As more companies launch new brands and venture into new markets in the region, SCOLA KAMAU speaks to Heineken East Africa’s general manager about opportunities and challenges in the lucrative sector.

What strategies is Heineken employing to penetrate the East African market?

We have done extensive consumer and trade research and found that consumers like the Heineken brand, want to buy it, but cannot always find Heineken in places they would expect it. So, our first priority is to get our brand out there to meet the clearly existing consumer demand.  Simultaneously, we are building local relevance for some of the international platforms that Heineken is known and loved for (such as our sponsorship of the UEFA Champions League and the Trophy Tour). We have embedded a culture where our people know that Heineken never copies the competition. You can expect that Heineken will bring this to life through unique marketing communications and activations in a signature style “only Heineken can do.”

What drove Heineken’s entry into the East African market?

Tanzania consumes seven litres of beer per person per year, Uganda nine litres and Kenya 10 litres, which illustrates the upside potential of the regional beer market and explains why Heineken entered the market in 2011.

In addition, we see a growing number of African consumers willing to purchase international premium brands. This is supported by a number of regional factors, including enhanced purchasing power (Kenya, Tanzania and Uganda exceeded the “tipping point” of $1,000 per capita) and high urbanisation rates (about 20 to 25 per cent in Kenya, Tanzania and Uganda).

Given the shaky global economy, what is the future of the beer market? Are we likely to see a drop in consumption?

The global beer market grew by around 2.5 per cent in 2011 and is expected to grow by a similar margin in 2012. The emerging markets (Africa, Asia and South America) showed solid growth of around four to five per cent. Growth in mature markets, such as Western Europe and the US, was around one per cent in 2011, which means that overall the global beer market has shown resilience in the current economic climate. We expect this trend to continue.
In the recent past, we have seen global players showing interest in emerging markets, particularly Africa...

The beer category in emerging markets is growing due to a strong combination of population growth — with more people reaching the legal drinking age — and economic growth, combined with increasing political stability, which means that the per capita consumption of beer is growing in these markets. 

Look at Ethiopia for example, where Heineken acquired two breweries, Harar and Bedele, in 2011. The Ethiopian population is growing by around two per cent per year, economic growth is hovering around eight per cent and the country is showing political stability. Although still small at three million hectolitres per annum, the Ethiopian beer market grew approximately 20 per cent per year over the past five years. Beer and non-alcoholic malt consumption in Ethiopia was approximately four litres per capita in 2011, which is still well below the global average of 27 litres and below beer consumption.
We have seen your firm engaging in cost cutting measures recently. Why is this so? Is the move likely to hamper your expansion plans in the coming years?

You are never really done with cost savings, you can always do things better and more efficiently. Through programmes such as Fit2Fight and Total Cost Management, Heineken has reduced costs by over $1.6 billion over the past few years. Part of these savings drop to the bottom line, but we also use a large chunk of the cost savings to reinvest in the business. For example, by increasing our marketing and selling expenses (now at 12.8 per cent of sales), by improving our capabilities (in marketing, sales and global business services) and by increasing our production capacity in emerging markets. So in short, taking out non-value added costs enables growth investments in the business.

What is Heineken’s long-term plans in the region?

The market is growing due to an emerging middle class. As a matter of fact, this is a market of more than 100 million consumers, a clear indication that there is bound to be competition in such a lucrative market. With our robust market strategies in our operations covering over 170 countries globally, we are certain we will emerge the best in this market. At the moment, our plan is to grow our profile, understand and meet the growing East Africa’s consumer base

What does the recent solid investment credit rating by Moody’s and S&P mean to your operations?

Heineken was one of the few multinational companies that did not have a public credit rating. With the tighter unrated credit markets and a substantial piece of our debt maturing in 2012, these solid investment grade credit ratings by S&P and Moody’s give us more financial flexibility moving forward.