Business Strategy, SWOT and PESTLE of Heineken India

1. Heineken Lager Beer
- Kumar Rajgeet

2. Alcohol Industry in India
 The Alcohol market in India can be segmented into four
categories: IMFL, CL, Beer, and Imported Liquor.
 Revenue generated from the IMFL and CL segments is
considerably higher than that generated from the Beer segment.
 However, the Beer segment is the fastest growing Alcoholic
Beverage segment in India by consumption and revenue share.
Beer
Alcohol
Industry
in India
IMFL
Importe
d Liquor
CL
The Hindu Business Line, 2013

3. Market Overview
 In terms of alcohol content, the market is divided into
two segments: Strong Beer and Mild Beer. In terms of
type, the market includes standard lager, premium lager,
and other beer.
 Growth Rate by Revenue
The Beer market in India was valued at US$4.13 billion in
2013 and is expected to reach US$9.03 billion by 2018,
growing at a CAGR of 16.94 percent.
 Growth Rate by Volume
Total beer sales in India were 2,248.53 million liters in 2013
and are expected to increase to 4,438.47 million liters by
2018, growing at a CAGR of 14.57 percent.
Market Research, 2014

4.  Key Vendors
 Carlsberg India Pvt. Ltd.
 Mohan Meakin Ltd.
 SABMiller India Ltd.
 United Breweries Ltd.
 Drivers
Increase in Disposable Income
Increasing Young Population
Changing Lifestyles
The Hindu Business Line, 2013

5.  Challenges
 Restrictions on Advertising Alcoholic Beverages
 Heavy Taxation on Beer
 Increasing Vendor Competition
 Trends
 Growing Demand for Barley
 Increasing Preference for Strong Beer
 Increasing Availability of Imported Beer
The Hindu Business Line, 2013

6. Heineken Overview
 Heineken, is a pale lager beer with 5% alcohol by volume
produced by the Dutch brewing company Heineken
International.
 One of the world’s leading brands >130 years.
 Global network of distributors and 115 breweries in more
than 65 countries
 Heineken Lager Beer was first brewed by Gerard Adriaan
Heineken in 1873.
Heineken International, 2014

7.  The beer is made of purified water, malted barley,hops,
and yeast.
 In 1886 H. Elion finished the development of the Heineken
A-yeast, which is still used in the brewing process today.
 Since 1975, most Heineken brand beer has been brewed at
the Heineken brewery in Zoeterwoude, Netherlands.
 In 2014, 2.74 billion litres of Heineken brand beer was
produced worldwide.
 The total beer production of all breweries fully owned by
the Heineken Group over all brands was 16.46 billion litres
globally.
Heineken International, 2014

8. Vision
Our aim is to be a leading brewer in each of the markets in which
we operate and to have the world’s most valuable brand portfolio.
Mission
HEINEKEN is one of the world’s great brewers and is committed
to growth and remaining independent. The brand that bears the
founder’s family name – HEINEKEN – is available in almost
every country on the globe and is the world’s most valuable
international premium beer brand.
Heineken International, 2014

9. Organization goals and objectives
 Aims for sustainable growth as a broad market leader
and segment leadership.
 Expand and optimize product portfolio.
 Embraced innovation as a key component of their strategy
in the areas of production, marketing, communication and
packaging.
 Goal is to grow the business in a sustainable and
consistent manner, while constantly improving
profitability
Heineken International, 2014

10. Business Priorities
 The Heineken® brand is a key strategic asset and the
undisputed leader in the international premium segment (IPS).
 HEINEKEN is committed to being part of the conversation with
consumers and being recognised as the preferred partner for its
customers.
 HEINEKEN has transformed its emerging market presence in
recent years through a clear acquisition strategy, strong organic
growth and our excellent joint venture partnerships.
 As the world’s most international brewer, HEINEKEN is investing
in new business initiatives aimed at better leveraging the scale
of our global operations across commerce, supply chain,
purchasing, information services (IS), human resources and
finance.

11.  HEINEKEN employs more than 85,000 people in over 70
countries.
 Brewing a Better Future is integral to our business and to
our success in becoming a consumer-inspired, customer
oriented and brand-led organisation.
 That’s why we have recognised sustainability as an
integral part of our strategy alongside our other
commercial and business imperatives.
Heineken International, 2014

13. Price Product
Heineken is a premium product and
hence its price is more than its
competitors in the market.
The strategy of pricing is skimming,
hence Heineken has made deals with
premium pubs and discotheques to
promote and sell its products.
Name Price (Rs.)
Calsberg 150
Heineken 180
Fosters 110
Kingfisher 100
Heineken sells its beer in 650 ml green
bottles. Heineken contains water,
barley malt and hops.
The alcohol volume of Heineken pilsner
is 5%.
Beer contains gluten, which comes
from the grain used to brew it.
Heineken has a policy of not using any
GMO raw materials. Heineken is brewed
using a natural brewing process with no
additives. It contains water, barley
malt, hops, and the unique Heineken A-yeast
for fermentation in the brewing
process.

14. Place Promotion
Heineken is in alliance with United
Breweries and hence enjoys the
distribution network of the same.
Government market (65%)
State government is the sole distributor
Auction market (16%)
State government auctions
geographical territories which has led
to monopolies / cartels
Free market (19%)
Through trade licenses
Through various advertisements,
Heineken always portray itself as ‘the
adventurer’s drink’ and a ‘drink of
voyage’.
The alliance with UB has led to the
increase in Heineken’s promotion not
only in the IPLs but also in various
events UB organizes.
The Economic Times, 2014

16. STRENGTHS
 Premium brand > 130 years old
 Heineken’s leading brand portfolio includes more than 170
international premium, regional, local and specialty beers.
 The company has undertaken various advertising and promotional
initiatives, which has improved its brand equity.
 A geographically widespread plant network reduces transportation costs
as well.
 Strong network of breweries helps the company boost customer
satisfaction and reduce costs
 Excellent branding and top of the mind recall owing to advertising and
sponsorship initiatives
 Alliance with India’s leading United Breweries
Reuters, 2014

17. WEAKNESSES
 Conservative/”Play it safe” culture
 Struggle to obtain large breweries
 Not drank by regular beer drinkers
 Expensive when compared to other Indian beers.
 Maintaining corporate values, image and quality standards in the entire
country is a challenge.
Reuters, 2014

18. OPPORTUNITIES
 Falling trade and ownership regulations in India.
 Innovations contribute to the top-line growth and to the strength of the
Heineken brand in particular.
 Increasing beer market share in global market
 Growing Indian population.
 Majority of young population in India
 Increasing pub culture in India
Reuters, 2014

19. THREATS
 Tax regulations in the beer industry.
 An increasingly negative perception in society towards alcohol could
prompt legislators to restrictive measures.
 Heineken has many operations in mature beer markets where the
attractiveness of the beer category is being challenged by other
beverage categories.
 Changing buyer taste and preference.
 Input costs (including transportation and energy) have accelerated to
unprecedented levels in the past few years.
 Being a leader susceptible to fake imitation products
 Beer markets in India faced a challenging year due to the combined
impact of the financial crisis, mixed weather, smoking bans and
unprecedented increases in excise duties
Reuters, 2014

20. Business Strategy of Heineken
 Grow externally to strengthen the position of the
company in developed markets as well as maximizing
potential for profit in high-growth markets.
 Basically do whatever is necessary to get your company
represented around the world.Heineken was the pioneer
of this strategy, becoming the first brewer to cut deals to
distribute worldwide.
 Pull strategy.
 Alliances with leading breweries of the country.
 Tie ups with leading pubs and discotheques
 Catering in high end airlines and hotels
Heineken International, 2014

22. Political
 Different states have different rules for liquor.
 Some states like Gujrat are Dry states where the sales of
liquor are completely banned.
 Some states have time limits i.e., after 9 the sales of liquor
are prohibited.
 Even the age limit for drinking in India is under discussion.
 The advertisement of liquor is banned in India.
 Heineken has targeted the public houses and discotheques
for their promotion which is very apt
The Hindu Business Line, 2013

23. Economic
 The disposable income of people specially living in urban
cities is also increasing rapidly.
 Thus Heineken has targeted only the urban cities of India
to penetrate the market.
 Heineken has aimed to grab a market share of approx. 10
% by next 2 years, once that target is achieved, they will
expand their base to other cities and rest of the country.
The Hindu Business Line, 2013

24. Social
 Due to its diverse culture we can’t categorize India under
one segment.
 Per capita income is rising, but at the same time the gap
between the haves and have-nots is also widening.
 There is a school of thought against the so called pub
culture.
 Heineken is relying on the change and has targeted
the new Indian who is open to change.
Heineken India, 2014

25. Technological
 With the joint venture with United Breweries, Heineken
has set up breweries in India.
 Due to the technical advancement of its plants, Heineken
never compromises with its quality.
 There are now endeavours to bring the overall cost of
manufacturing lower, but the company has no intention of
lowering its market price, so as to retain its premium
image.
The Hindu Business Line, 2013

26. Legal
 Heineken is very careful about the steps it takes because
of the political environment which could land it in
trouble.
 As the laws are different for different states, Heineken
India has played smart in making social media as the
primary channel of its advertising.
 Heineken abides with every law dictating the alcohol
industry.
 Due to its huge financial resources, the company easily
adapts to the new laws that are passed by the government
in the minimum time possible.
Heineken India, 2014

27. Environmental
 Due to the harmful effects of plastic in the environment,
Heineken hasn’t launched its plastic keg bottles.
 Due to its relatively new entrance in the Indian market,
Heineken is still trying to figure out ways to deal with the
surrounding environment.
The Hindu Business Line, 2013

28. Referencing
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[Accessed 16 November 2014].
 Latest Reports. 2014. Latest Reports. [ONLINE] Available
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