Heineken is to cut 8,000 jobs and seek €2bn of savings over two years as new chief executive Dolf van den Brink reshapes the world’s second-largest brewer in a pandemic that has dealt the drinks industry its worst blow in decades.
Van den Brink, who took charge last year, said on Wednesday he would slash almost 10 per cent of the Dutch brewer’s 85,000 staff as part of a programme to restore margins and push up productivity.
The plans follow Heineken swinging to a loss for 2020. The brewer of Amstel, Tiger and Moretti on Wednesday reported a net loss of €204m for the year, down from €2.2bn profit a year earlier, after the closures of pubs and bars in the pandemic pushed revenues down 17 per cent to €23.8bn.
“The impact of the pandemic on our business was amplified by our on-trade [pubs, bars and restaurants] and geographic exposure,” said van den Brink, adding that the company expects revenues, operating profits and margins below 2019 levels this year.
He said his strategic plan “is about future-proofing the company so we can deliver superior profitable growth . . . The world is changing, the industry is changing and we need to change accordingly.”
It will aim to bring Heineken closer to consumers, improve digital operations and “stretch beer and move beyond beer”. This will include further rollouts of no and low-alcohol beers such as the company’s successful Heineken 0.0 brand, and of hard seltzers, the newly fashionable flavoured alcoholic carbonated water drinks. Heineken was relatively late to produce hard seltzers, but in 2020 launched the Pure Piraña and Amstel Ultra Seltzer brands.
The job cuts include a reduction of about 20 per cent in personnel costs in Heineken’s head office, with those lay-offs to be completed by the end of the first quarter.
The Amsterdam-based group will seek to reduce complexity by cutting product lines: in some European markets these will be slashed by as much as a third, said van den Brink, while inefficient local advertising spending will also be cut.
The company will seek to return operating profit margins from 12.3 per cent during the past year to 17 per cent by 2023. Meanwhile, the €2bn of gross savings by 2023 would enable the group to restore marketing spend, invest in technology and mitigate inflation and currency costs, Heineken said. Recommended News in-depthHeineken NV Heineken bets youthful incoming chief will keep pace with change
The volumes of beer Heineken sold shrank 8.1 per cent, measured on an organic basis, in 2020 as socialising was curbed. The company said fresh restrictions in the fourth quarter hurt its business in Europe, where fewer than 30 per cent of bars and restaurants were operating by the end of January.
But van den Brink said a trend towards “premiumisation” had continued despite the economic impact of coronavirus, with African consumers upgrading the beers they drank and the main Heineken brand growing steeply in Brazil.
Rival Carlsberg last week said it expected a “normal summer” in 2021 if vaccination programmes go well, and even a surge in demand similar to the Jazz Age boom of the 1920s. Heineken was more cautious, but said it expected “market conditions to gradually improve in the second part of 2021 and to continue improving into 2022, with significant differences across markets and channels. In particular, we see a slow recovery of the on-trade channel in Europe.”
The company has proposed an annual dividend of €0.70 a share for 2020, down 58 per cent from a year earlier. Shares in the group fell 1.3 per cent to €87.90 in early trading.
Financial Times