Heineken Seeks Further Cost Savings

Heineken NV, the Dutch brewer, is targeting further savings from its zero-based budgeting effort and a push to automate certain processes across the organization.

The company reported a 49% jump in profit for the first half of 2017, fueled by strong sales in Europe.

Heineken applies zero-based budgeting, an accounting tool developed in the 1970s, in varying degrees in the countries that it operates in. The process requires managers to plan each year’s budget as if starting from scratch, rather than extrapolating from the previous year’s spending patterns. The technique forces them to justify their costs and to evaluate benefits every 12 months.

Heineken has around 80 operating companies globally and and procurement is one of the areas in which the company sees room for maneuver.

Consumer preference for smaller bottles presents Heineken with challenges, as bottling lines and packaging need to be adjusted. Simpler packaging is one way to save costs.
Contrary to competitors like Diageo PLC, Heineken does not provide guidance on cost savings.

Diageo last week said it will increase savings from £500 million ($660.5 million) to £700 million in its 2019 financial year. Like Heineken, Diageo applies zero-based budgeting, as do other European consumer goods companies like Anheuser-Busch Inbev SA and Unilever PLC.
The company reported that automation in the front and back office will provide additional savings.

Heineken is also experimenting with different solutions in the area of revenue management, predictive maintenance and production planning. The company is also exploring applications for artificial intelligence.

However, it is too early to tell how these technologies will impact headcount. Heineken currently has around 3,500 people working in its finance function.