Heineken’s acquisition of Krusevice confirms its bolt-on acquisition approach
- June 18, 2007
||company acquisition announced, June 2007;
||Royal Brewery of Krusovice (Czech Republic), domestic beer producer;
||Heineken NV (Holland), no.1 beer producer in Europe;
||Radeberger Gruppe KG (Germany), domestic beer producer;
||to jump from no.4 to no.3 in Czech market, acquire a brand strong in Prague;
||acceptable valuation, focus on domestic market, possibly financial problems;
||with this deal, Heineken overtakes Budweiser in total beer volume in Czech.
A more impatient company might have exited the Czech market, by now. Heineken has been languishing there, with a mere 5% market share, for nearly a decade. Producing in Slovakia and southern Moravia, its brand portfolio is weak and lacking in a domestic premium offering. That’s not to say that the acquisition of Krusovice represents a major breakthrough. Its 700k hectolitre will only add 3% to Heineken’s market share, which means it will remain in single figures and way behind SABMiller and InBev. The group will either continue this pattern of piecemeal brand acquisitions, or will take a decision to exit the Czech market at some point. In either case, that’s good for M&A activity.
The Czech market may be the biggest in the world, in per capita terms, but it’s saturated and not growing, making life even harder for small ‘generalist’ players like Heineken Czech. But at least Heineken now has the morale boost of overtaking Budvar, state-owned producer of the legendary Budweiser brand, into the no.3 market position.
Plus the fact that Krusovice gives Heineken a clearly premium brand and a stronger position in the all-important Prague market, two things which it had sorely lacked beforehand. There’s also upside potential to increase Heineken brand sales in Prague, as well as regional export potential for Krusovice, which is a beer with a very noble image.
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