Heineken cuts back spending on external consultants by a fifth

17 May 2016 Consultancy.uk

Heineken’s spending on external consultants fell by 21% last year. In total, over €140 million was paid to management and technology consultancies, as well as independent consultants.

External consulting budgets have been on the decline at many organisations worldwide, in light of the financial crisis and its aftermath. Brewer Heineken was a notable exception to the rule in the years following the crisis – as the company increased its budget for external management and IT consultants. Between 2009 and 2012, Heineken increased expenditure on consultancies, independent management consultants and project managers, from approximately €82 million to a peak of €191 million. After a dip in 2013 – expenses decreased by 13% to €166 million – expenditures on external consultants again rose in 2014 to €179 million.

However, lately, Heineken appears to be shifting its strategy away from bringing in ever more external advisors. Last year, advisory expenses for the company decreased by more than a fifth (21%) to a total of €142 million. That is the lowest level since 2010, when Heineken spent €127 million on the services of external consultants and project managers. An important caveat, however, is that the analysis is based on the expenditure mentioned in the annual results of the company under the heading of external consultancy costs; the figures may not include other external contracting – for example, strategic analysis or just temporary interim jobs.

Consulting expenditures of Heineken

Heineken’s spend on external consultants
If changes in Heineken’s expenditure on external advice in 2015 is compared to changes in its turnover since last year, the decline in percentage terms are even starker. The turnover of the global brewer increased to €20.5 billion in 2015 from €19.2 billion the year previous, mainly due to a series of completed acquisitions. Last year, the brewer took an equity interest of 50% in Lagunitas Brewing Company in the US and a majority stake (51.1%) in Laško, a brewery in Slovenia. Due to the increase in revenue and decrease in expenses, the total cost of external advice now comes in at around 0.69% of turnover, compared to 0.91% in 2014 – a decrease of approximately 25%. In 2012, spending on consultants as a ratio of turnover was the highest at 1.04%.

The multinational, in its annual report, does not disclose which external companies it hires, as part of the external advice category. Yet, one company name has found its way into the report. Part of the external advisory budget last year went to Willis Towers Watson, which was hired by the brewery for advice in the area of executive remuneration and the provision of actuarial services.

In addition to their advisory expenses, there were two other expenses into which Heineken was able to cut costs in 2015. The brewery reduced its energy and water costs (-6%) and spent less on raw materials (-9%). On the other side, packaging became significantly more expensive – the company spent around 20% more on packaging, with a total cost of more than €3 billion in 2015, the second biggest cost after personnel (€3.2 billion) for the corporate.

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