Since it is the first time our readers are going to read about Heineken Slovakia, can you give us a brief overview of the steps that marked the development of Heineken since its creation?
Heineken was founded in Slovakia in December 1995, after acquiring a brewery in southwestern Slovakia. At that time the brand - Zlatý Bažant produced in the brewery had 8% market share and was declining almost to bankruptcy. We acquired this factory because we had a vision that the brewery had a lot of potential, and we did well, because at that moment Zlatý Bažant has 16% of the market share. So in December 1995, we bought the first brewery, in December 1997 we bought another one in western Slovakia, and finally, in December 1999, we acquired Gemer, located in eastern Slovakia and Martiner which is located in central Slovakia. So, currently, we have four breweries. In five years, we increased our market share from 8% to 42%.
What was Heineken's main motivation to come to Slovakia?
First of all, we were already present in Hungary, but we just serviced the Hungarian market. Due to the similarities of the countries we had some contacts in Slovakia. We were the first international company to invest into the beer industry, which is always an advantage. Our second reason was to get into the vast former Czechoslovakia's market. The third reason was our vision of the market, not in terms of volume but in terms of value. The economic situation at that time was supposed to bring good prospects and this was probably the most important reason. The economy was positively unblocked.
How has your market share evolved since you have been here?
With 42% market share, Heineken is the leader in this market. In 1990, SAB breweries came to this market and they are number two with 20% market share. The third place is occupied by local shareholders, Topvar and they have 12%. Then you have six or seven other small sized breweries. There are a lot of players and a lot of breweries in quite a small market. The market is about 4.7 million hectoliters. We can look at this market as a relatively small one, especially if we compare it with the Czech Republic that has 16.5 million hectoliters. However looking at the consumption per capita Slovakia has 92 liters per head, which is among the highest in the world. The Czech Republic is the leading beer consumer in the world with 116 liters per capita. Belgium is supposed to be among the highest as well with 89 liters per capita.
Today, what is your production level?
It is no secret that we reach 2 million hectoliters. We still have the capacity to produce more, but first we are focused on producing good quality beer.
How do you manage to keep up with Heineken's international standards?
We have created a corporate standard. Because we are part of Heineken, we have to maintain a high level of quality. If we acquire a new brewery, the priority is to reach the same level of quality according to Heineken and their international standards. That is what we did when we arrived in Slovakia, we invested in a lot of new equipment and technology. The quality was good, but maintaining good levels of quality is a challenge. Our main objective was to be able to sell and serve beer with sustainable high quality anywhere at any time.
Which percentage of your total investment in Slovakia did you actually spend when arriving in the country?
We invested gradually over the years, but with 50% at the beginning. We didn't plan to create an enormous brewery in the country, we rather planned to invest in other breweries throughout the region.
And today, do you plan to acquire new breweries?
We have no plan to acquire new breweries in Slovakia. The first reason is that we have a portfolio of eight brands, which is satisfactory. It is sufficient for the different needs of our consumers. The second reason is that we have already acquired a fine share in the market as we already have 42%.
Do you have any major investment plan for the near future?
We are doing business in a very profitable environment, which is very acceptable in the beer industry. Why is that? First of all, it is due to the characteristics of this country. If you take Bratislava, it is a beautiful city, as well as the central or eastern regions of the country. Have you been to Banská Bystrica? You have to go to there or Rimavská Sobota, where we have a brewery and then you will see Slovakia. Then, if we look at the average salary in the country, which is lower than 10 000 SKK per month, approximately 110 US$. In our company, the average salary is around 12 000 SKK. When you try to set-up a business in Slovakia, you really have this very low salary and it is a fact. As an example, Tesco decided to be in Slovakia because of these low salaries. They have a plan to become a market leader in food segment in Slovakia. They have the same vision as us. If you go to a village in the country you can see quality that you get there through Tesco. So, to come back to what we are going to do: first, we have to look at our profitability. The gross margin on our premium brand is 30 cents per hectoliter, that is 600 SKK. Because the beer costs the same all over the world, the only difference is the country where it is being produced. It really is a challenge to survive in the time being because you cannot increase the price, as you would like to. You also have to take into account the fluctuating inflation level. Normally the price is so high that if we increase the price we immediately drop our sales. Now we concentrate on marketing and the image of our brands, to justify that the quality increases. | Between 1999 to 2000, your turnover increased by 50%. What are your expectations for 2001 and 2002?
We have a ten-year plan, so of course we have some expectations. We are the leader in the market and we are going to remain the leader. Anyway, what we want to do is to grow in terms of volume. We need to create more volume to support our production cost. We have an ambitious plan to grow.
Heineken has the reputation throughout the world of being very active in the socio-economic development of local communities. How would you describe your corporate and social responsibility in Slovakia?
There is always a commercial reason to support any kind of development within the country. We are very much involved in this aspect. We sponsor the national soccer team and ice hockey team, we are very much involved in sports. That makes about 30%. Another field is the culture. There is an international film festival that we try to develop in Bratislava we are a big supporter of these types of events. We support film festivals, music, painters and museums. We are very actively involved in cultural aspects of the country. Heineken has philosophy, that if we come somewhere we want to be perceived as good citizens. Not as an international investor, but as a part of the community. Therefore we feel responsible for the social welfare of the community. We also support hospitals, orphan houses, doctors, research and universities. We do this through equipment, finance training, some university students are coming to our laboratories. We do it because we feel as a part of a country and we feel responsible towards contributing to the society. In a state with 5 million people we have a mission, to focus on the professionalism of the people. We try to create an access to credit. We create a pension plan for our employees, as well as life insurance, in order to secure families against accidents.
Heineken Slovakia is an example of FDI in Slovakia. How would you qualify Slovakia as a potential investment destination?
First of all I would like to say that Slovakia is in a development phase. It is very much concentrated on EU integration, people are eager to be a part of this process. For sure I would say that here in Slovakia we have a valuable market. There is a huge tourist potential because of the way Slovakia is situated. There is enormous human resources potential. It is a great pleasure to work in Slovakia. We have very good teams who are hard working, eager to work and work seven days a week if needed. The young generation in this country is absolutely wonderful. There are a lot of people that speak foreign languages, especially in Bratislava and big cities or centers for tourism. In western Slovakia, German is broadly spoken, then mainly Hungarian in the southwestern part. English is very well spoken all over the country, about 60% of our team speak English. There is a huge potential. The problems I have mentioned are everywhere, so it should be a key aspect for an investor to decide whether or not to invest in the country they just have to determine which aspects of the economy have more value to them. There is the prospect of EU integration and a population of five million people eager to work. Heineken joins an extra huge community in Slovakia and that is perfect. Slovakia is faced with this challenge and a chance to become a member of the EU.
Your malt exports represent around 20% of your turnover. What is your development strategy on international markets?
We have become an export base for the East. We are known there, we are a good example, a lot of people speak Russian here also. So we export mainly to the East, not the West. In ten years this will be absolutely difference. We came ten years ago and can see the differences accomplished just after ten years. We have invested a lot into Slovakia, but we are among the largest exporters as well. This year we are going to produce 160 hectoliters more. Among the larger producers we are one of the smallest in Europe. We are also in contact with the farmers here and inform them from an educational point of view with regards to fertilizers and so on. Through this we are much closer to Slovak reality.
What is your final message to Forbes readers?
You said that you came over to discover this country. I say this is the country to go to. I think if your readers are going to read this article it will raise some curiosity or they will have a desire to come over and make their own opinion. It is a very interesting country. People here have an absolute sense of hospitality, a sense of tradition and a sense of family. I am from Belgium where I was taught to enjoy family lifestyle, good food, good drink, things I also find here. This really is Slovakia, this sense of enjoying life. So the message is come and discover Slovakia. Take the time to get to know the people. It was a big shock when I came here 8 years ago in terms of cultural, there were no billboards, no marketing, if you compare the things that you now have all over Slovakia. To be a part of this development and to see how people react is a beautiful human experience. It is a place to stay.
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