Heineken SWOT Analysis (2020)

Heineken

Heineken is one of the world’s largest brewers. In this article, we are going to do a SWOT analysis of Heineken. SWOT is a strategic analysis tool to investigate the strengths, weaknesses, opportunities and threats for an organization. If you want to learn more about what a SWOT Analysis actually is, have a look at this article.

Heineken Company Profile

Name: Heineken N.V.
Year Founded: 1864
Industry: Beer & Non-Alcoholic Beverages
Biggest Competitors: AB InBev, Carlsberg, China Resources Snow Breweries, Molson Coors Beverage Company
Headquarters: Amsterdam, Netherlands
Number of employees: 85.000+ (2018)
Revenues: € 28.551 billion (2019)
Net Income: €2.166 billion (2019)

SWOT Analysis of Heineken: Overview

In the Infographic below, you’ll see an overview of the strengths, weaknesses, opportunities and threats for Heineken.

SWOT Analysis Infographic of Heineken

Strengths

Strong Brand Name

Heineken has a very strong brand name that is known around the world. Although personally it is not my favorite beer, Heineken stands for quality. Customers and businesses know what to expect from the product. Heineken has a strong reputation which it has built over their existence of 1.5 centuries. Additionally, the beer brewer has a strong logo. The red star is recognized all over the world.

While Heineken is the main brand, The Heineken Group owns many other strong brands. In fact, there are more than 300 HEINEKEN Brands. Some of the main strong international brands are:

  • Tecate (Mexican)
  • Amstel (Dutch)
  • Cruzcampo (Spanish)
  • Sagres (Portuguese)
  • Desperados

Product / Market Diversification

Al already became clear from all the brands that Heineken owns, the global beer brewer has a wide product portfolio:

  • Heineken has a global presence (more about this in the next paragraph)
  • It has many different beer brands (+/- 300)
  • Heineken has diversified by offering malt products and non-alcoholic beverages.

Global Presence

Heineken is active all around the world: the firm sells their products in more than 190 countries. To illustrate how impressive this is: there are 195 countries in this world. That means Heineken sells there products in 98% of all countries worldwide. More than 85.000 employees help to deliver Heineken products.  This global presence helps Heineken to pursue new growth opportunities. It also spreads the risk of regional economic downturns.

Let’s look at how well Heineken is present globally in a bit more detail. In its 2019 annual report, Heineken distinguishes the following regions:

Africa, Middle East and Eastern Europe

Heineken is growing fast in Africa, Middle East and Eastern Europe. Key brands in this region are Heineken, Primus, Amstel, Mutzig and Life.

Americas

In the Americas, Heineken has a strong position as well. The main brands (aside from Heineken) are Tecate, Dos equis, Schin and Lagunitas. Brazil and Mexico are growth regions for Heineken. The US beer market is challenging for Heineken. Heineken 0.0 however has a growing trend.

Asia Pacific

Heineken has grown fast in the Asia Pacific region in 2019. Popular brands in this region are Heineken, Anchor, Larue, Tiger and Bintang. The beer market in this region is growing in general, which has a positive effect on Heineken too. Heineken adapts its products to the local markets. For example, in Vietnam, Heineken Silver was launched, an easy to drink beer with a lower alcohol percentage of 4%.

Europe

Heineken is well presented in Europe. Key brands on the European continent are Heineken, Cruzcampo, Birra Moretti, Desperados, and Strongbow. Focus point for this region is digitalization.

Marketing Power

In 2019, Heineken spent € 2.632 billion on marketing and selling expenses. They have a solid marketing strategy. This allows them to let the world know about their products. It also helps to position their Premium brands. Heineken knows how to make a strong commercial.

Here’s one example, created during the Covid-19 pandemic:

Or this hilarious one (it’s in Dutch, but the video is self-explanatory):

Next to advertisements, Heineken is highly active in sports sponsorships to promote their products.

For example, the beer brewer sponsors the following sports events:

  • Formula 1
  • UEFA Champions League
  • Rugby World Cup
  • Heineken 0.0% is going to sponsor the UEFA Europa League as of August 2020

Product Development & Innovation

Heineken likes to position itself as an innovative company. As a premium beer producer, innovation is important to keep justifying the relatively higher prices. Customer needs keep chancing and Heineken needs to stay on top of that.

Heineken mentions two programs to ensure innovation:

  • The in-house accelerator called iLABS. I cannot find any information about this, but it seems to be an internal programme to stimulate innovation and promote an innovative culture.   
  • An open innovation platform called The Brewhouse. This one is more interesting: an online platform on which Heineken organizes innovation challenges. These challenges cam ne focused on product design or sustainability.

Heineken continuously develops new products. One great example is Heineken 0.0. This is an increasingly popular beer without alcohol.

Heineken also tries to innovate by using advanced technologies such as Big Data, Artificial Intelligence and IoT. With data driven analytics, Heineken tries to improve its supply chain processes and investigate consumer trends. Read more about how Heineken uses technology in this excellent article.

Weaknesses

Low Market Share in Several Markets

Although Heineken is geographically diversified, they are not as successful in all regions. Especially in the United States, the second largest beer market after China, Heineken is lacking. This poor performance lead to necessary measurements: Heineken had to cut 15 of its US workforce in 2019.

North America is not the only region in which Heineken is struggling. Although Heineken is growing its volume in Asia, its market share in that region is still relatively small and there is plenty of room for improvement. This is especially the case in China.

Currency Rate Dependency

Heineken’s result are dependent on favorable currency exchange rates. Weaker currencies in markets where Heineken is strong negatively impacts the results. In 2020 for example, Heineken reported such a negative effect. In 2016, a weak Peso meant the results In Mexico were worse than expected. This effect is hard to predict.

Opportunities

Economic Growth

The world economy can be expected to grow based on the fact that the population is growing. Population growth and emerging economies provide new opportunities for Heineken. More people means more beer will be consumed. This increases the demand for Heineken’s products. Economic & population growth is currently especially visible in Asia. Heineken has an objective for growth in this region, and rightfully so.

M&A Activities

The beer industry is consolidating. In recent years, we have seen the massive takeover of SABMiller by Ab InBev, making it by far the biggest brewer in the world. For Heineken, there could also be opportunities for growth through acquisitions. This could be a good opportunity for Heineken to gain market share in ‘weak’ regions. Heineken has shown they always keep their eyes open for potential targets:

  • In 2015 Heineken bought a 50% stake in craft brewer Lagunitas (USA). Two years later, Heineken bought the rest of the stake.
  • In 2019, Heineken bought Biela Ecuador. This opened up a new market for Heineken.

Changing Consumer Trends

Consumer trends are constantly changing. This offers new opportunities to Heineken. In recent years, we have seen a growing demand for 0.0% beers as well as for craft beers. Such changing trends are a great chance for Heineken to diversify and enter new markets.

Threats

Competition

The beer market is a market with fierce competition. The biggest threat to Heineken is Anheuser-Busch InBev, commonly known as AB InBev. Through the takeover of British brewing company SABMiller in 2016, AB InBev enormously increased its market share.  There could be a fight for power between these two giants. Ab InBev might threaten Heineken in markets where it used to feel top dog, such as Europe. U.S. beer brand Bud *owned by Ab InBev) has already been introduced in Heineken’s home ground: the Netherlands.

Other big competitors of Heineken are Carlsberg and China Resources Snow Breweries:

  • Carlsberg: a Danish Brewer, owning famous brands like Carlsberg, Kronenbourg & Super Bock.
  • CR Beer: the biggest brewer in China.

There are plenty more local competitors that are a threat to Heineken.

Economic & Political Developments

Heineken is highly influenced by local / regional economies. Heineken is hit enormously by the COVID-19 crisis. The volume of beer that was sold declined significantly. In countries like Mexico and South Africa, the sales of alcohol was put to a hold during lockdown. This hit Heineken hard, the company has a strong presence in these countries. When lockdowns were lifted, the volume started to increase again. However, it is uncertain how fast the recovery of economies will be. Worries over a second wave are still present. In many countries the coronavirus situation is not under control. Heineken’s global presence mitigates this threat to an extent, but nevertheless Heineken is highly impacted by economic and political developments. This remains a threat in the future.

Regulations

An increasingly negative perception against alcohol could be a threat to Heineken. Governments could implement stricter regulations against the consumption & marketing of alcoholic drinks. Will Heineken be allowed to sponsor major sporting events? Will there be health warning labels on beer products? This kind of regulation changes are something Heineken needs to be aware of and create a scenario analysis.

Heineken could also mitigate this threat by diversifying their product range. The firm already promotes Heineken 0.0%. This is a smart move. Not only because of changes in consumer demands, but also to protect itself against potential regulations for alcoholic beverages.

Regulations could also appear in the area of environmental legislation. This is a highly relevant topic in 2020. Stricter rules for packaging, production & transport is a potential risk factor for Heineken.

Changing Consumer Trends

Consumer preferences are constantly changing. Craft beers have become more popular recently. Consumer trends could also be changing towards consuming less alcohol. Another trend that is relevant for the food and beverage industry, is the shift towards healthier products. This requires Heineken to stay innovative. The firm has proven it is able to adapt to changing market circumstances. However, this will remain a threat. The moment Heineken stops innovating, their competitors will take advantage of the missed opportunities.

Additions

Do you have any additions or do you agree with some of the factors covered in this Heineken SWOT Analysis? Drop a comment below!

Interested in more strategic analysis? Take a look at other analyses here.

References

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