Heineken moves to regional strategy in Russia

Heineken moves to regional strategy in Russia

Heineken has given up attempting to be a nationwide brewer in Russia and is instead focussing its resources on key regions in order to improve its beer market share, the brewer's chief financial officer has said.

Heineken's market share in Russia has returned to growth "after having dropped very heavily" last year, Rene Hooft Graafland told the annual conference of the Consumer Analyst Group Europe yesterday (30 March).

However, Hooft Graafland said that Heineken has been forced to adapt its strategy in Russia, given Carlsberg's domination of the market with a 40% volume share, and Sun InBev's strong number two position. Heineken sits in third, and lost ground in 2010 after suffering disproportionately from the Government's three-fold tax hike on beer.

Answering a question from just-drinks on the group's expectations for Russia in 2011, Hooft Graafland said: "We always say that you need to be a number one or number two in a market, but in Russia we are certainly not.

"In this situation, there are two things that you can do. [First], try to acquire a business that gives you that strategic position, but this is not very likely in Russia because the market is very concentrated. That means that we need to do it organically.

"We have to concentrate on regions where we have a number two position and give up on regions where we're just not strong enough." He added that Russia's size, stretching over nine time zones, makes this easier. "Russia is not a national market," he said. "You can play a regional strategy."

Heineken will, however, continue to "play a national game" with its namesake brand, which, according to Hooft Graafland, was unaffected by the company's market share losses last year.

During 2010, Heineken sought to cut costs across its business, largely across Western and Eastern Europe, as part of its three-year 'Total Cost Management' initiative.
Hooft Graafland said that reducing debt and integrating the FEMSA Cerveza business in Mexico remain Heineken's core focus in the short-term. But, he said that the brewer remains interested in small, bolt-on acquisitions. Earlier this week, it emerged that Heineken has placed the highest bids for two state-owned Ethiopian breweries, Harar and Bedele, that are due to be privatised.

"It looks like we're well-positioned to get them," said Hoof Graafland, who said that Africa is currently a "sweet spot" for the global beer industry.