Aussie Rules - or running Heineken UK the Orlowski way

Nine months into his stint as boss of Heineken UK Stefan Orlowski says he is delighted to be working in the domestic brewing and pub sectors, despite the well-publicised problems.

The 43-year-old who replaced Scottish & Newcastle stalwart Jeremy Blood last year says he relishes the intellectual challenge of working here. He says he finds the integral part that beer, cider and pubs play in British society "fascinating". It gives the industry a "special place in the community", he believes.

But last July the first day of his time as the managing director of what was then Scottish & Newcastle UK was not a great one for Orlowski the Australian cricket fan.

"The first day of my induction I went to Lord's. That wasn't so enjoyable," he says, leaving one to imagine his reaction at landing in a tough new market, only to watch his beloved Aussies lose the second Test against England by 115 runs.

Putting aside the thought that most of us would love to mark the start of a new job by watching a game of cricket, the former corporate lawyer-turned-marketer, with nine years under his belt at the Dutch brewer, will have put the defeat in perspective.

He has far bigger things to be getting on with, primarily growing Heineken's businesses in a market which has seen one of the biggest slumps in living memory.

Bitten off more than it could chew?

Did he appreciate those who observed rather drily at the time of Heineken's takeover of Scottish & Newcastle in 2008 that it couldn't have bought into the UK at a worse time; that it had bitten off more than it could chew?

"Jean-Francois van Boxmeer [Heineken's chairman and chief executive] is on record as having said that strategically it was absolutely the right thing to do," Orlowski says. "The timing was not the greatest, but things are easy to say with hindsight. They don't change the strategic rationale."

Heineken has a "fantastic track record" in marketing its brands, he says, plus the group "practices what it preaches", with increased investment in its pubs to enhance the consumer experience.

"When you walk into a pub you get the perfect product that cannot be replicated elsewhere," Orlowski says. "We've a role to play in that, in conjunction with our lessees and customers. We have that consumer touchpoint in the on-trade. We're not just selling 'stuff' somewhere; we're able to engage with consumers in a way that many other FMCG sectors simply can't."

Heineken says it does not report performance "below Western European level" but suggested its UK trading performance in 2009 was "notably ahead of the market and a significant improvement on 2008".

Going from a player with a three per cent share of the beer market to market leader in one fell swoop will have been quite a sea-change for the brewer, plus finding it has getting on for 2,000 pubs under management.

True, existing staff have allowed for a relatively seamless transition, although the economic landscape has meant the taking of some tough decisions - planned brewery closures at Dunston in Gateshead and Reading in Berkshire are to go ahead in the next couple of months.

Given the various nuances in the UK brewing and on-trade markets, what will Heineken's game plan be going forward? Orlowski is unequivocal. "We have a fantastic portfolio of brands and we can do a lot more with them. And we're absolutely committed to our pubs," he says.

Difficult decisions

Acknowledging the brewery closures were "difficult decisions to implement", Orlowski says the group has "no plans to anything else beyond what we've already announced. The aim is to get what we've got right. A bit of investment here and there. As a business who knows how things will play out over a period of years? Our priority is to optimise our network and make it as efficient as possible and the highest quality we can."

Orlowski is, perhaps predictably, an opponent of calls to implement minimum pricing for alcohol.

"We don't believe it will solve the problems it purports to be able to solve. Primarily because the vast majority of people are responsible drinkers whose consumption is part of their lives. There's nothing wrong with that," he says.

"Minimum pricing would just punish them. We should be intervening with the harmful minority.

"Plus there can be better enforcement of existing laws, on issues like under-age purchasing, anti-social behaviour, and the like. I'm not one who defaults to more regulation to solve our ills."

He also bangs another familiar drum, namely that society is changing and pubs, if they are to survive, need to reflect the changing needs of consumers.

"I was recently talking to a large part of the estate population. I think there is that understanding and a commitment to succeed. There's a real passion in that part of the business," he says.

"But we have to move on. We cannot dwell on what things were like 30 years ago. Things are changing and we have to change too. We have a responsibility to drive that change and bring it to the lessee.

"There's a tendency on the part of some lessees to look at their pub from the inside out. Not from the outside in. We have to help them change that perspective."

Boosting the bar

To illustrate his point Orlowski points to Heineken's new retailing initiative called Bar Boosters, which he describes as

"a very interesting programme designed to put the pub back at the heart of the community".

"Bar Boosters is about all the different ways that the location can be used to maximise the revenue for the lessee," he says.

Orlowski is aware that the tenant/landlord relationship has been hitting the headlines in recent months, notably with regard to the beer tie. His view echoes that of other defenders of the arrangement.

"Our view of the tie is it is still a model which enables people to enter the industry in a relatively cheap and effective way. If I look at how we operate it, we do so by concentrating on adding value to our lessees," says Orlowski.

"If our lessees are not successful, we're not successful. It's as simple as that. The right pub, the right location, the right lessee doing the right thing in the pub. The lessee is so important to that.

"I've been out to the pubs and I see the value we can add to ensure lessees can compete with everything else that is going on around them."

Noting Heineken's taking on of the 420-odd strong Globe Pub Company - the estate formerly owned by property tycoon Robert Tchenguiz which it has managed for several years - Orlowski says the brewer is "now at the stage of applying our operational excellence to make sure those pubs and the rest of the S&NPC estate are run as well as possible".

Still, at a £180m-plus cost to the brewer not a great house-warming present all the same.

Orlowski says the group's "absolute focus is going to be on our operational excellence is helping lessees weather the [economic] storm. It will ultimately pass, but we don't know when", he says.

"So it's about getting out there and saying 'OK, what do we need to do to attract as many consumers to this pub, drive footfall, get the service quality right, etc?' It's not about waiting for the sun to come out," he continues.

"If you've done the work, then when the sun does come out, you'll be set up better."