Thony Ruys: An ambitious caretaker
Elsevier Food International, Vol.8, No.2, May 2005
Pascal Kuipers
Heineken’s executive chairman Thony Ruys is the new co-chairman of ECR Europe. As a rule the tenure of this position at ECR Europe lasts for two years. There were, however, doubts as to whether Ruys would still be the brewer’s chief executive when his co-chairmanship at ECR Europe was ending. Last April 12, Heineken put an end to the rumours by announcing the chief executive’s retirement as of October 1 this year.
When asked in March 2003 how he would like to be remembered as Heineken’s executive chairman, Thony Ruys took up a very modest position. “I see it as a challenging task in the turbulent world of today to pass on what has already been established. If I am then remembered as a caretaker who minded the shop, I will take that as a compliment. I am not interested in playing a heroic part.”
The question was not asked to a chief executive close to retirement. Quite the contrary, it was published in the Dutch business publication FEM Business on 29 March 2003, almost one year since Ruys took over the helm at Heineken and less than a week before Ruys announced the acquisition of the Austrian brewer BBAG. This €1.9 billion deal has been the largest takeover in Heineken’s history.
Preference for wine
Ruys’ extreme modesty can be explained as an act of counterbalancing as in March 2003 he obviously knew that he was to clinch the largest acquisition in the brewer’s history. Ruys surely knows how to keep his intentions a secret – something that distinguishes him from his predecessor Karel Vuursteen. Immediately after his appointment as Heineken’s executive chairman in April 2002, Ruys admitted that untimely disclosures of growth and acquisition ambitions was to be a thing of the past. “If you are looking for differences between me and my predecessor, this is a clear example,” he said in April 2002. “We get on very well together, however different our personalities are,” Ruys said in 2002 to the magazine Management Team. Indirectly he admitted that where Vuursteen had a strong preference for beer, he is more inclined to drinking wine.
According to the analysts of the British investment bank Cazenove, Ruys would have been spotted too often holding a glass of wine, which allegedly is considered a mortal sin for a global brewers’ figurehead. According to the bankers who base their statement on “objective insights and rumours from different sources” this would feed additional speculations regarding a premature departure of Ruys sometime in 2006.
Cazenove’s pessimism with regard to the professional fate of Ruys at Heineken depends largely on the brewer’s performance under Ruys’ reign, and the figures do not speak well for the chairman’s position. Since he took over the reins at Heineken three years ago, the share price has declined by some 12.5 per cent annually and in 2004 net profit plummeted by 32.7 per cent. According to the Dutch financial newspaper Het Financieele Dagblad (FD), Ruys and his executive board cannot be held fully accountable for the brewer’s poor financial and stock market performance. “In the past the strong American dollar combined with increasing sales on the American import market used to be the basis of Heineken’s success story,” the FD reads. According to the newspaper, the freefall of the US dollar is the most important reason for Heineken’s poor performance. And future perspectives in the US are far from rosy, with increasing price competition and lowering consumption levels. Also in Europe Heineken is hurt by the combination of increased price competition and lower consumption levels.
An extremely difficult task
Moreover, there is the consolidation game that has been impacting the global beer market in recent years. Interbrew and Ambev merging into the largest brewer globally and South African Breweries acquiring Miller, are strong competitors for Heineken with a strong potential to create synergies and expand their operations. One day after the announcement of the Interbrew/Ambev merger on 3 March 2004 Ruys was interviewed for a publication of the consultancy Arthur D. Little. “Oh, it is not really a surprise. You could see it coming,” he responded to the intended merger. “For one thing, it is a logical and courageous move, even though I cannot yet fathom all the synergies.” In the interview, Ruys said that “For Heineken, autonomous growth is much more important than growth by acquisition. We are convinced that autonomous growth is a much better guarantor of sustained profitability.”
Words that would fit perfectly well with Ruys’ predecessor Vuursteen but seem to clash with Ruys’ track record of numerous acquisitions and joint ventures under his chairmanship. Since he spoke those words, Heineken did acquisitions in Israel, Nigeria, Germany (twice), Russia (twice), Kazakhstan and China. Furthermore it clinched joint ventures for the US market (with the Mexican beverage company FEMSA) and the Australian market (with Lion Nathan). In the same period, Heineken divested its operations in Angola and Chad and its 20 per cent minority share in the Brazilian brewery Kaiser. The latter cost Heineken €190 million.
“Only two years ago we were asked during analysts meetings in the US why Heineken did not participate in large takeovers just like the other brewers,” Ruys said in March 2003 to FEM Business. “They thought we were too passive. Now Heineken is considered a hero. To my surprise and pleasure I am esteemed for what my predecessor Vuursteen was reproached with.”
Vuursteen, however, could please investors with solid growth figures especially from the US. Being stripped of the US market as an important sales and profits growth engine and facing challenging market conditions in different regions worldwide, Ruys and his executive board members have an extremely difficult task to do. A further complicating factor is that Ruys has to do a balancing act between Heineken’s heritage and change-provoking challenges in today’s and tomorrow’s market place. Especially the relationship with the Heineken family, who still hold a controlling stake in the company, is crucial. Since it is the family’s intention to retain a controlling stake, it is difficult to attract foreign capital via the stock exchange to fuel acquisitions.
Family ties
“Be careful what you do to the company as it’s my name that’s on the bottles,” are winged words that the late Alfred Heineken spoke to Vuursteen. Both men had a close cooperation, exchanging views and opinions every week over a cup of tea – obviously in morning meetings – whereas Ruys cannot boast of such close ties to Charlene de Carvalho, Alfred Heineken’s daughter and majority shareholder. “Charlene considers Heineken as a patrimony. A heritage is to be shared. A patrimony is to be preserved,” Ruys said to FEM Business, which refers to the chairman and the majority shareholder who had to find a balance of power in the first year of Ruys’ chairmanship. “Slowly we built trust”, Ruys said. “Evidently, the family continues to allow us to invest in new and hazardous countries, to appoint new executive board members and to reorganise.”
However, that was over two years ago. In the meantime Heineken carried through reorganisations in the Netherlands (in September 2003 it announced the reduction of its workforce by 450 people over the next two years) and elsewhere in Europe. In February 2005, Ruys announced a reduction of brands in western Europe and further cost-cutting measures that were to reduce annual cost levels by €50 million before the end of 2007.
In order to stimulate the proceeds, Ruys focuses on innovation (e.g. the BeerTender, a draught beer system for home use) and rejuvenation. He appointed young members to his executive board and as a whole the brewer refocused on a core customer base of young adults in their early twenties who are about to establish their preferences when it comes to beverages and brands.
Knowing that market conditions remain unfavourable at least for the short term, Ruys has to break the rules of the illustrious Alfred Heineken. Last March, Heineken announced to test a new light beer on the US market under the brand Heineken Premium Light in order to stimulate consumption of Heineken among the weight concerned consumer base in the US. It is a major concern of the brewer to get the US growth engine running again. This end justifies the means even when not in line with the rules of Alfred Heineken, who used to veto any experiment with taste and sub-branding of the brewer’s flagship brand. On 25 March, yet another unwritten law of Alfred Heineken was ignored as Heineken proposed a new share-based remuneration policy for its executive board. Alfred Heineken was opposed to any rewarding that was linked to the share price, as it would only provoke short-term decision-making.
Trying to do his difficult task, Ruys has the courage to challenge Heineken’s corporate culture. A caretaker would never do so and Ruys knows the risks of his position, might he lose the trust of the Heineken family. Illustrative is what he said to FEM Business: “I realise the risks but I am not worried day by day. I know my responsibilities and I realise that what is good today can be explained differently tomorrow.”
A responsible brewer
Ruys is also actively engaged in Heineken's corporate social responsibilities (CSR) programmes, which touch on environmental issues, AIDS prevention in Africa or responsible consumption of alcoholic beverages. Especially in the developed and saturated markets, these issues appeal to young customers.
“Heineken has been increasing its commitment to CSR over the past few years,” says Katharine Preston, senior analyst at Innovest, which analyses companies' performance on environmental, social, and strategic governance issues, with a particular focus on their impact on competitiveness, profitability, and share price performance (www.innovestgroup.com).
“Innovest rates Heineken as above average along its social, governance, and environmental performance,” Preston says. “Heineken performs well on its disclosure of CSR programmes and performance and produces a sustainability report following GRI guidelines. The company has had very strong environmental performance for years, focusing on eco-efficiency especially in terms of energy and water use. Heineken sources some renewable fuel to run its plants and its by-products are sold and re-used by other businesses.
Heineken has developed human rights policies for its operations, which is especially critical given its strong presence in emerging market countries. The company is a leader in meeting the HIV/AIDS challenge and has developed an International Medical Services group at its African operations. This group develops activities in the field of preventive and curative healthcare for employees and their immediate families, especially in countries where public health-care provision is inadequate.
Heineken's commitments to CSR are especially critical given its global spread and the product it produces. Being committed to raising the awareness of responsible alcohol consumption is critical in the sector and Heineken has strong employee and community education programmes. The company is committed to being one of the top three global brewers in terms of sustainability. Heineken is not yet there according to Innovest's assessment but “the company is on their way.”
Profile
Anthony Ruys (1947) is a descendant of the ship owning family that established the Royal Rotterdam Lloyd Wm. Ruys & Sons that later merged to become Nedlloyd. After he studied commercial law, Ruys opted in 1974 for a career at Unilever. He started as a marketer and later moved on to work as marketing director and chairman for various Unilever subsidiaries in the Netherlands, Colombia and Italy. “I have built my career solely on my own merits,” he said in FEM Business in March 2003. “If I had gone to work for Nedlloyd, everybody would have called me a Daddy’s boy had I done well there. That is why I made the radical decision to choose for Unilever.”
In 1993, Ruys transferred to Heineken where he became a member of the executive board. In 1996, he was appointed vice chairman and per 25 April 2002 he is Heineken’s chairman of the executive board.
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