Is Heineken beer about to exit Uganda? Company sacks nearly all employees

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By Moses Kaketo

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All is not well with Dutch brewer- Heineken beer in Uganda. The beer is said to be struggling as the Ugandan market still refuses to accept it.

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Steven Baryevuga, a consultant with Heineken Uganda, told Newz Post that Heineken is yet to break even in Uganda. The beer was launched in the country three years ago.

In what could be described as a move to clear dead stock, management recently reduced prices of the 330ml bottle from Ugx. 5,000 to Ugx. 4,000 while the 500ml bottle now goes for Ugx. 5,000 down from Ugx. 7,000.

In what could be seen as survival strategy, management, early in June, sacked nearly all employees. Only three members of staff were left to manage the entire country. Heineken Uganda was employing about 30 people.

Heineken East African Boss with friends

The firm has since returned the leased cars to the owners- BAELL, a car leasing firm.

While the brewer’s regional turnover increased to KSh1.8 billion in 2015 up from KSh1.3 billion in 2014, the sales in Uganda are said to be struggling.

Mid last year, Heineken Uganda country manager Juliana Kagwa resigned her job to join rivals, Uganda Breweries Limited (UBL) as the Assistant Marketing Manager in charge of Spirits.

Following her departure, management scrapped the position of Country Manager to instead have a National sales manager.

With only three employees, the management has now empowered the distributors to distribute, market and promote the beer. In return, the firm will be extending some  budget to cater for this.

In April this year, Heineken, through Heineken International BV issued a termination of contract notice to Heineken distributors in Uganda, Kenya and Tanzania. This move was meant to cut costs. However, a Commercial Court Judge in Kenya, Eric Ogola, restrained the brewer from fulfilling this plan.


Asked whether Heineken was about to exit the Ugandan market following struggling sales registered over the years, Mr. Baryevuga said that Heineken was in Uganda to stay, preferring to call the changes ‘normal’

‘‘Heineken is sponsoring the Formula1 to the tune of US $ 150m. In Uganda, we only need 2m Euros to market and sustain the market for the whole year. That is little money for Heineken beer,’’ he said.

When contacted for a comment regarding the sackings and low sales in Uganda, Uche Unigwe, Heineken, General Manager for East Africa, was tight lipped. He said he preferred to discuss details on his return from a working trip in Europe.

Heineken is the third largest brewer in the world, after Sab-Miller and Anheuser-Busch inBev. The brewer holds several global and local brands including the flagship Heineken, Amstel, Fosters, Strongbow, Bulmers, Cruzcampo, and Tiger Beer.

What is the problem?

Analysts say the beer is struggling partly because it is not to the Ugandan tastes. The beer is said to be designed for another market. For this, not even the reduction in prices could push the sales up. Heineken is not the only struggling imported beer. Carlsberg was recently handed over to UBL for distribution. The brand’s visibility has since reduced.

Heineken could learn from Coca Cola. The Coke sold in Nigeria does not taste the same as that in Uganda or South Africa. Ugandans love Sweet things, for this reason, the Coke sold in Uganda is so sweet. On the other hand, the Coke sold in Nigeria is very dilute. Coke is a global brand. They localized it to meet the local taste.

Another example is Guinness. The Guinness sold in Uganda has a lower alcoholic content than that sold in Nigeria because of market preferences.

A few years ago, UBL had inadvertently turned itself into a sales representative for Coca Cola. Then  the Guinness sold in Uganda was so bitter that many consumers had to mix it with Coke to dilute it. UBL had to quickly change the Guinness to match the local taste.

 

Heineken is said to be poorly positioned and marketed in Uganda.

According to analysts, sponsoring the UEFA league and putting night-lights at bars is not enough. As such, it is difficult for beer lovers to associate with the brand. The poor visibility of the brand also makes it less attractive.

Some marketing experts argue that sponsoring major global sporting events like Formula1; UEFA does not have direct impact on consumption in Uganda. The brand is not involved in sponsoring local causes which means it rarely get to resonate with the potential consumers.

Local vs. imported beer

Market reports indicate Uganda’s beer market is controlled by locally brewed beers -brands that match people’s taste and are comparatively cheaper. These include Eagle Lager, Senator, Chibuku and a new beer on the market called Engule.Reports reveal that more than 50 percent of the beer market in Uganda is controlled by the Nile Breweries’ Eagle Larger – a brand that resonate with the local people.

Heineken is beer for the upper end market, which market is in its infancy in Uganda. The market is said to be less than two percent of all beer sold in Uganda, with so many brands competing for this market. These brands include imported beers like Carlsberg, Bavaria, Heineken among others. The foreign brands face stiff competition from middle-class  locally brewed brands including Bell Lager, Club, and Bell. Additionally, the later are not subject to heavy import taxes.

Survival for the fittest

Industry experts agree on one thing: success in this competitive market will be determined by players who embrace people’s tastes and preferences.

As John Quelch, a professor at Harvard Business School said of Heineken:

“Heineken is in danger of becoming a tired, reliable and exciting brand.This will become a reality if the brand does not rejuvenate itself by positioning well in the new markets. And now is the time.’’

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