Many of the interviews we’ve carried out in recent months have been inspiring for us (and we hope for readers too). Our recent discussion with Hervé Le Faou, Chief Procurement Officer of Heineken, certainly refreshed the parts that other procurement with purpose interviews couldn’t reach!
OK, we couldn’t resist that, although the famous advertising slogan has not been used by the brewer for 20 years or so, but it entered general usage long before the adverts stopped. While Heineken is still one of the world’s leading advertisers, in terms of marketing quality and spend, it has also developed a reputation for being at the forefront of sustainable procurement.
Le Faou himself is very much one of the new breed of CPOs. He has worked for a range of blue-chip consumer goods firms including Danone and Unilever, working in general management roles in India, Europe and the US and has now been at Heineken for 5 years. So whilst his background is in operations and supply chain, his general management experience means he sees his current role as having “a business focus rather than a functional focus.” Most of his roles have involved transformation and he looks to leverage the skills of whichever area he is working in “to drive the organisation towards a successful future.”
Through the company’s ownership structure, the Heineken family involvement and vision is being retained, which helps keep the focus on “the long term and the top line,” Le Faou explains. This perhaps makes supporting sustainability actions easier than in a company that is always focused on the next quarter’s bottom line results. So what is the strategic positioning of procurement in the firm?
Procurement used to be about the flow of goods “into the box”, Le Faou says, “but now, we see ourselves as the owners of the ROI that the supply base provides to the stakeholders within the business. We are powered by suppliers, we plug them into our business like electric plugs, not just in raw materials but even in marketing. Simply, if we choose the wrong agency, then that budget doesn’t work.” It is the quality and performance of suppliers that helps you win, “and we must constantly re-shape the supply base to meet our needs.”
But the future focus includes what happens after the box, as it were. The billions of cans and bottles the firm buys annually could go over 30 times around the planet and without responsible and clean recycling schemes in place, a significant proportion can end up going into landfill. “We have a responsibility to the planet. The circular economy and care for the environment is vital for us and the communities we operate in”.
That procurement with purpose attitude extends into indirect spend too and a focus on developing an ecosystem of diverse suppliers. “We depend on a network of complex supply chains and we need to make sure there is wealth there.” Indeed, in some countries such as South Africa, demonstrating supplier diversity is key to doing business.
Collaboration is key to the strategy too. For instance, Heineken has also been helping some strategic suppliers with supplies of PPE during the Covid-19 pandemic. “We were able to share supplies through our contracts because these firms are critical for us” and this approach is going to accelerate, he thinks. “We’re being transparent with key suppliers, asking “how can we best get through this crisis” – things will need to change, for instance as we re-design bars and social gatherings.”
So the focus now for Le Faou and procurement is on three main (and linked) areas – technology, sustainability, and the agility of the supply base.
“Agility is key. We work in an uncertain environment – I mean macro-economic developments, political shifts, the environment, trade – but whatever happens, an agile and diverse supply base should help you manage”. The firm is also sensitive to the growing focus on social issues, such as the need for responsible drinking behaviour. The focus of the firm’s marketing now is on fun and creating “memorable experiences,” whilst also focusing on global responsible drinking campaigns such as: ‘When You Drive, Never Drink’ or the recent Heineken® #SocialiseResponsibly campaign.
“Experiences could be at the centre of what we do in the future”, Le Faou believes. Hence links to major sporting or music events, and maybe consumers buying something that is much broader than just a bottle of beer. That might bring some interesting challenges and opportunities in terms of procurement activities, we suspect and “there might even be subscription models in future to “create a dream”, as we say.”
But let’s return to the technology angle. “Our role is to challenge our supply markets – not just in categories such as glass and cans but also in logistics, or media or marketing spend. Digitization moves so fast, so maybe in the future media will be totally different. So creative thinking is important”.
“This is the link between sustainability and innovation – it is about designing the future”, Le Faou says. If you don’t think about the future you will lose it. “We need to paint a picture of a possible future, and create a sense of purpose for that vision”.
He believes that negotiation will “disappear” as we design new ways of doing business. Artificial intelligence will give total transparency of the supply chain, so we will see ecosystems with a shared P&L. “It will not be about stealing margin from your suppliers. It is about speed, and using innovation to create competitive advantage and grow market share”.
(More to come in part 2 shortly!)