Nov 11, 2020
Heineken in Africa: a troubling case study
Olivier van Beemen’s book puts a stain on the beer brewer.
I’ve been interested in how business is conducted in Africa since 2017.
I believe that the continent is either underappreciated or grossly misrepresented by people in the U.S. The continent is often viewed purely through the lens of poverty, safaris, or brutal dictators instead of business opportunities. I never understood why a continent with six of the world’s ten fastest growing economies — at least before COVID — receives so little attention at U.S. business schools. Faculty would consistently talk up how important future technologies like AI, 5G and robotics will be while Africa and its emerging tech sector doesn’t even warrant a mention. As stewards of a more globalized world, shouldn’t business students learn more about the rapid changes taking place across the continent? Is it an example of American exceptionalism to neglect discussion of business in less developed regions while extolling the virtues of mega corporations at home?
Rapidly growing demographics, vibrant economies, and climate change mitigation are three factors shaping Africa’s potential. While many economies face a decline in growth from the pandemic, the continent holds outsized importance for the future. Major corporations — from Facebook to Twitter to Mastercard — all consider Africa part of their future growth strategies. Fortune 500 CEOs, Silicon Valley investors, and U.S. political junkies are all beginning to pay attention to Africa’s rising importance. After decades of being deemed by many companies as too risky for investment, perhaps this is a sign that some are finally starting to notice what others, such as Heineken, have known all along: investing in Africa can be good business. The flipside of this coin begs the question: is investment by corporations always good for Africa and its people?
I find it shocking that Heineken in Africa: A Multinational Unleashed has zero reviews on Goodreads.
There have been few case studies of multinationals operating in Africa until now, although executives from Twitter, Facebook and the like may want to read this book and take notes. I first heard Olivier van Beemen, the book’s author, speak during a class on business and human rights at NYU last year. If it weren’t for his lecture, I probably wouldn’t have read it over a year later. The 250-page book is a rigorously researched text that illuminates the uncomfortable situations corporations may face on the continent. The book reads like a novel, and van Beemen weaves vivid stories and statistics together in a masterful way. While Heineken should not be used as a reflection of all foreign companies doing business in Africa, it can be taken as an example of what not to do.
Heineken, the world’s second largest brewer and the Netherland’s most storied company, shows what happens when companies value profit over purpose. Brewing beer “at all costs” may have turned Africa into the company’s most profitable region, but it also forced them into complicit support for some of the world’s worst human rights abusers. From 2012–2017, van Beemen spoke with 400+ sources close to the brand to uncover a trail of misbehavior, negligence and abysmal business ethics. Originally published in Dutch (2015), French (2018) and finally English (2019), this book deserves to be read, analyzed and discussed by business students, corporate managers, and African governments.
First, let’s dive into some background. Initially sent to the region to cover a story about Tunisia’s Jasmine Revolution in 2011, van Beemen was shocked when he learned about the scale of Heineken’s operations in an autocratic country led by a then-kleptocratic family clan. As a Dutchman inculcated with positive stories about the brewer at home, he writes of how shocked he was to find out about the company’s 165 breweries in over 70 countries. After digging into the company’s shady connections to Tunisia’s political elites, he decided to dig even further by embarking on a six-year project to uncover Heineken’s long and troubled history on the continent.
Heineken has been brewing beer in Africa since the 1930s, opting to continue activities during the colonial period, through independence struggles and into the present. Indeed, the company maintained many questionable policies during the colonial era, including supporting apartheid in South Africa. But Heineken never viewed its business activities in Africa as central to its growth strategy until 1999, when former CEO Jean Francois van Boxmeer no longer considered the continent to be on the “periphery of business.” With globalization unleashing high growth rates throughout the continent, the company increasingly bought into the ‘Africa Rising’ narrative and began ramping up operations in many countries. Although the continent had always been profitable, Africa’s emerging middle class and growing consumer appetite for international brews meant that Heineken could capitalize on higher margins.
In fact, Heineken realized that brewing beer in Africa is much more lucrative than in other markets. According to van Beemen, sales on the continent account for nearly 21% of the company’s profits, outpacing the global average by nearly half. Moreover, Heineken’s beers in Africa are about 50% more profitable than anywhere else, and Nigeria — Africa’s most populous country — is one of its biggest cash cows. These statistics alone are remarkable given Africa’s relatively low purchasing power on the global stage. Contrary to what some would think, Heineken’s beers in Africa are not sold at lower prices, despite nearly 40% of people living below the global poverty line. The world’s largest international beer companies all operate in Africa — including AB Inbev, Castel, Diageo, and SAB Miller — and, like Heineken, they mostly produce beer under separate, country-specific labels through joint venture schemes. Some Heineken examples include Nigerian Breweries in Nigeria, Bralirwa Breweries in Rwanda, and Bralirwa Brewery in the Democratic Republic of the Congo (DRC) that produce brands like Star Beer (Nigeria) and Primus (DRC).
European players have dominated the African beer market for themselves while leaving little room for competition. In many countries, global brewers have informal agreements with one another to stay away from each other’s markets and hedge against undercutting prices. Viewed in this way, European beer in Africa is a case study of an oligopoly in practice; tacit collusion keeps prices high, profits fat, and new entrants out. While less likely to happen in highly regulated markets in the U.S. and Europe, poorly regulated markets in Africa make it easier for major corporations like Heineken to bribe government officials, evade taxes and earn huge profits. All across the continent, van Beemen cites cases where the company has successfully lobbied government officials to keep excise taxes and import duties low. In other, more egregious cases of corruption, the company has had major politicians — such as in the beer-obsessed Burundi — sit on its Board of Director’s in order to peddle influence. In the DRC, the company paid off armed rebel groups so that it could continue brewing beer during the Kivu Conflict. And in Rwanda, Heineken maintained close relationships with Hutu Génocidaires during the 1994 genocide, with many attesting to drinking the lager to numb themselves from the mass killings.
Heineken’s market dominance and the weak regulatory environment in many countries also allows it to get away with shady labor practices. Until reports of sexual abuse came to the fore through reporting from van Beemen and others, Heineken had indirectly employed some 15,000 female promoters (‘promotion girls’) to sell its beer in over 100 countries, according to a 2007 internal document. Most of these promotion girls worked in dimly light bars throughout Africa for low pay — in Mozambique, Kenya, Uganda and elsewhere— often drinking beer themselves to convince customers to do the same. Many were pressured into prostitution. Despite donning short skirts emblazoned with the company’s branding all over it, Heineken was able to skirt responsibility for the exploitation many women faced by using third party staffing agencies. Heineken supposedly banned its ‘promotion girls’ practice altogether in 2018, but it’s hard to verify either way.
Perhaps the most worrisome thing about Heineken’s operations in Africa is how little they’ve been held accountable.
The shady marketing tactics it deploys in Africa is one major reason for their success. In country after country, Heineken has been able to capitalize on aggressive PR campaigns that glorify its corporate social responsibility (CSR) initiatives which claim to support local economies. They build schools in Rwanda with Heineken logos, create agricultural programs for local farmers in Burundi, and claim to have indirectly created over 632,000 jobs in Nigeria alone. When rigorously fact checked and investigated by van Beemen, however, these claims didn’t hold up.
On the jobs figure, van Beemen found that the company only employed some 3,000 people in Nigeria as of 2018. It should come as no surprise that such unreliable statistics were produced by a Dutch impact consulting firm hired by Heineken called Stewart Redqueen; when van Beemen spoke with the company, he found out that they didn’t conduct any field observations or on-the-spot verifications. Their figures were guesstimates at best and a total misrepresentation that enabled Heineken to market itself as a vital job producer to local governments at worst.
Despite van Beemen’s explosive work of journalism, the beer brand continues to remain popular globally and across Africa.
Heineken continues to perform well on the global market. Quarter 3 earnings beat market expectations, and despite a dip in sales and reports of layoffs, the company’s share price rose to a six-month high in early November. Unsurprisingly, Nigeria remained one of the company’s strongest markets in Q3. While the embattled former CEO van Boxmeer has moved on to a new position leading Vodafone, a toxic company culture and a trail of human rights abuses still stain Heineken to this day. This leaves me wondering: does the average investor care about Heineken’s activities in Africa, and will the beer brewer ever change its practices?
Probably not, at least in my view. Unless shareholders hold the company to account, I don’t see how Heineken’s corporate image suffers much. The unfortunate reality is that big multinationals operating in weak regulatory environments — such is the case with Heineken in Africa — can largely avoid the same kind of scrutiny that would come from regulators and an engaged civil society in developed markets. In Africa, governments will still hold up the Heineken example to Western investors as a testament to their ability to attract foreign capital and create jobs. And because of the brand’s historic place in Dutch lore, it seems as if the company will likely get the benefit of the doubt by domestic audiences despite mounting evidence that they shouldn’t.
For more, check out an interview with Olivier van Beemen from 2019 at this link.
