Monday, June 8, 2009

BTO: Drinking to good times and bad

Business Times - 06 Jun 2009

Drinking to good times and bad

How is Asia Pacific Breweries' new chief executive coping with his move and the downturn? Roland Pirmez shares his views. By Emilyn Yap

ROLAND Pirmez can brew his own beer - he even has a master's degree in brewing to show for it. But these days, the chief executive of Asia Pacific Breweries (APB) barely has time for this pursuit. 'Don't spend time, just drink Tiger,' he says.

It is not surprising to hear Mr Pirmez cite Tiger - APB's flagship brew - as his favourite beer as well. The former head of Heineken Russia officially became APB's CEO in October last year. He took over from Koh Poh Tiong, who led APB for 15 years before moving on to helm the food and beverage division at parent company Fraser and Neave (F&N).

Growing up in Belgium has certainly helped Mr Pirmez cultivate a taste for all beers. From white, red, golden to lambic beers, over 450 varieties are available in the country. It is usual to drink beer even as an aperitif, he says. 'I'm a lucky guy. I'm producing a product in line with my culture and I enjoy it.'

But it is with a cup of espresso that Mr Pirmez settles down for the interview in his office at Alexandra Point. Alcohol may be his passion but he still needs caffeine at work. 'I need many espressos. It is well-known in the company that before meetings, I need my espresso or the meetings won't be nice,' he says with a smile.

Mild jokes aside, Mr Pirmez is serious when it comes to business. He joined APB just as one of the most severe economic downturns in Singapore's history was - and still is - unfolding.

So far, the company has held up well, living up to the notion that F&B businesses tend to be recession-resilient. For the second quarter ended March 31, 2009, APB even grew its net profit by 5.8 per cent from a year ago to $46.2 million. Its contribution to F&N is particularly important when the recession has weakened the conglomerate's property arm.

Mr Pirmez acknowledges that the beer industry is not as appealing during boom times. 'People are not drinking more beer. They are buying more cars, more TVs, holidays,' he says. 'But it's clear that when you have a recession, the beer industry is less affected than many other sectors. We start being a little bit more sexy.'

Nevertheless, APB is not completely immune to the downturn. The product of a long-time partnership between F&N and Heineken, APB has brewery operations across 12 Asia-Pacific countries and offers over 40 brands of beer in these markets. From Singapore to Mongolia, from India to New Zealand, the impact of the economic slowdown has been different.

'Globally, people are trending down,' Mr Pirmez observes. What this means is that consumers are switching from high-priced spirits to premium beers; from premium beers to mainstream beers; and from mainstream beers to economy brands. 'In terms of volume, we are less affected,' he says. 'But in terms of value, we are a bit affected.'

New Zealand was one of APB's weakest markets in Q2 2009. Falling consumption, coupled with stiff competition, higher packaging material costs and the falling New Zealand dollar drove profit before interest, taxation and exceptionals down by 78 per cent.

'A recession is not easy. You have to keep margins to continue investing in your brands, to manage cash flow better,' Mr Pirmez says. 'The good news for APB is that this is not the first time it is going through a recession. The management team has been through two or three crises. They have some experience, though it is never easy.'

Apart from the downturn, something else could be keeping Mr Pirmez up at night. 'You know the Blackberry - you can send emails at midnight and you have to answer emails three minutes after midnight. I tried to avoid it,' he says, but global connectivity has clearly won this fight. 'I have my Blackberry - somewhere.'

According to Mr Pirmez, the fast work culture here is one of the few differences between working in APB and Heineken. APB is also smaller, but it has the same professionalism and high standards for its brands, he adds.

So having worked in both Heineken and APB, how does he view the relationship between both companies, and between Heineken and APB's parent F&N? Are market rumours true, that Heineken has been frustrated with a 1931 agreement that allows it to set up breweries in Asia only through APB? Tension was particularly high in 2006, when Heineken went to court against F&N and APB over the right to appoint the chief executive for APB's China operations. The incident even sparked speculation that Heineken might take over APB or F&N.

Mr Pirmez is keen to first keep APB out of the picture. 'There is no relationship between Heineken and APB. APB has two major shareholders, Heineken and F&N. It's a relationship between two shareholders - Heineken and F&N.'

He then downplays talk of hostility among the various parties. 'It is a very, very old joint venture of 78 years,' he says of the agreement, proceeding to draw a sine curve in the air. 'Can you imagine a couple of 78 years, sometimes there are ups and downs.

'If I remember, two or three years ago, there was some tension between Heineken and F&N, but it has passed. The past is the past. Today there is no tension, there is a good relationship between the two shareholders.'

The former Heineken executive is no stranger to APB. Before his six-year stint in Heineken Russia, he was general manager at Thai Asia Pacific Brewery for four years. He believes APB hired him partly because of that experience.

'I had a lot of contact with Singapore, I had the opportunity to know the competitors, the management team. When I came back here it was not a new adventure,' he says.

Mr Pirmez's life does read like one big adventure so far. He has spent more than 20 years working in the beer industries of Africa, Thailand, Russia and now Singapore. His first overseas stint with a Belgium group Unibra in the Democratic Republic of the Congo (formerly known as Zaire) even coincided with the outbreak of civil wars.

'Somebody tried to kill me and my family - they didn't succeed,' he deadpans. He was married with three children when the conflicts occurred, and he now has five. 'I won't say it was a good experience but it was a learning experience. After this kind of experience, you look differently at your life. There is more sense of your priorities.'

But somehow, fleeing the region was not on top of Mr Pirmez's mind. In fact, he moved on to Angola to join Unibra's competitor Heineken as managing director. 'I don't know why,' he says of his decision then. 'Everybody who has worked in Africa loves Africa... It's amazing. The people talking badly about Africa, they've never worked in Africa.'

Mr Pirmez has come a long way for someone who grew up in a small quiet village. Surrounded by forests, it was almost 'natural' for him to develop an interest in agriculture, particularly in beer brewing, he says.

No more bad brews?

So what makes a good beer? 'Today, because of the sophistication of technology, because of the sustainable quality of the raw materials, you don't have bad quality beer. It does not exist anymore.

'What makes the difference between a good beer and a great beer is the patience that you put in. And I don't think that there are bad beers but there are different beers. That depends on the culture, the market, and many things.' Western markets in general have a larger variety of beers packaged innovatively, Mr Pirmez says. 'In Western Europe, beer is more for your own consumption - you enjoy your beer alone watching TV, so there is more choice in taste and packaging. That is the main difference.'

In Asia, however, it is the service that counts. 'When you drink beer in Asia, the brand experience is not only about the beer itself and the packaging - it's the full package. Asia is a beautiful place. There are amazing, charming ladies serving you with smiles, there is amazing food. In Asia, the way to drink is outside. The packaging is less important than in the Western world.'

Under Mr Koh's stewardship, APB went on a regionalisation drive and eventually grew its footprint in Asia. So far, Mr Pirmez has no plans to alter this path. 'When you have a newcomer, I don't think that you change your strategy like this. It's not good for a company, especially for a successful company.'

But not every market in the region has been rewarding - China, South Asia and Mongolia yielded operating losses in Q2 2009. While every serious corporate player wants to be in China, the operating environment there is also tough. 'We are a small player in China. Our strategy is to continue to develop as a small player.

'China is one of the main sources of growth in the region, so that's the good news,' Mr Pirmez says. 'The bad news is that it is a very competitive market, very, very competitive... All of the competitors are working with very, very low margins. I don't know a lot of foreign companies winning against China with margins.'

Nevertheless, other markets in the region have done well. Singapore, Papua New Guinea and Indochina enjoyed double-digit growth in profit before interest, taxation and exceptionals in the same period. Regional growth will remain on APB's cards, but the company will have to focus on its existing business because of the economic downturn, says Mr Pirmez.

'Definitely the short-term challenge for many companies is to get through the crisis and we will be very busy. After that you can start dreaming again of growth opportunities,' he says. 'The good news is, if you see the Asian market, it is one of the main sources of growth for businesses in the world. There are still a lot of opportunities. When you go through the timetable of what there is to do, you can stay for 15 years.'

Looks like Mr Pirmez will be busy brewing plans in the region for some time to come.


Chief executive, Asia Pacific Breweries

Born 1960 in Leuven, Belgium

1978-84 Attended the University of Leuven, Belgium, graduating with a bachelor of science degree in agriculture and a master's degree in brewing

1985-95 Joined Unibra in the Democratic Republic of Congo and took up various positions (including chief operating officer)

1996-98 Joined Heineken Angola as managing director

1998- 2002 Joined Thai Asia Pacific Brewery as general manager

2002-08 Joined Heineken Russia as chief executive 2008 Became chief executive of Asia Pacific Breweries

Mr Pirmez is married with five children

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