Heineknen’s David Forde — moving on by moving back
The Chief Executive of Heineken Ireland has taken his leave to head up a greatly expanded Heineken UK. David Forde spoke to Pat Nolan about his time here.
Print28 June 2013
After four years here as Chief Executive of Heineken Ireland Galway-born David Forde is moving on – or back. Having spent every day of his career with Heineken the UK’s something of a return as he takes up the Chief Executive’s role at Heineken UK. He’s been there before. But this time it’s a considerably larger entity, with a lot more beer brands – oh and with 1,400 pubs to look after too…
That ‘temporary’ job as a Heineken Merchandiser in Donegal town for a Summer as a young Applied Physics graduate will have been extended by 25 years on 4th June.
In that time, he studied marketing in Dublin and moved up to various positions in Poland, the Netherlands and the UK in the international Heineken orgainsation before returning to head up Heineken Ireland.
Integration
In the UK he participated in Heineken’s successful joint bid with Carlsberg to acquire the assets of Scottish & Newcastle plc which was split between them market-by-market with Heineken taking the UK and Irish businesses of S&N (including Beamish & Crawford).
Having successfully integrated Heineken UK into a S&N operation 20 times its own size, David’s returned to Ireland in 2009, overseeing B&C’s integration into Heineken Ireland.
Draught beer & the Irish pub
“Considering the recession we’ve gone through for the last four years, the beer market has been relatively resilient,” he reflects, “In overall terms we’d a couple of years where we’d quite low levels of decline. And within the beer market the lager market has continued to perform strongly – obviously for ourselves as a lager-dominated business, that has been a stronger performance than one might have expected.
“If you look at Ireland, people say the economy is collapsing with massive emigration, huge consumer lack of confidence etc so we would have expected that the market would have suffered more than it did.”
Looking forward however he’d have concerns for the next couple of years rather than the last four.
“The tax increases are really beginning to bite the consumer and disposable income is under enormous pressure” he says, “forcing the consumer to make more difficult choices day-by-day. I’ve always said that beer is an affordable luxury but by the day that thought is being challenged.”
Despite this, he’s optimistic.
“Draught lager has proven its capacity to grow and has proven remarkably resilient in the last couple of years; the innovation and improvement in dispense and an increased focus on quality by both the supplier and the trade have given it the opportunity to compete aggressively in the market and offer consumers strong value-for-money.
“There’s a nice level of dynamism across the total draught market with the introduction of lots of new brands and the emergence of a strong craft/super premium segment which is providing the consumer with a lot of variety and interest – and a reason to stay in that market.”
A pint of beer is certainly fine value for money in a good Irish pub, he believes.
“Draught beer is a key element of the Irish pub offer. Always has been and always will be. Publicans need to – and we need to with them – maintain their relevance to draught beer because it’s the key differentiator of the pub and publicans need to ensure that every consumer’s draught experience every time is perfect.
“Beer will continue to grow from other sectors in the market. For example it outperformed cider. Innovations like Heineken Extra Cold have played a fantastic role in enhancing the refreshment value of lager.
“Brands like Desperados allow beer to compete more effectively late at night where it can now compete with the spirits domain.”
“I look at the proliferation of fantastic world beers that are entering the market that have the capacity to compete with the wine market in offering diversity in taste and origin, they certainly play an increased role in building the relevance of beer to food for example.
The beer market hasn’t exploited the food market fully as yet either.
“The beer market is as diverse as the wine market. Our job is to bring that diversity to the Irish consumer to inspire them and give them reason to try those beers.”
Craft beers
The challenge for crafts, as he sees it, is the potential proliferation of many brands very quickly onto the market then being faced with the realisation that the scale of distribution simply isn’t commercially viable.
But he’s no doubt that craft beers will continue to grow for the next five or six years — but it won’t be enough in itself to arrest the decline in the market.
Pricing
At the recent VFI conference rural vintners were critical of Diageo and Heineken for raising prices last year at a very difficult time.
David seems surprised.
“Our input costs have risen quite dramatically in the last four or five years,” he responds, “Primary inputs like oil used to brew our beer and malt – a key ingredient – have seen dramatic increases in price.
“Also, prior to that, we’d three years of price stability despite increasing cost pressures. I think for us to continue to invest in the category, to support events, to improve our quality etc we need to make sure that we can cover our cost increases. As I look at Heineken over the long term, particularly over the last decade, our price increases have been remarkably modest and never above inflation.”
Sponsorship
And his views on the alcohol sponsorship debate couldn’t be clearer.
“They’re having the wrong discussion,” he says, “The proposals as presented will simply not deal with the issue of alcohol misuse in Ireland. There’s absolutely no correlation or evidence that the sponsorship of sporting events in any way leads to misuse.”?He elaborates: “The major sponsors for sports occasions are beer brands yet the beer market has declined by about 20% in the last decade. There’s no correlation between the beer brand sponsoring these events and increased consumption.
“How many wine brands do you see sponsoring sports events? But wine sales have grown.
“The danger is that the Government is going to miss an opportunity to address the issue by implementing initiatives that will be ineffective and will have a potentially dramatic impact on sports and cultural organisations the length and breath of the country.
“The primary way to deal with alcohol misuse in Ireland is via education and that’s the long and challenging task we all face.
“In that context an initiative like drinkaware.ie is absolutely central to a long-term solution.”
The pub’s future
David Forde remains firmly convinced that the Irish pub is a fantastic product.
“Even today, there are pubs winning and growing in the market,” he says, “And the pubs that are winning as we see it are doing a couple of things right that are very important to share with your readers,” he tells me, “Firstly they’ve a relentless focus on quality standards. Secondly they’re continuously innovating. If I look at the way pubs are communicating with their customers, engaging in social media, leveraging the power of facebook, twitter and e-mail to attract the consumer into their outlets, those doing that are having fantastic results.
“If I look at the way some pubs are re-connecting with the community, repositioning the pub as the hub, there are some who’re really delivering fantastic growth.
“Publicans now understand more about the concept of value-for-money and that value-for-money does not necessarily mean cheap prices.
“Dropping prices to try to match supermarkets will not sustain the industry.
“Pubs offer fantastic entertainment, service, food, comfort and conviviality – that’s something that the Irish consumer is still willing to pay for when it’s done well.
He also hopes that the banks will show some faith.
After all, the difference between the pubs and the banks is that the pubs don’t have a safety net called the taxpayer, he says.
“The need for Government to stimulate the local economy is nowhere better demonstrated than in the labour-intensive hospitality industry and anything they do to undermine that is absolutely crazy. It’s a massive employer.”
His role at Heineken UK
We get up at the end of our talk and I ask how his new role will differ from that in Ireland to date?
“The sheer scale of the business, for one thing,” he responds, “It’s one of the largest businesses that Heineken has globally, employing in the region of 2,500 staff with close on 30% share of the UK market. It’s the largest beer and cider producer in the UK…. And the company also owns 1,400 pubs.”
As he takes his leave of our shores, David Forde can take pride in having inherited a strong company in Heineken Ireland when he took it over — and passing it on now as a still stronger company.
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