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Family-run brewery finds success amid adversity
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Receiving one of the most prestigious accolades for excellence in family business was a memorable moment for the five cousins from the Swinkels family who gathered in Montreux, Switzerland, on October 16 last year. As executive members of the seventh generation of the brewer family that owns and runs Bavaria NV, the second largest brewery in the Netherlands, they steered the business which was founded well before 1680 through the ups and downs of the tumultuous beer industry.
Western beer markets have been stagnating for years — some are even declining — and competition is best described as ferocious. Over the past decade, the competitive landscape has changed considerably, mostly through heavy consolidation. AB InBev’s recent nearly completed acquisition of its largest competitor SABMiller is proof of the dominating role of the “Big Four” brewers (AB InBev, SABMiller, Heineken, Carlsberg) which together control 47 percent of the global market volume and 60 percent of its value. For a mid-sized, family-owned brewery like Bavaria NV ensuring sustainability is priority number one.
Since 2007, five cousins from the seventh generation of Swinkels family brewers and owners have been at the helm of business operations. “We consider it a plus to have a relatively young management board — when you are in your early thirties and early forties you are full of energy,” said Jan-Renier Swinkels.
A solid governance model has been put in place and non-family expertise is valued on the supervisory as well as the family holding and council boards. As a matter of fact, both boards are chaired by non-family experts and the supervisory board currently has more non-family than family members.
The Swinkels family fascination with the whole brewing supply chain is reflected in a number of patented technological breakthroughs. For instance, Bavaria was the first company able to brew a true non-alcoholic beer.
Traditionally, non-alcoholic beers were produced by adopting a standard alcoholic fermentation process, and then removing the alcohol by evaporation. Unfortunately, the process also destroyed some of the more complex beer flavors and did not find much credence among beer aficionados. Researchers at Bavaria developed new strains of yeasts able to ferment without producing alcohol; the fermentation process is stopped after the yeast has generated the required flavor but before it produces alcohol. A major advantage is that it allows for full “halal” labeling, opening up sizable opportunities in Muslim countries.
Off the beaten path
Another example of the team of cousins daring to tread off the beaten path was their African market entry in 2012. The potential for growth there seems to be huge: GDP has been growing fast on the continent and with higher incomes consumers have started to switch from their local home brews to factory-made beer. The average consumption of beer per capita in Africa was about 8.8 liters per year, compared to 72 liters in North America and 55 in Western Europe.
Bavaria acquired a significant stake in an Ethiopian start-up business, Habesha Brewery SC. For Bavaria, this represented a new model for doing business in emerging markets. Habesha was started by a group of local investors committed to building a local brewery with a local brand for local people.
The brewing knowhow and some of the ingredients such as hops and yeast would come from Bavaria but the water and raw materials such as barley and cassava would be sourced locally. About 8,000 direct local backers co-invested with their family members and friends via a share coupon system, similar to an early crowdfunding effort.
The forecast for Ethiopia was positive, with solid economic expansion expected over the next decade. A new investor-friendly regulatory environment combined with relatively high security levels and political stability makes the country attractive. On the other hand, it still has a very rural profile, with little infrastructure and roads that make distribution slow and costly.
Benoît Leleux is Stephan Schmidheiny Professor of Entrepreneurship and Finance at IMD. Anne-Catrin Glemser is Family Business Research and Development Manager at IMD. Shanghai Daily condensed the article.
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