His mission was to show that beer was neither a regional nor a local product, but it could be travel. His work laid down Heineken’s concern for its international organisation and structure (Riggs 88). Initially, when Heineken was started, horse drawn carriages and carts delivered the beer, but later on Lorries came in to make transportation easier, along with shipping for its international markets. The containers containing the beer are loaded onto ships at Rotterdam and transported to the world. This exportation began early. Between the two world wars, there was Heineken, which exported its beer to Indonesia, West Africa, Britain, France, and Belgium. Heineken was the first foreign company to import beer into the US following the prohibition (Riggs 89). On top of this, they bought stakes in other breweries, in the US as well as around the world. This was, in addition to building new breweries, in some countries. In recent years, Heineken has been seeking attention for their brand via increased sponsorship of various events (Riggs 89). They have sponsored in recent years the South African rugby World Cup, Saint Maarten regatta, Heineken Classic golf tournament, and the Davis Cup Tennis Tournament. Sponsorship of Sport events is but one avenue via which Heineken attempts to interact with their customers. Others include via music like the Umbria, Puerto Rican, and Montreux Jazz festivals. The company mission is to be a Niche marketing market leader to accelerate top line growth that is sustainable. It also aims to accelerate cost reduction and efficiency, as well as accelerating their implementation. They also aim at making faster decisions and to focus on markets in which they believe they have a chance of winning. Heineken owns, markets, and sells over two hundred and fifty brands (Riggs 90). Its global brand is principally Heineken. Other specialty, international, regional, and local, premium brands include Zywiec, Zlaty Bazant, Star, Sol, sagres, Primus, Ochota, Newcastle Brown Ale, dos Equis, desperados, Cruzcampo, birra Morreti, Amstel, and Tecate. Joint ventures with other breweries include Tiger, kingfisher, Cristal and Anchor. Within a few years of being founded, Heineken had started to export beer to the Far East, Germany, Spain, Italy, and France (Riggs 90). Heineken’s managers decided, in 1914, to export their brand beer to the United States. This was successfully established by contracting Van Munching & company for the distribution of their product in the North American market. Following the end of the Second World War, Alfred Heineken travelled to New York in order to study advertising and marketing with van Munching before returning in 1948 to the Netherlands armed with the knowledge that would aid in the expansion of the brand to worldwide foreign markets. However, Heineken did not establish brewing in the U.S. Alfred’s trip to the US had enabled him to learn from the experience of Lowenbrau brewers who had started brewing in the US, but experienced drop in sales. This can be explained by the fact that since their beer could no longer be considered an import, its authenticity as a Bavarian beer was lost. Even as, it is obviously cheaper to brew Heineken in the U.S., Heineken continues to export its beer to the United States. Recently, they purchased Van Munching & Company, now owning outright the Heineken distribution arm (Riggs 90). Heineken realized that they needed an efficient way to process sales orders and forecasts (Gyeung-min & John 86). Traditionally, Heineken which was a global company, had a lead time that was too long in receiving forecasts and distributing products to the world, and in this case into the United states. A task force came up with an objective to reduce the period between which an order is placed and when the products were delivered to approximately 5 weeks from 11. It was in 1995 that they came to the decision to implement a system of supply chain management (Gyeung-min & John 86). This was to succeed the old method of communicating with distributors. Heineken implemented an extranet connecting them to suppliers or customers using internet technology (Gyeung-min & John 87). This technology was based on Voyager XPS, which is compliant with logility’s CPFR. This system can be utilized as an intranet that connects people in sales to Heineken’s central database. The system is christened Heineken operational planning system, and through it, Heineken can perform forecasting, replenishment, as well as ordering in real time via interaction with the distributors. Through this system, they can give forecasting data that is customized to their distributor’s individual web sites or pages. They are the first beer enterprise to plan and forecast on the net (Gyeung-min & John 87). The distributors access their customized web sites by use of internet connection and standard browser. On entering, an I.D and the password, distributors can view their forecasted sales, modify orders that had been made, and submit their complete orders, all by the click of a button. Submission of orders can be viewed in real time, in Europe, at their brewery. The Brewers can then adjust shipment and brewing schedules. The voyager XPS has a calendar that notifies the distributors of schedules and events. They also broadcast newsletters, new products, and problems (Gyeung-min & John 87). More benefits of collaboration online for planning include shorter time cycles, smaller inventories, and lower costs of procurement. This collaborative planning by Heineken USA has brought down order cycle times to four weeks from three months and simplifies planning for customers and distributors. By reducing lead-time, the beer, can be produced much closer to the period in which delivery will be made. This ensures that consumers receive beer that is fresher than before. Through it, Heineken achieved a reduction of fifteen percent for errors in forecasting, which was coupled to a sales increase of twenty percent (Gyeung-min & John 87). During the past 6 years, Heineken USA has been marketed as “the beer that reaches the parts that the other beers miss” (Gyeung-min & John 88). Heineken USA has re-arranged its system of distribution and this has made it more competitive relative to domestic brewers like Anheuser-Busch. While not reducing costs, these changes have allowed it to supply its four hundred and twenty five local distributors better. The depression-era restrictive laws have ensured that distribution of beer is via a structured 3-tier system. This means that for Heineken beer to reach the shelves on stores and pubs, it has to deliver the beer to local distributor networks. Heineken’s business is concerned with the flow of beer from the brewery to the consumer and includes all the logistics that are involved in between. Their goal as far as logistics were concerned was to structure the logistics in such a way that, they steered clear of a restaurant stoppage and optimized flow with their clientele. Beer is transported in keg form from the brewery in the Netherlands, via inland canals to Rotterdam, where it is loaded onto ships and transported to the U.S. Large proportions of the Heineken USA’s sales volumes are in the form of keg, whose size ranges from, thirty litres to fifty-litre spread all over fifty states. Their sales have continued to out sprint the market trends for imported products, and they thus realized that opportunities for improvement were in existence for their traditional methods of cooperage returning to the brewery for production needs in the future (Tompkins et al 103). Traditionally, distributors would return directly to their warehouses, which messed with customer services. Distributors were not appreciative of storing kegs until there was the accumulation of full export loads. To solve issues such as this one, the company, turned to Satellite Logistics Group Companies. This logistics company had come up with a program for reverse consolidation, which resolved negatives coupled to returning cooperage that dealt with all levels of the chain of supply. They came up with a new system christened Kegspediter, which utilized nine consolidation centres (warehouses) strategically located around the United States. These locations manage at least 70 different brands all from different domestic producers and importers (Tompkins et al 103). The contract covers Heineken shipments to retailers all over the United States (Boyson et al 99). Thanks to a network of national warehouses, coupled to its SAP-integrated star link, Heineken USA is now able to fill orders at a much faster rate than most importers. While building warehouses looks like a bad step, considering the orthodoxy of lean supply, Heineken USA has attempted to cut costs by enlisting providers for third-arty logistics (Boyson et al 100). For example, warehouses are managed and owned by other companies. This has acted to reduce the company assets, which are tied and connected to distribution, as well as adding flexibility. When a Seattle warehouse failed to reach expectations, for example, they just folded operations on the West Coast into the distribution point in Oakland. Outsourcing has helped to maintain Heineken USA’s task in selling and marketing beer, and moved them away from starting a logistics department. Given its size, the money used for coming up with its own logistics would be colossal (Boyson et al 100). Heineken USA continues to work with other distribution and transportation companies, to manage warehousing and drayage services in these diverse centres of distribution. Heineken’s corporate culture is defined by respect, enjoyment, and a passion for quality. These sustain the company’s drive towards social, environmental, and economic sustainability. Heineken has attempted to fulfil this in its shipping and packaging. In 1960, Alfred Heineken, on a visit to Curacao Island, was shocked by the beach, which was littered by discarded Heineken bottles (Denison & Guang 76). He started thinking of a responsible solution to the problem of exporting beer to countries that lacked the infrastructure for dealing with imported beer waste. Whereas in the Netherlands every bottle was returned to be refilled, and was usable for at least thirty round journeys, the Dutch Antilles bottle is not worth anything after beer consumption. This practice is still carried out today, with over a billion bottles produced every year (Denison & Guang 76). On returning to the Netherlands, Alfred, began to conceive a bottle design that would be for secondary use. He conceived a bottle that was akin to a building component, which turned the packaging function on its head. Through this design, Alfred saw the beer as a product that was useful for filling a brick during its shipping to overseas markets. He saw it as less redesigning the bottle and more redesigning the brick. Early designs offered many, varied bottle forms, which proved unworkable for construction, functionality, and manufacturing. A bottle requires a neck to be functional, which enables one to pour the contents in a controlled manner. The first design challenge was on the connection of the two bottles while still consisting of a protruding neck. This departure from cylindrical bottles that were the standard would portend implications for Heineken’s manufacturing process as well as image. The traditional bottles were also cheaper and faster to produce, compared to the other bottle shapes. This meant that the bottle would have to be cost justifiable. Since the production run consisted of six million bottles every day, manufacturing cost increase would add up soon. Cylindrical bottles display characteristics that are overall the strongest. Square bottles are fragile on their side, as they would be placed when being shipped (Denison & Guang 77). A simple solution for the design came up that used both the cylindrical bottles and square bottle strengths. The two opposite sides were made to have a flat profile, with the remaining two sides given a slight curve. This imbued the cylindrical bottles strength with a brick’s functionality. The issue of the interlocking neck was solved equally easily by a recessed design in the bottle’s base that fit the other bottle’s neck. Each of the bottles could then be bonded via use of mortar and cement and adhesion provided tiny surface protrusions (Denison & Guang 77). This resulted in a simple design that was ingenious a solution that was brilliantly re-thought. The final design of the bottle, which would pass the test of non-waste after use came a few years after the discovery of the former (Denison & Guang 78). The design became a resource that was valuable in an environment that was seeing waste management as a critical problem. The departure from a bottle design, which conventional allowed every bottle to turn into a building brick that could be connected to others for the purpose of a vast range of functional and recreational structures. One bottle can be connected to another sideways or lengthwise via pressing the knobs into the others cavity. When collecting these bottles, the reuse options and their material, which is valuable, become almost without limit. Many bottle making machines can manufacture these bottles using standard bottle material in most automatic bottlers (Denison & Guang 78). Palletising, capping, and labelling are also solved by the fact that the bottles shipping dimensions and closures are not very different from those of ordinary bottles. Heineken is working towards cylindrical, cubical, and prism like bottle designs. These products can be used for various applications after use including floating pontoons, partitions, boxes, shelving, furniture, and children playhouses and toys. These bottles can even be sand filled and utilized for the construction of bigger structures like greenhouses and pavements for gardens. Heineken USA’s strategy in relation to other large beer companies is aimed at five priorities of business (Riggs 250). Each of these priorities helps the brand in the achievement of its ultimate goal of winning over all markets in which Heineken brand is present, and to possess a complete brand portfolio in the chosen markets. This means that Heineken aims at taking the market leadership from other competing companies and maintain market leadership in those markets that they are present. These priorities include growing the brand Heineken in chosen markets to compete with other established brands as the brand of choice. They also aim to be brand-led, customer oriented, and consumer inspired. They have done this via the opening of the Heineken museum that celebrates Amstel beer and allows consumers to interact with the company. Another strategy has been the capture of emerging market opportunities before the competition gets in ahead of them. This has been done via market surveys that have yielded great results. They have also leveraged Heineken’s global scale benefits, by using them to gain a foothold in new markets by taking advantage of the global appeal of their name. Via a personal leadership drive, they have managed to consolidate their vision in the global market with stable and fast decision taking. This ensures that emerging threats to market share can be dealt with fast and decisively. Outside of Europe and the United states, Heineken also holds market shares in several other countries (Haig 62). It has over 15 breweries in the Middle East and Africa. These include Israel’s Tempo Beer Industries, Nigerian Breweries, Burundian Brarudi, Brasseries de Cameruon, Algeria’s Groupe Castel Algerie, Egypt’s Al Ahram Beverages company, Namibia Breweries, Nigeria’s Consolidated Breweries, Rwanda’s Bralirwa, and the Sierra Leonean Brewery. In Asia Pacific, they sell their product through Cambodia Brewery Limited, Chinese Hainan Asia Pacific Brewery Limited, the Indonesian Multi Bitang Indonesia, and Asia Pacific Breweries in Singapore. Works Cited Boyson, Sandor, Lisa H Harrington and Thomas M Corsi. In real time : managing the new supply chain. Westport: Praeger, 2008. Print. Denison, Edward and Guang Yu Ren. Thinking green. Hove : Roto Vision, 2011. Print. Gyeung-min Kim, John Price. Heineken USA: Reengineering Distribution with HOPS. Hershey: Idea Group, 2009. Print. Haig, Matt. Brand success : how the world's top 100 brands thrive and survive. London: Kogan Page, 2011. Print. Riggs, Thomas. Encyclopedia of major marketing campaigns. Detroit: Thomson Gale, 2007. Print. Tompkins, James A and Dale A Harmelink. The supply chain handbook. Raleigh: Tompkins Press, 2008. Print. Read More