Case study - investing for growth

Latin America is one of the world’s growth regions when it comes to beer. The Heineken brand has been sold in markets across the region and is today available in many Latin American markets.

The Chilean and Argentinian beer markets in particular have seen strong growth in the last few years with per capita consumption reaching record levels in Chile in 2008.

In 2003, to solidify its platform for future growth in these markets, Heineken agreed a 50 per cent stake in the joint venture Inversiones Representaciones S.A. (IRSA), the company that holds a controlling stake in Compania Cervecerias Unidas (CCU). CCU is a fully diversified beverage company selling beer, wine, spirits and soft drinks. It is Chile’s largest brewer. The company’s most famous beers are the Cristal and Escudo brands. In addition, the company brews, markets and sells the Heineken brand in Chile and Argentina.

In Argentina, CCU is the second-largest brewer operating two breweries with a market share of over 16 per cent.

Since 2006, CCU has instigated a number of strategies that support and promote sustainable operational improvements. Most significantly, the company has implemented a large-scale Supply Chain Optimisation (OCA) programme aimed at improving line efficiencies, and reducing losses in packaging and glass breakage. The OCA was first rolled out throughout its brewery and soft drink operations in Santiago and later, given the clear benefits, was extended to its breweries in Argentina, again leading to exceptional savings and efficiencies.

The partnership with CCU has certainly enabled expansion of the Heineken brand. But it is not only Heineken that is growing. In 2008, with sales volumes increasing in every category, CCU announced an investment of $400 million over the coming three years in order to expand its production capacity and be prepared for the next phase of development.