Heineken announces reorganisation
Heineken plans to close one brewery and sell another one in France in order to cut costs.
Perhaps it was not meant as a joke although everybody laughed. At the Canadean Madrid conference in April a delegate asked Alex Myers, Senior Vice President Western Europe of Carlsberg why he had taken on the Kronenbourg business of Scottish & Newcastle, insinuating that France was not a very profitable or easy market. Mr Myers said something to the effect that Kronenbourg was a great brand. However, most delegates would remember that earlier in April Scottish & Newcastle’s French brewery Brasseries Kronenbourg sold its distributor subsidiary company Elidis to C10, an independent distributor, for EUR 108 million. Scottish & Newcastle had announced its intention to sell Elidis to C10 in November last year. Based in Strasbourg, Elidis, with its 1,600 staff, sells beverages to cafés, hotels and restaurants. The company has 59 warehouses across France and saw its 2007 turnover amount to EUR 380 million.
However, Scottish & Newcastle estimated Elidis’ financial losses for 2007 at EUR 1 million and was happy to see it go.
That may serve as a background to Heineken’s May announcement to reorganise its French production units “in order to drive efficiency improvements”. Well, we know what that means.
Heineken said that it would close the Brasserie Fischer in Schiltigheim by the end of 2009 and transfer its production to the l’Espérance brewery in Schiltigheim. In addition it would sell the Saint Omer brewery, the production site of Heineken’s non-branded beer business. It is expected that the total reorganisation will lead to 126 job losses in Alsace and 62 in Mons-en-Baroeul by the end of 2010.
At the same time Heineken said it will invest EUR 124 million over the next three years to upgrade its three remaining breweries in Mons-en-Baroeul (North of France), Schiltigheim (Alsace) and Marseille. Their combined capacity is over 6 million hl.
The exceptional restructuring costs associated to the reorganization will be charged to the 2008 and 2009 consolidated profit and loss accounts and will be recovered in 3 years after completion of the programme. For 2008, these restructuring costs are included in the F2F programme. For 2009, Heineken forecasts additional assets write-off of approximately EUR 20 million, which will be treated as exceptional items.
In its statement, Heineken would not be explicit on the sale of its Saint Omer brewery other than saying that there were talks with its former owner and current chairman, while the French media already reported on 31 May that André Pecqueur had agreed to buy back the brewery for an undisclosed sum. Only 12 years ago Mr Pecqueur and his brother had sold the Saint Omer brewery to Heineken because they thought that as a private company they could not survive in the French beer market. The Saint Omer brewery, popular with “booze cruise” tourists from Britain because it is located close to Calais, produces 1.8 million hl beer, 90 percent of which are distributor own brands (DOB). That’s a segment of the French market that has been growing over the years.
Unfortunately, there is not enough money to be made in the DOB business for the likes of Heineken. As Heineken wants to concentrate on its premium brands Heineken, Pelforth and Desperados in France, the Dutch brewer was glad it found Mr Pecqueur, at 65 years of age not exactly a hotspur, willing to take back his former brewery.
In France Heineken has a market share of about 30 percent. Brasseries Kronenbourg controlled 36 percent in 2007.
