Home' Brewers Guardian Digital Magazine : November 2012 Contents financial value of possible transactions is enormous. Hooft
Graafland places the value of 2012 spending by HGP at seven
billion euros. It splits, roughly, at 55% for product-related trans-
actions, with the remaining 45% non-product related.
Hooft Graafland outlines three operational models for the
interaction between HGP and the OpCos. The first is the most
basic, where Global Procurement acts as a centre of excel-
lence, helping OpCos "buy their stuff", with the OpCo respon-
sible for agreeing the purchasing contract. (There are some
requirements, such as energy contracts, which can't yet be
organised on a global level. The same is true for some media
spend, where a local competitor has a stronger position that
the contracted global provider.)
Then there are 'centre-let' contracts, which are negotiated
centrally in behalf of OpCos but the execution of the contract
is in the countries. Hooft Graafland uses the example of global
contracts negotiated with providers of temporary labour
services, where the conditions are defined centrally but the
OpCos order from an in-country supplier, working within the
Finally, there's the big prize, the buy-sell model where HGP
buys goods and services and resells them to the OpCos. In
these arrangements it becomes possible to average prices, to
introduce risk elements such as hedging, and to have transac-
tion transparency across markets.
There are, obviously, implications in this centralisation for the
supply chain, differences in the way that Heineken will interact
with its suppliers, and vice versa.
"I think you get more intense relationships with suppliers; you
get more partnerships with suppliers and that helps to align the
agendas in a big way," says Hooft Graafland. "I think it will be
easier for suppliers because instead of dealing with individual
companies they deal with one company and you can really align
each other's agendas.
"It also helps in our case in cases of shortages. We have had
the years where there were shortages on the bottle markets.
Having a central contract and having full visibility where you ship
what, you can allocate that much better than in the situation in
Capex outside the box
There's a rethink going on as well as to how outright capital
expenditure can be better managed, especially in developing
markets. To date, brewery construction has been handled on a
case-by-case basis -- and Heineken Supply Chain would retain
responsibility for project management.
But the purchasing of plant, the brewhouse, the packaging
lines, and so forth is with Global Procurement. And here's the
radical idea: what if Heineken were to forward contract for a
number of brewhouses, and packaging lines, rather than order-
ing them one at a time?
"We are moving more and more to seeing how you could
make with one or two suppliers longer term partnerships;
indicate what your need for the coming years is and therefore
also work on standardisation across our breweries," explains
"Over time, common equipment in your different breweries
enables people to move from one brewery to the other, which
could ultimately enable you to group spare parts and these
kinds of things instead of taking every project on its own."
He adds that forward purchasing would benefit suppliers,
allowing them to better manage their production schedules; and
it would allow Heineken to react more quickly to the demands
of fast growing markets.
Global standardisation of production -- intuitively it makes
sense. But given the diversity and working lives of breweries
in an expanding yet consolidating Heineken universe, globally
standardised plant is a decidedly long-term objective.
The APB fall-out
The headline M&A news is, of course, Heineken's ultimately
successful bid for Fraser and Neave's share of their brewing
joint venture, Asia Pacific Breweries, bringing to an end their
remarkable 80-year partnership.
Heineken moved on APB within days of rival brewer ThaiBev's
interest in Fraser & Neave becoming public. That it was able
to finance the deal quickly, and at remarkably low rates, is a
marvel, with it issuing US $3.25 billion in credit notes for rates
as low as 0.80% over three years.
Hooft Graafland is in agreement with this assessment, noting
that the timing was good with Heineken having deleveraged
following the FEMSA transaction. That, plus a company that is
"easy to read" for analysts combined with a strong brand name
makes for cheap credit. He adds, "These are rates a couple of
years ago which we were dreaming about."
"We are moving more and
more to seeing how you could
make with one or two suppliers
longer term partnerships"
Links Archive September 2013 Navigation Previous Page Next Page