Dutch King Willem Alexander and president Putin in the Holland Heineken House in Sochi (2014)

Dutch King Willem Alexander and president Putin in the Holland Heineken House in Sochi (2014) © AFP, Mikhail Klimentyev

Heineken reneges on its promise and invests in Russia

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Despite its promise to cease investing in Russia because of the Ukraine war, Heineken launched a whopping 61 new products on the Russian market last year. The Russian subsidiary recaps on ‘a turbulent year, with many new growth opportunities’.

While Russian bombing was destroying Ukrainian cities and ground troops occupied large parts of the neighbouring country, Heineken embarked on a massive sales offensive in Russia.

According to Heineken, their Russian branch launched 61 new products in 2022 ‘in record time’, accounting for 72 million litres of additional sales in beer and soft drinks. ‘It was made possible by the belief that anything is possible and the amazing teamwork – Marketing, Sales, Production and Procurement, Finance made it a reality!’

'2022 has become a turbulent period for all market players, but at the same time it has presented many opportunities and opened up new ways to develop and expand our business,’ it says in a retrospective on Heineken Russia’s website. ‘We are proud to announce that we have achieved record levels in several segments at once.’

‘A fantastic result’

‘Heineken thereby backtracked on its earlier commitment to not make any new investments in Russia. As to how much the recent investments in Russia cost, the brewing company declined to disclose. The development, production and marketing of new products is typically an expensive process.

In late March 2022, Heineken announced it was effectively pulling out of Russia. It stated that ownership of the Russian subsidiary was no longer ‘sustainable or viable’. This followed more than a month after the invasion of Ukraine and three days after Follow the Money revealed that previous measures haven’t amounted to much.

Last week, top executive Dolf van den Brink announced that the sale process was more difficult than anticipated, partly because of ‘evolving local legislation’. Allegedly he also wanted to prevent the company from falling into the wrong hands.

The multinational stopped producing Heineken beer in Russia, but thanks to Amstel’s strong growth (also a Heineken brand), the company managed to fill that gap mostly on its own.

Heineken launched three new subbrands in the Russian market: Amstel Fresh, Amstel Extra and Amstel Natur Wild Berries. ‘We managed to grow the brand almost twice as compared to last year (!), which was reflected in the market share, which in October amounted to 2%! According to this indicator, Amstel achieved the results of the Heineken brand last year!’ the website reports.

The company also expresses its satisfaction with the launch of its new brand Black Sheep, a so-called stout beer developed as a replacement for Guinness.

‘Black Sheep – this launch deserves a special page in our history. In just a few months, Heineken Brewery and the Production Department of the Central Office created a unique product that easily replaced the brand, which is 263 years old! And thanks to colleagues from the Marketing and Sales Departments, this drink is sold in 900 outlets just a few months after the launch. This is an amazing result that we can rightfully be proud of.’

Heineken also sees plenty of opportunities to tap into the soft drink market in Russia. It states on the website: ‘After the withdrawal of Coca Cola and Pepsi products, we decided to enter the non-alcoholic carbonated drinks market and launched several lines at once in the fall – Royal Cola, Tony Lemony, Botanic Secret and the updated Solar Power.’

The company announced further new investments for 2023, including more modern packaging and new flavours.

‘In a cynical manner’

Heineken, which uses the slogan Brewing a better world, continued to pay taxes to Russian authorities in 2022 – the corporation does not want to reveal the amount.

In 2019, the brewery paid the Russian tax authorities almost 400 million euros. The company hired 243 new employees there last year; how many have left is unknown.

Last year, chairman of the board Van den Brink announced that he no longer wanted to ‘financially benefit’ in Russia and that the subsidiary would be ringfenced from the rest of the corporation. It is unclear what this means in concrete terms, how it will be applied, and who will benefit from possible wartime profits. Heineken has not responded to questions regarding these matters.

‘This absolutely contradicts the official story about divesting our Russian subsidiary’

‘On the one hand, I get it: if you want to sell the company, you maximise market share in the short term, to increase value,’ a manager at Heineken tells us. ‘The better they do that, the sooner they can find a buyer. But on the other hand, after all our announcements last year, it is hypocritical. Heineken is cynically benefiting from the fact that big international brands have pulled out of Russia – Budweiser and Carlsberg brands were much bigger than Heineken over there. Heineken is filling this gap by investing heavily in its own local and international brands. The same applies to soft drinks. Product launches, advertising campaigns and aggressive growth plans require large investments. This absolutely contradicts the official story about divesting our Russian subsidiary.’

The manager expects that the Russian buyer – just like anywhere else – will have to pay royalties for the use of Heineken’s international brands, such as Amstel, Affligem and Krušovice.

‘Fear of reputational harm’

The introduction of new Amstel subbrands seems to indicate that Heineken wants to maximise those revenues. ‘If Heineken plays its cards right, it might be able to earn more than before. Russia’s market has low profit margins but high royalty revenues.

‘Every month we remain active, our taxes contribute to Putin’s war machine’

‘Internally, we are trying to pressure management,’ says the internal source. At a so-called town hall meeting last week, a session during which top executive Van den Brink answered questions from staff, the situation in Russia featured high on the agenda. ‘As an employee, I really want Heineken to pull out of there as soon as possible. Every month we remain active, our taxes contribute to Putin’s war machine. Dolf van den Brink’s narrative is all about values, meaning, and the importance of corporate social responsibility, and it’s time he demonstrated that.’

The manager calls it embarrassing that Heineken is openly bragging about its Russian successes and sees the pushing of Amstel as proof that Heineken was purely removing its own brand from the market for fear of reputational harm. PR bullshit is evidently more important to management than doing the right thing in Russia.’

Translation: Delia Burggraaf

Heineken’s reaction

Among other things, Follow the Money asked Heineken why the company reneged on its promise to stop investing in Russia; who benefits from the revenue and any profits in Russia; and whether a future buyer will have to pay royalties to Heineken for the use of international brands. We also asked about last year’s sales, profit and growth figures in Russia and exactly how the ringfencing from the rest of the corporation works. Heineken did not answer any of these questions.

The company sent the following summarised statement: 

‘We remain shocked and saddened by what is happening in Ukraine. In March 2022, we were the first global brewery to decide to pull out and stop selling the Heineken brand in Russia. To minimise the risk of nationalisation and ensure the safety and well-being of our employees, we believe it is essential that we continue with reduced operations during this transition period as we seek to transfer our business to a new owner in full compliance with national and international laws. In doing so, we are making progress while dealing with regularly changing regulations. We will not benefit from any sale or transfer of ownership and have ringfenced the Russian operations from the wider business in order to stop the flow of money, royalties and dividends from Russia. Heineken will no longer accept any net financial benefit from the Russian operations. We expect to reach an agreement in the coming months.’

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